VC Syndicates: A Collaborative Approach to Early-Stage VC

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1. The Information Disrupts Silicon Valley: The Information’s Founder and CEO Jessica Lessin on navigating the changing relationship between readers and the media over the next decade. (Link)
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TODAY'S CHART: THE VC Bubble X VC Innovation

The VC Bubble x VC Innovation: Below we look at some statistics from the run-up in VC leading into 2021 from market leader AngelList (2018 - 2021), the market leader in fund administration:

1. Assets under support increased from $1BN to $10BN in 2021
2. Assets under support increased 10x from 2018 at a CAGR of 115%
3. The number of GPs increased from 255 to 800 in 2021
4. The number of "active" GPs has notably dropped from the highs. We are seeing 40-50% less managers in the space.
5. While the VC valuations and capital bubble are ugly in hindsight for a lot of GPs - the innovation in early-stage investing is crystal clear. Limited Partners and LPs want the ability to pick direct access in leading private investments and supplement their outside alternatives portfolio.

TODAY'S NEWS STORY: DEFINE VENTURE CAPITAL SYNDICATES

In the dynamic and ever-evolving world of entrepreneurship and investment, syndicates are making their mark in the venture capital industry.

With a unique approach focused on collaboration, syndicate VCs bring together a community of Strategic LPs to invest in early-stage startups.

Investors can take the form of several individuals: founders, business executives, Other VC/PE GPs, financial professionals, aspiring investors, and forward-thinking entrepreneurs.

Emerging managers have taken advantage of the syndicate VC structure to launch pockets of highly strategic capital that can prove to be incredibly helpful to world-class founders.

What truly sets some of these new syndicate VCs apart is their commitment to collaboration.

Syndicates can actively seek out partnerships with other VC firms, fostering a robust network of investors and entrepreneurs. By collectively pooling resources and expertise, they create an environment that fosters innovation and accelerates growth.

"Syndicate GPs in venture capital are rapidly developing new playbooks in the post-COVID era. The barriers to start your own VC or syndicate has fallen dramatically with tools like like AngelList and Sydecar . While this has increased speed and competition dramatically, it has also produced extremely talented money managers in the Micro VC space. We work with several solo or emerging managers who work with small/ often remote teams - usually in a niche industry background - that can add a lot of value to a Founder's cap table." Dennis Unrein

While the number of VC Syndicates has significantly dropped off since the 2021 run-up, the technology and operational efficiencies behind investment teams is only getting better.

We have seen more and more traditional players in the venture space add generalist syndicates to their product offering to their Limited Partners.

The downside to this market is VC syndicates can be risky. Buyer beware.

As with all private investments, there is significant risk including up to 100% of the loss of principal.

Additionally, given the team sizes, there can be significant “key man” risk that exists at other major funds. With a GP there are other partners with a Solo GP its usually a one person show.

Finally, a lot of the managers in the space are emerging managers and lack performance. While that can be a problem in the institutional world - for HNWs and increasingly Family offices they want to go direct through new managers.

Ultimately, syndicates have only gotten better over time and we feel they play a new role in investor portfolios in the private markets.

"In today's post-ZIRP market, VC funds are sitting on large piles of cash to deploy in a challenging market. Investment rounds are generally taking longer and diligence has normalized from the "go-go" of 2021. Given how large some of these fund sizes are, some founders are looking to creative solutions. The dilution would be too high on some of these smaller businesses - and they do now want to be a $10BN company (which can be a daunting category). They want to duel process exploring (1) growth/ VC route and (2) profitability/ FCF and alternative exit. Weather the GP takes the check from the Tier 1 lead or not (and we work with plenty of amazing Tier 1 leads) - Founders are also looking for strategic capital and small but powerful VCs to fill-out a round and that is where we can look to win some business on the early-stage side. It feels like a great vintage to invest." - Dennis Unrein

Explore the potential of Syndicate VC at?www.privateventuresgroup.com.

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