How to Generate Outsized Returns 2009-2019
Two key trends have dramatically altered the venture capital industry over the last three decades: the rise of larger fund sizes and the decline of Initial Public Offerings (IPOs) as an exit market for venture-backed companies. These trends have accelerated in the current decade and are fueling burgeoning interest in new paradigms in venture capital that better align the interests of investors and fund managers and that provide the potential for outsized investment returns for which the asset class is known.
This paper will suggest that fund size segmentation yields important insight into the debate about the viability of the venture model and that smaller funds with less than $250 million of committed capital are the answer to better alignment and outsized returns. Additionally, given the recent global financial turmoil, there is a unique opportunity to acquire unfunded secondary interests in these smaller fund managers which further improves the return opportunity by lowering the cost basis and shortening the J-curve.
The Venture Capital Rebound (Link to Original White Paper)
