Bye several a few months ago, the venture capital market experienced a historic bull run that lasted for the better part of a decade. Many new investors and funds have entered the fray, but the past few years have also seen the rise of many new venture capital firms. This trend peaked in 2021, with 270 first-time funds raising a total of $16.8 billion. PitchBook Data.
This means that there are currently about 300 firms in the US alone that raised their debut capital in a bull market and are operating in very different market conditions today.
Over the past few months, many reputable investors have been quick to suggest that many of these new funds will struggle as markets deteriorate, even if they manage to survive. But what these old VCs forget is that new entrants don’t have to think about an existing portfolio of dozens of startups before making every decision.
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What keeps these aspiring fund managers up at night is not their chances of surviving or starting a second fund, but rather how best to manage their time and assets in a seemingly volatile market. “The biggest challenge has been scaling my team’s time, especially managing a growing portfolio at a time when founder support is critical,” said Ariana Tucker, founder of Conscience VC.
This does not mean that these venture capitalists are not being careful about what they are willing to bet on. “Our company valuation process has not changed, but we have certainly reconfigured our compass to assess the current, rather than the future, projected value of the companies we intend to invest in,” said Giuseppe Stuto, co-founder and managing partner, 186. Enterprises.
“It makes sense for us to be more thoughtful than we’ve already been about portfolio building and make sure we don’t overdo any vintage or ‘company stage’ pricing, e.g. 2021, pre-product, pre-revenue. ,” he said.
So how are these aspiring fund managers doing? TechCrunch+ asked the six of them how they are preparing for this volatile market, how this environment has changed the way they approach Fund II investing and raising, how best to market it, and more.
We spoke with:
- Giuseppe Stutoco-founder and managing partner, 186 enterprises
- Ariana Tuckersolo therapist and founder, Conscience VK
- Leslie Feinzaigfounder and CEO, Graham and Walker
- Tom Fergusonsolo therapist and managing partner, Burnt Island Ventures
- Rex Salisburysolo therapist and founding partner, Cambrian
- Marco DeMeireles as well as Allan Jean-Baptisteco-founders and general practitioners, Ansa Capital
Giuseppe Stuto, co-founder and managing partner of 186 Ventures
How would you describe the thesis and structure of your foundation?
We are a $37 million pre-seed fund focused on multiple industry groups – fintech, web3, enterprise SaaS, digital health and consumer innovation. Although we are geographically independent, we expect the majority of Fund I investments to be based in the US (today we have only one international investment in Nigeria).
Our strategy is a generalist strategy at the initial stage. However, we believe our strength lies in our ability to provide practical know-how to grow a company “from 0 to 1”, given our founder/operator experience and access to a network of industry leaders in various industries.
We have a traditional venture capital vehicle structure with a 10-year life cycle. Today the team consists of three full-time employees – me (founder, investment team), Julian Fialkov (founder, investment team) and Sophie Panarese (platform and operators).
How are you preparing for the current, more conservative market conditions after first raising funds in a bull market?
We like to think that we have been consistent in how we find and treat investment opportunities in both bull markets and current markets.
We started investing in September 2021, so we have a lot of bull market investments under our belt (about 10 of our 11 investments were completed during the bull market). We have two outstanding commitments, so we expect to complete at least three post-bull market investments by the end of August.
Our company valuation process has not changed, but we have certainly recalibrated our compass to assess the current, rather than the future, projected value of the companies we intend to invest in.
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