Should LPs try to time venture fund vintages, or select managers and invest consistently across vintages?

Beezer Clarkson · Oct 18, 2023

Pausing venture commitments to rebalance is dangerous because you can't time exits, so LPs must commit consistently

There is a long history of venture returns showing that if you're not in the market you don't know how to call the exit

Scope: an LP with existing managers still deploying could probably skip a year and still have money going into the ground

10:41 20VC: Are LPs Open For Business? What Does it Take to Raise a Fund Today? How Has What LPs Want to See in Fund Investments Changed? Why Do LP Incentive Mechanisms Need to Change? Which Funds Will be Hit Hardest with Beezer Clarkson @ Sapphire Partners

Beezer Clarkson · Oct 18, 2023

Institutional LPs make few new manager bets each year because they're looking for relationships they can hold across multiple fund cycles

41:55 20VC: Are LPs Open For Business? What Does it Take to Raise a Fund Today? How Has What LPs Want to See in Fund Investments Changed? Why Do LP Incentive Mechanisms Need to Change? Which Funds Will be Hit Hardest with Beezer Clarkson @ Sapphire Partners

Jamin Ball · Jan 10, 2024

LPs trying to pick venture vintages to sit in and out of is a mistake; the right approach is selecting a small set of managers and investing across their vintages

Market timing is very hard in any asset class and vintage timing tends to make LPs miss the best vintages; manager selection matters more than ever

Scope: stated as a misconception rather than an unknown

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Bill Gurley · Dec 6, 2021

Venture capitalists must invest across the whole cycle over a twenty- or thirty-year period, and the biggest possible mistake is trying to call the top.

Fund-of-funds data showed that removing 1996–1999 from a twenty-year window removed the majority of returns, and several Silicon Valley firms that pulled out in 1996 calling it crazy missed the best three years of the window; venture is also a hugely distributed market where individual worry changes nothing.

19:33 Gps should invest continuously across the cycle rather than attempt to time the top