Final upfront lp survey data 2016

LP Outlook on Venture Capital 2016

1

LP Survey Data @msuster

LP contributions to the VC industry is back to pre-recession highs (but still well below the 2000 peak)

2

US VC fundraising activity

0

65

130

195

260

$0

$15

$30

$45

$60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Capital raised ($B)# of funds closed

237258

193187

134150

118

184178193

162

$35$34

$20$24$25

$19

$12

$33$34$37

$22

162

193178 184

118

150134

187 193

258237

Source: PitchBook 2015 Annual U.S. Venture Industry Report.

3

US VC funds annualized cash flow by year

-$60

-$40

-$20

$0

$20

$40

$60

$80

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Contributions ($B)Distributions ($B)Net Cash Flow ($B)

17

-11-5-5

-11-18

-6-6-13-16

8

-11-11

342630

2419

1011

2722

117

28

1011

-18-27-29-28-25-21

-29-33-28

-24-23-20-21-22

-11 -11

8

-16 -13-6 -6

-18-11

-5 -51 -1

17

Distributions haven’t made up for a decade of negative cashflows. Markups don’t pay the bills

Source: PitchBook 3Q 2015 PE VC Benchmarking Report.

The good news is that only 7% of LPs believe they will cut back on venture programs with 26% of funds looking to increase exposure

4

4%

22%

67%

7%

Source: Upfront Survey Jan 2016, 73 LPs.

How would you describe your fund’s current allocation to VC?

About the right allocation

Aggressively growing venture Too much allocated to venture

Trying to grow our venture program

40% of LPs have a full bench, 40% looking to add, 20% looking to cut back

5

3%

38%

40%

19%


How would you describe your fund’s current outlook on VC managers?

Cutting back on managers

Aggressively add new managers to our program

Pragmatically add managers to our program

Happy with our existing roster

But LPs expressed caution, too. Nearly 75% of LPs have concerns about investment pace, valuation levels and burn rates of underlying companies

6

6%

68%

26%


How would you describe your fund’s outlook on your existing (VC) managers activities?

Very happy with investment activities of our existing managers

Deeply concerned about the market behavior

A bit concerned by pace, valuation creep and burn rates

61% of LPs believe that VCs are coming back to market to raise money at too quick of a pace - a reflection of anxieties of the over-funding of portfolios

7

61% 15%

24%


How would you describe your fund’s outlook in your existing (VC) managers funding (and fund raising) pace?

Managers come back at a normal cadence and it hasn’t changed much

Managers have been coming back more quickly than in the past and we’re fine with this

Managers have been coming back more quickly than in the past and it concerns us

Even if some short-term concerns, 70% of LPs still bullish on VC as a great long-term asset

8

30%

69%

1%


How would you describe your current views on venture capital overall?

We’re even more bullish about VC than in the past

We still think VC a great long-term asset class.

At current levels, Venture Capital is starting to feel over-funded

And 82% of LPs are likely to maintain their existing investment pace

9

10%

82%

8%


How would you describe your likely investment pace in venture over the next 3 years?

We’re likely to increase our investment pace

We’re likely to keep the same investment pace

We’re likely to slow down our investment pace

It seems clear that “direct investments” are becoming a more important part of the LP asset mix for nearly 40% of LPs.

10

1%17%

21%

44%

17%


How would you describe your fund’s position on direct investments

We do some directs. It’s opportunistic. Unlikely to ever be meaningful

Direct investments are the only reason we fund VC managers in the first place

We never do direct and never willWe think direct is a very important

strategy for us

Doing more direct investments and this is becoming an important part of our

strategy

Overwhelmingly LPs have been supportive of “opportunity funds” provided they are done pragmatically and with favorable economics

11

3%

82%

15%


How you would describe your fund’s outlook on growth / overage / opportunity funds?

We only do core funds

We’ve been very active in the growth / overage / opportunity fund

Done with a pragmatic approach & favorable economics we’re favorable

While the market for Seed Funds grew enormously in the past 7 years, many LPs still express some concerns about capacity and market crowding

12

23%

66%

11%


What is your fund’s outlook on the seed market?

Seed delivers the highest potential returns and we’ll continue to invest heavilyThere are too many seed funds and we’re worried they

won’t have enough capacity

We fund seed VCs but we’re very discerning on which ones we’ll fund

Unsurprisingly half the market is looking for a balance of seed, A/B and growth funds. 1/3rd focuses mostly on A/B

13

17%

50%

33%


What is your fund’s outlook on traditional Series A/B venture capital?

We prefer to focus on traditional A/B venture

We think traditional VCs are being squeezed

We want a healthy mix of seed funds, A/B and growth VCs

Also it’s not too surprising that LPs are most cautious about growth stage funds - in particular concerns about late-stage valuations

14

68%

32%


What is your fund’s outlook on later stage venture capital / growth equity?

We like growth stage but want a healthy balance of seed, A/B and growth

We’re worried that the growth stage is the most over-valued part of the market

73 LPs surveyed, part 1

15

Fund type

0

10

20

30

9

445

23

28

Fund size

0

10

20

$0-250M $250-750M $750M-1.5B $1.5-5B $5-10B $10B+ Blank

4

16

7

18

3

11

14

Which of the following best describes your focus on VC?

0

25

50

Only VC Mostly VC Very diverse Not much VC

2

42

10

19

Foundation or Endowment

Fund of Funds

Family Office

Discretionary Advisor

Insurance Company

Other

Survey respondent geography

0

15

30

NorCal SoCal NE US Other US ROW Blank

24

28

11

6

22

Source: Upfront Survey Jan 2016.

73 LPs surveyed, part 2

16

Position

0

20

40

60

Partner / MD Analyst to Principal Blank

1

18

54

How long has your firm been investing in VC (years)

0

20

40

0-3 3-10 10-20 20+

1

23

30

16

3

How long has your firm existed (years)

0

20

40

0-3 3-10 10-20 20+

38

1614

5

Personal investment experience (years)

0

20

40

0-3 3-6 6-10 10-15 15+

2723

15

44

Haven’t invested much in VC

Source: Upfront Survey Jan 2016.

LP Outlook on Venture Capital 2016

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LP Survey Data @msuster

Final upfront lp survey data 2016

Investor Relations

Transcript of Final upfront lp survey data 2016