MDSV Capital

Keith Rabois, Managing Director at Khosla Ventures perfectly described the venture liquidity paradox in a recent episode of the All-In podcast hosted by Chamath Palihapitiya, Jason Calacanis, David O. Sacks and David Friedberg. “If you have a venture fund of $500M or more, you simply don’t drive meaningful returns via M&A…we need IPOs to return our funds.”? Mega funds with this kind of total dependency on IPO outcomes have been hard pressed to offer liquidity to their institutional LPs given the challenging IPO dry spell in the U.S. over the past few years. IPO activity as of Q3 2024 is lower than at pre-pandemic levels, according to KPMG’s Venture Pulse report. Yet, despite the lack of distributions from low IPO activity and dissatisfaction with the current state of liquidity in venture, institutional LPs are continuing to allocate almost exclusively to the large funds that require successful IPOs for liquidity - a perplexing paradox! As evidence of this continued pattern by allocators, the combined recent $16bn fundraise of A16Z ($7.2bn), General Catalyst ($6bn) and Khosla Ventures ($3bn) almost exactly equals all VC capital raised by emerging managers in the US in 2023. Alpha is at the early stage, and emerging managers in venture who invest in companies at the earliest stages (and lowest valuations) benefit from more liquidity optionality (M&A, a growing secondary market) as opposed to a total dependency on IPOs. For institutional LPs, the question is how to execute that strategy at scale. MDSV Capital helps institutional investors invest in top-1% emerging manager funds and their fastest-growing early-stage outliers, delivering ???????????????? ?????????????? ?????????? ???? ?????????? in a balanced, risk-adjusted manner. Learn how institutional LPs can benefit from investing in emerging early-stage funds through our strategy: https://lnkd.in/grk_73mt Sources:? 1. Episode 207 of the All-In Podcast 2. ‘Venture Pulse Q32024: Global analysis of venture funding,’ KPMG,?Oct 16, 2024 #vcfunds #earlystageinvesting #ventureliquidity #investinvc

Brand name LPs choosing brand name funds - a formula for success? Nope. The recent poor performance of Ivy League endowments isn’t simply a matter of greater allocation to private assets like venture or private equity, as this article suggests. The real question to ask is what type of managers do these endowments invest in? Institutional investors tend to gravitate towards large brand name mega funds run by established venture managers but data from multiple sources including Prequin, Carta, the Stepstone Group and Cambridge Associates points to the superior performance of emerging manager funds for more than 20 years now. Alpha is at the early stage in venture, and the best access point for early-stage Alpha has proven to be emerging manager funds. That’s why high-performing endowments like Baylor University are actively targeting the emerging manager segment in venture, achieving better GP/LP alignment and registering Ivy-League beating returns, as we outlined in a recent post. #VentureCapital #InvestinVC #Endowments #Investors

How do you find alpha in the world of #venturecapital? focus on #emergingmanagers. That was the theme of a session on Day 3 of the innaugural VC for Tech program organized by the UC Berkeley Sutardja Center for Entrepreneurship and Technology (SCET). We heard from Michael Downing from MDSV Capital and Youngrok Kim from GREE LP Fund. For this group of aspiring managers, it was good to hear that LPs are eager to give them a hearing! Mahendra R. UC Berkeley College of Engineering Kristina Susac

We are just beginning to see institutional investors understand the consistent outperformance of emerging managers in venture and fully grasp the long-term benefit of closer LP/GP alignment in their allocation strategies. As awareness builds across the LP landscape, certain challenges come to light. ?????? ???????? ???????????????? ???????? ???????? ‘????????????????’ ?????? ???? ????????, typically dialing up fund size once their early funds outperform and attract an inflow of LP capital. One of the star emerging managers in our portfolio graduated from sub-$20M funds to a $100M fund with 70% institutional LPs, catapulting out of the emerging manager category in just a few years. Investing in an emerging manager’s Fund I & II helps institutional investors and family offices build relationships with high-performing emerging GPs early, and carry them forward into future funds.? MDSV helps institutional investors and large family offices engage with the emerging manager segment of the venture market in a structured, risk-mitigated manner through its ???????????????? ?????????????? ?????????? ???? ?????????? ????????????????. Find out how: https://lnkd.in/gG6X5bZt #emergingmanagers #emfs #investmentstrategy #venturecapital

Could a wave of new GP secondary buyers be the structural change of this cycle that represents the next evolution in the venture capital market? According to Venture Capital Journal**, 26 Firms now focus on GP secondaries, managing more than $67.5B – a list that has ?????????????? in size in the ???????? ?? ???????????? ??????????. As we mentioned in our earlier post ‘Capital Will Find A Way,’ the market needs a regeneration of LP capital that occurs earlier in the cycle, especially for emerging managers and their LPs whose funds may last 12 to 14 years. ?????? ???? ???????? ?? ???????? ???????????? ?????? ??????? To help answer this question, we created an ?????????????????????? ????????????????????, that enables modeling of typical GP secondary sale scenarios, including how it impacts the fund’s overall performance, DPI, ongoing TVPI, etc. To make things simple, we’ve pre-filled defaults based on actual historical data (averages from the last 15 years), which you can tweak to see a range of outcomes. Please dive in: https://lnkd.in/gMMhzMUm * Feel free to suggest any adjustments or edits and our team of quants will review ?? ** Source: Guide to VC secondaries buyers (updated): https://lnkd.in/gDNrWBZV #MDSVCalculator #MDSVCapital #VentureCapital

Speaking at the AbuDhabi ECW Conference as a panelist, our managing Partner Michael Downing discussed the evolution of the startup ecosystem and venture capital funding landscape. This was a terrific opportunity for MDSV to connect with capital allocators from the region and contribute his insights from nearly three decades of investing in the innovation economy in Silicon Valley. #Startups #Innovation #ECWConference

We recently posted about the trend of startups with newfound AI-driven operating leverage and capital efficiency shunning traditional later-stage venture investment. Is the latest announcement by CRV more evidence of this happening in the market?? CRV (formerly Charles River Ventures) just decided to return $275M in uninvested capital to LPs from its $500M Select fund for mature companies, citing the overvaluation of late-stage deals as the deciding factor. In the last two years, we’ve seen a series of start-ups scale to $20M, $40M, and even $60M+ on seed financing of less than $10M (the #SoloSeed phenomenon). All through utilizing advanced AI & automation technologies in their internal operations to scale to unprecedented revenue levels with very low headcount. Simultaneously, we have seen later-stage Series-B, Series-C companies re-tool their internal operations with AI similarly to drastically cut costs and increase efficiency.? The common thread is that all these companies opted ?????? to take traditional later-stage VC dollars from the usual suspects. Is this a sign of what’s to come in VC? Is AI actually disrupting VC? What will the impact be for large, later-stage venture funds? And what is the impact on LPs who want to be in the outlier companies of tomorrow? #VCInvesting #InvestInVentureCapital #AI #InvestmentStrategy

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Approximately half of the top-performing venture capital managers by vintage cohort since 2001 have been emerging manager funds (EMFs), defined as firms that have raised up to three funds. This data from Preqin, reported by the StepStone Group, aligns with their own findings from proprietary data – that smaller funds tend to outperform larger ones. What does this mean for LPs looking to invest in venture capital? Venture is no longer an ‘access class’ where long-time stalwarts drive all returns. Armed with agility, fresh perspectives and the ability to tap into early-stage opportunities, new EMF talent is generating Alpha, and more LPs are looking for ways to navigate the emerging manager ecosystem. At MDSV Capital, we are tapped into the emerging manager network in several ways - through LP commitments in EMF funds, co-investments in EMFs’ top-performing outliers and our curated online EMF community, The Promontory. Learn how we deploy our ???????????????? ?????????????? ?????????? ???? ?????????? strategy in the MDSV Emerging Outliers Fund: https://lnkd.in/dtYu6sMv #VentureCapital #InvestInVC #EmergingManagers #EMFs

Our Managing Partner, Michael Downing, discusses emerging manager hunger with fellow panelists Seyonne Kang of the Stepstone Group and Ben Choi of Next Legacy Ventures on a Fund of Funds panel moderated by Jason Calacanis at the Liquidity Summit 2024. Listen to the fascinating panel discussion on ‘This Week in Startups’: https://lnkd.in/gPYM7N5E Learn how we help institutional LPs identify and invest in a portfolio of top-1% emerging managers to achieve ???????????????? ?????????????? ?????????? ???? ??????????: https://lnkd.in/gM6pAKza