Federico Feijoo

The venture apocalypse is upon us. Only two funds raised 44% of the venture money in the US in 2024. The cash amounts deployed against emerging managers (firms with less than three funds) relative to more established firms dropped from 19% in the 2010 to 2020 periode to 16% and falling. Lux Capital's predictions of 30-50% of emerging managers ceasing to exist over the next couple of years are over-shadowed only by claims of an outright extinction of venture capital. This post explores the bigger context and why such developments are short term healthy and long term risky for a nascent startup ecosystem: https://lnkd.in/d-fsYg6b

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10 years ago, Nadim Malik and his team at Sutton Place Strategies, by Bain & Company started putting out a Deal Origination Benchmark Report (link to all annual reports in comment). It was a visionary move back then; shout out to them for the 10 years of amazing data they've gathered for and made available to the #privateequity ecosystem. I haven't seen a 10-year analysis of this data anywhere else, so I'm taking a crack at it here. 😅 Before we get into it, what does the DOBR report on? Its main metric is "Market Coverage" -- essentially, how many deals DOES a buyer see in its sectors of interest, vs. how many deals SHOULD that buyer see in those sectors. This Market Coverage metric is 'narrow': it reports on this for private equity firms ONLY (not corporates, independent sponsors, family offices, etc.), and it only tracks deals that are represented on the sell-side (deals sourced on a proprietary basis aren't counted). In 2023, 167 PE firms qualified for inclusion in the data set (by virtue of being SPS clients), and they reported seeing about 800 deals a year (median). So, what the DOBR is saying is, if a PE firm's Market Coverage score is 20% and it in fact sees 800 deals a year, then it sees 1/5th of all the deals it should see (4,000). The trend in the data is that really, no PE firm has cracked that nut. The average firm is stuck at just below 20%. The top quartile of firms is a tad above 25%. The obvious interpretation of this data is that PE firms aren't good at this and if they were to just invest in this a bit more, they would see 2-4x more deals. And that would be consistent with the general lack of meaningful change in #dealorigination in the PE world, over the past 10 years. I've lamented this state of affairs many times: tech is slow to be adopted; leaders don't care to advance manage non-deal related problems like data set quality or email deliverability; outreach processes aren't standardized; top-of-the-funnel work tend to be under-celebrated relative to other functions; and so on. There are massive blockers to getting this right, but it is true that improving market coverage is hard--there are thousands of sell-side advisors, many generalists who may take only a handful of deals to market every year. Where to focus, how to stay in touch, etc. are difficult decisions and campaigns to scale. And then, for your reward, you get to participate in a bake-off with hundreds of other buyers... 🙄 So maybe there is another interpretation: firms have optimized this already, and they have invested in their sell-side market coverage to the extent they think it's worthwhile, and instead are developing other sources of deal flow (like buy-side advisors like Spearhead Corp Dev, doing direct-to-company outreach themselves, incentivizing referrals from portcos, etc.) Being on the buy-side, it is now a weekly occurrence to hear from a PE firm: "ah yes, we're considering buy-side advisors for the first time"...

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How does a GP prove they can generate attractive results when they haven't had exits? Some excellent points from Bain & Company's 2024 Private Equity Report.

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VC world can be cruel and unforgiving. With LPs more and more pushing for distribution and liquidity, fund managers in the mid-tenure of their fund with zero DPI and TVPI around 1.0 would have much more difficulty to raise new fund. The ability to fundraise is one of the crucial indications and validation of the job for VCs. Key highlights from the article below: Thirteen percent of venture General Partners (GPs) no longer plan to raise another fund due to LP pullback. This rate has doubled since H1 2023 when only 6% of GPs had no plans for another fund. Nearly 44% of venture firms surveyed in mid-2023 had previously postponed their fundraising plans due to concerns about overexposure to the asset class. Many emerging managers entered venture capital in 2019 or 2020 when the LP market supported more funds. However, slow exits in the first half of 2024 have led to challenges in raising second funds without significant cash distributions to LPs. Some venture GPs are now actively participating in the secondaries market to demonstrate returns. Despite the challenges, GPs who secured fresh capital remain optimistic. They expect the 2023 and 2024 vintages to be the strongest return years since 2019. 🚀📈 #VC #VentureCapital #Fundraising #LPs #EmergingManagers #TechInvestment #MarketTrends #CountdownCapital #IndustryInsights #JetVentures #JetInvestment‍‍‍‍‍‍

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Private Equity Blackstone’s Infrastructure Fund for Individuals Raises More Than $1 Billion: Asset manager continues to shift further from its buyout roots : Blackstone betting individuals will turn the firm into a bigger force in roads, ports and data centers : Digital infrastructure dealmaker Blank is the new fund’s CEO

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I’ve been advising my clients of this for a long time. SAFES are a great tool to use - once. Don’t get enamoured with them without thinking more thoroughly about the alternatives! Also, since we’re on the topics of SAFEs, their evolution has gone something like this: Startup community: we need a simple security to quickly and easily raise money without racking up legal fees and without having to agree on a valuation since setting a valuation at this stage is too difficult and arbitrary and moving quickly is to everyone’s benefit here. YC: how about this SAFE? It’s super simple, no valuation and the investors will get a 20% discount on the next round for taking risk coming in early. Founders and investors: this is awesome! It’s very simple and everyone is happy! The rest of the terms don’t matter until our priced round. VCs a couple years later: yeah this is great, but you know what would be better? Let’s add a valuation cap and here’s my 10 page side letter with board rights, prorata rights, negative covenants, transfer restrictions, etc. Founders: umm but now we have to agree on valuation and negotiate all these terms? VCs: no, no - it’s called a SAFE so it’s fine. 😂😂😂

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We have an another lineup of star investors for MELT. Let me introduce 23 amazing VCs and Angels ! ☞ Stedde Capital Sector: Biotech, B2C, B2B ☞ The Collective Sector: Fintech ☞ Muivona Capital Sector: Healthtech, Legaltech, Retailtech, AI, E-commerce, B2B ☞ Touring Capital | AI SaaS Fund Sector: SaaS, B2B, AI ☞ Forum Ventures Sector: Fintech, Climate tech, Govtech, Legaltech, Cybersecurity, AI, B2B, SaaS ☞ Plain Sight Capital Sector: Fintech, Insurtech, Retailtech, Legaltech, Govtech, Adtech ☞ Fantastocker INC Sector: Fintech ☞ Biran Capital Sector: Fintech ☞ Lynx Ventures Sector: Fintech, Proptech, Legaltech, AI ☞ CLNM Capital Sector: Fintech ☞ Brilliant Minds Sector: AI, Fintech, Climate tech, Retailtech, Biotech, Neurotech ☞ Woodside Capital Partners Sector: Adtech, E-commerce, B2B, B2C, SaaS ☞ Generous Ventures Sector: Fintech, Healthtech, Climate tech, Edtech, Insurtech, Proptech, Agtech, Govtech, Legaltech, Retailtech, Biotech, Adtech, Mobility, Cybersecurity, AI, B2C, Gaming, Web3, Robotics, AR/VR, Neurotech, Spacetech, B2B, E-commerce, SaaS ☞ 615.vc Sector: Spacetech ☞ seedlabs co / Harvard Sector: AI ☞ Bullpen Capital Sector: Fintech, Healthtech, Climate tech, Edtech, Proptech, Insurtech, Agtech, Govtech, Legaltech, Retailtech, Adtech, Biotech, Spacetech, Gaming, Web3, Mobility, Robotics, Cybersecurity, AR/VR, Neurotech, AI, B2C, B2B, SaaS, E-commerce ☞ Connecticut Innovations Sector: SaaS, B2C, B2B ☞ Matr (Matter) Ventures Sector: Fintech, Cybersecurity, Healthtech, Climate tech ☞ Sanctor Capital Sector: Web3, AI, AR/VR, Gaming ☞ Clockwork // 171 Ventures Sector: Fintech, AI ☞ W Ventures Sector: Fintech ☞ BASE64 Capital Sector: B2B, SaaS, AI, Cybersecurity, Robotics ☞ Conscience VC Sector: Healthtech, AI, B2C Founders x Investors Dynamic Network 『MELT』 6/3 5pm https://lu.ma/ldbfgkez 【💎VIP Sponsored】 ​Bradley Kam ​・Founded 2 companies Unstoppable Domains & Talkable ・Raised over $70M ・Unstoppable Domains recently raised $65M in a Series A round led by Pantera Capital, reaching a $1B valuation. Aquibur Rahman ​Founder of Mailmodo, has received funding from Sequoia and is an alum of Y Combinator S21 ​Nathan Stevenson ​CEO and Founder of ForwardLane Inc. has been featured by Forbes, the World Economic Forum, and American Banker ​Rene Anziani & Leevar Williams ​Founded by MIT alumni, APrime Technology Technology is an elite team of experienced engineers, product managers, and data experts intent on helping startups build innovative products that matter. Our customers operate in complex, data-driven, highly regulated industries such as quantitative finance, healthtech, fintech, and edtech. We have received 400+ registrations. ​・76 VC and Angel Investors ​・280+ Founders/CEOs ​3 Series D companies ​2 Series C companies ​6 Series B companies ​35 Series A companies ​15 Pre-Series A companies ​106 Seed companies ​146 Pre-Seed companies ​26 Bootstrap companies ​50+ Executives Meet at us MELT!

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Private equity is no longer just levering the companies they buy ... Now, they're levering themselves too 🧵 Trend: NAV loans to PE Growth: ➡️ ~$150B in debt issued so far ➡️ Volume expected to double in next 2-3 years How they work: ➡️ Called "Net Asset Value" (NAV) loans ➡️ Usually borrowing against portfolio investments in the fund ➡️ Use of proceeds is either doubling down on existing investments or investor liquidity Implications: ➡️ Many funds are doing this to get liquidity to LPs earlier. ➡️ The irony is LPs are worried that, by borrowing against their investments to pay them now, firms are actually putting these investments in danger over long-term What other trends are happening out there?

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Affinity Equity Partners’ recent withdrawal of its $800 million bid to acquire Craveable Brands caught my attention. The decision, reportedly linked to findings from due diligence, likely reflects concerns about growth prospects in Australia’s high interest rate and cost-of-living environment rather than issues with the quality of earnings. This trend could signal more secondary private equity deals faltering under similar pressures in 2025. So, where does this leave PAG? While pursuing a private sale remains an option, re-engaging potential acquirers after a failed bid may shift negotiation power from seller to the buyer. An alternative path could be a public listing, following the examples of franchisors like Harvey Norman or RFG. With its portfolio of well-known brands and solid earnings, Craveable Brands could attract market interest and secure a favourable valuation. That said, the challenges of public market scrutiny and evolving consumer behaviour in Australia’s current economic climate should not be underestimated. As we move into 2025, the intersection of high interest rates and changing Australian consumer dynamics will certainly impact how PAG approaches its exit strategy. Whether through a private sale or an IPO, their choice will be one to watch. What are your thoughts on the best path forward for Craveable Brands in this environment?

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Raising capital is never easy, and current market conditions add to the challenge. I found this article particularly insightful. https://lnkd.in/eWTjy3e4

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When making an investment decision the starting point for me is always the same: the founder. Not the market. No matter what stage, industry, or existing investment history – conviction in people is critical. Since I joined Index in 2008, I’ve seen a ton of change in venture. New VC entrants, shifting market dynamics, and major technological progress. Yet the core of the craft has remained the same - the focus on identifying outlier founders building the next outlier company. What defines an outlier founder? A unique combination of imagination, operational excellence, and high-quality decision making. I saw that in Olivier Pomel & Alexis Lê-Quôc at Datadog, Assaf Rappaport, Yinon C., Roy Reznik, & Ami Luttwak at Wiz, Joshua Motta & John Hering at Coalition, Inc. and other exceptional entrepreneurs. It was a pleasure to chat with Harry Stebbings about the complexities of VC and dig into key learnings from my time as an investor and board member on the latest 20VC episode. Thanks for having me, Harry!

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Congrats to all the YC S24 companies who participated in Demo Day this week! At only 14% of the overall class (36 out of 254 companies), this season's YC batch has the lowest proportion of consumer tech we have ever seen (see chart). However, at Goodwater, we continue to believe in the power of consumer tech to transform lives around the world, and expect this declining trend to reverse in future YC batches. For now, there are still many incredible consumer tech YC companies in the current batch that have caught our attention. Here are a few that we're excited to welcome to our Genesis program: TaxGPT: Automating tax filing with AI to save Americans 2B+ hours annually. Kashif Ali Isabella Maceda-Ali What we like: Impressively hitting $330K in ARR and growing 60%+ MoM Modern Realty: Making the home buying process better from discovery to closing, for very low commission. Raffi Isanians Raymond Xu What we like: Recent NAR ruling + AI = big shake-up of the $100B+ in annual US real-estate commissions Parley (YC S24): Automating legal work for immigration attorneys, starting with work visas and green cards. Philip Smart Ian Edwards Jackson Perry What we like: More targeted & effective use case of AI in legal work pap! (YC S24): AI agents that help you claim the money you're owed. Kamal Nahas Weijie David Wang Anthony Rassi What we like: There are $50B (!) of unclaimed refunds annually. pap! is growing 200%+ MoM Barrett Parkman Anna Consani

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LARRY FINK: TOKENIZATION WILL TRANSFORM FINANCE "The future is tokenization—every stock and bond will have a unique identifier on one ledger. Investors will have personalized IDs, enabling instantaneous settlement and eliminating issues like illicit activities. Tokenization will reduce costs, allow customized strategies, and give shareholders direct control over voting. This is a technological revolution for financial assets."

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