📈 Venture's alpha does not clear liquid alternatives — LP money leaves the asset class

“when people do the calculations on what the true alpha of venture capital is, they're going to come back with answers like this, which is it's not that great ... because the alternative universe is more liquid, it's less volatile, and it has roughly the same amount of return”

“On a day-to-day basis, it means there's going to be less companies that are going to get funded, but more importantly, there's going to be less LP money going into venture”

“two-thirds of the meetings I'm having, people are saying we're not adding managers, we're cutting managers, and we're cutting commitments to managers”

“So instead of being 1.8x, they're all going to return 0.7x or 0.5x, and they're going to lose money”

“I think there's going to be a lot of shutdowns of venture firms. I think a lot of venture firms are going to shut down”

“It's going to be hard to make outsize returns unless and until the entry price is completely correct ... they've partially corrected, but they may not have fully corrected”

“So I think this is going to be the best vintage of venture in our lifetimes. That's my personal belief. I invested in 100 companies this year.”

“that family office or that endowment who can rip in a check as an LP to a fund can still get five, six, seven percent, can get corporate bond at corporate yields at like eight, nine, 10 percent. ... Why take on 15 year illiquidity for oftentimes funds that return less than the S&P, which is the dirty little secret of Silicon Valley? It makes no sense.”

“It's true that smaller funds do perform better and larger funds become more of an index and achieve more average returns. When you got a multi-billion dollar fund, it's way harder to achieve a outsized return.”

“not only will that vintage underperform, but it could torpedo as many as 50% of firms that are managing capital today in Silicon Valley. And it could switch the capital allocation model that reduces allocation to venture as an asset class significantly”

“the only way to win in a world where your exits are not that great is to actually generate money via fees.”

“I've been talking to a lot of LPs, and in talking to them, they're looking at corporate credit and P&E deals because they can get a return on those, and then they're looking at venture and they're saying, hey, why is there no M&A occurring? Where's our DPI?”

“This past week, a lot of chatter about IPOs that are getting filed and that we could be ending the drought. And people were feeling very, very pessimistic about venture as a category. And I think these two things have changed a lot of people's feelings on that.”

“I do think that we are in a situation where the average returns are going to decay by 50 to 100 percent because of what Sacks said and because of what you said.”

“For example, the average venture fund is like a 2X return. But if the entry prices were artificially double, then there goes your return right there. You get 2X becomes 1X.”

“Instead of a Series A getting you 20% of a company, it got you 10 Instead of a C-check getting you 5%, it got you 1 There's no DPI possible.”