Oct 24, 2016 · 28m · 20vc
20VC: More $ Raised This Year Than The Past 15, War Chests Being Built & Decline In First Time Funds: So What The Heck Is Happening In Venture with Beezer Clarkson, Managing Director @ Sapphire Ventures
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this inaugural episode of 'Beezer's Breakdown' on The 20 VC, host Harry Stebbings interviews Beezer Clarkson, Managing Director at Sapphire Ventures, to analyze 2016 venture capital trends including capital concentration in mega-funds, declining first-time funds, and changing startup investment and exit dynamics.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 32.3% of the talking time here. How this is scored →
Harry as informed peer 4.0 Guest teaching 4.7 Guest disagreement 1.3 Harry pushing back 2.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 5:06 Re-framing Capital Concentration
Beezer directly rejects Harry's premise that capital is heavily concentrated in 2016 by explaining how capital deployed from prior micro-fund years balances out current headline numbers.
Hardest push from Harry ▶ 8:06 Challenging Mega-Fund LP StrategyHarry pushes back on Sapphire's LP allocation thesis, expressing explicit concern over the economics of billion-dollar funds and asking Beezer to justify avoiding them.
Biggest teaching moment ▶ 9:26 First-Time Fund Collapse StatisticsBeezer presents curated industry numbers demonstrating that first-time fund closes dropped from 120 in 2014 to just 31 in 2016, leaving Harry to admit the stats are depressing reading.
Harry holds his own ▶ 17:25 Citing Snapchat IPO Filing DetailsHarry demonstrates strong market awareness by citing specific news regarding Snapchat's confidential IPO filing with Goldman Sachs and JPMorgan to guide the discussion on private IPO bottlenecks.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Macro Venture Trends: Capital Concentration and the 'Haves vs. Have-Nots' | 3 | 5 | 2 | 2 | Harry opens with macro venture statistics on capital raised in H1, asking if venture has become a game of the 1%. Beezer updates his figures with Q3 PitchBook data ($33B across 157 funds) and re-frames the concentration argument by highlighting previous micro-fund deployment cycles. Harry acknowledges a gap in his knowledge regarding LP/GP fundraising cadence. | |
| Venture Fund Operational Cycles and LP Investment Strategy | 4 | 6 | 1 | 3 | Beezer explains LPA legal guidelines and deployment operational cycles that dictate when GPs raise new funds. Harry questions why Sapphire avoids mega-funds over $500M, noting concerns over mega-fund economics. Beezer educates him on Sapphire's strategy of pairing early Series A LP checks with direct growth funds. | |
| Deterioration of First-Time Funds and the 'War Chest' Phenomenon | 4 | 5 | 1 | 2 | Harry brings up his focus on first-time funds, and Beezer shares curated data demonstrating a sharp drop from 120 first-time funds in 2014 down to 31 in 2016. Harry offers a hypothesis about mega-funds raising defensive war chests, which Beezer validates while expanding on LP behavior during market uncertainty. | |
| Series A Selectivity, Direct Flight to Quality, and Private IPOs | 5 | 4 | 1 | 2 | Harry asks whether the drop in first-time funds contradicts the seed overcrowding narrative and brings up current rumors of Snapchat filing for an IPO. Beezer provides market context on deal value vs deal count and explains how crossover investors exiting private markets forced companies to re-evaluate going public. | |
| Tech Ecosystem Resilience, Macro Shifts, and the Impact of Brexit | 4 | 4 | 2 | 3 | Harry probes Beezer on dangerous political grounds regarding Brexit and its impact on UK and European fund raising. Beezer playfully turns the question back to London-based Harry before explaining how LP blind pool commitments rely on manager resilience during macroeconomic shifts. | |
| Quick Fire Round: Opportunity Funds, Hard Raises, and the SaaStr Fund | 4 | 4 | 1 | 2 | In the quick fire round, Beezer reveals a significant spike in opportunity funds (14 raised vs historical 5 per year) and cites Fred Wilson's post on hard raises. Harry actively highlights Jason Lemkin's SaaStr Fund as a prime example of an early-stage exception to Sapphire's usual check size. |
Statements from this episode (12)
US VC Fundraising in 2016 Hit Highest Level Since 2001
“At the end of Q-three, we pulled some numbers, thanks to our friends at PitchBook, and there's been thirty-three billion raised by 157 funds. This is just in the U.S., And what's really interesting about this is we haven't seen this much money raised in one ye…”
Sub-$100M VC Funds Declined in 2016 While $500M+ Funds Surged
“Statistically, a much bigger year of more five hundred million dollar funds being raised in a decline of these sub one hundred million dollar funds. But this is coming on the back of a number of years of 30 billionish raises where you had a lot of micro funds …”
Sapphire Ventures Has Historically Backed Only One Fund Over $500M
“Well, so for us and our platform, we focus on series A, and we tend to use what we call the right size fund, so we don't always do many funds that are over five hundred million. In fact, we've only done one historically.”
Venture Funds Exceeding $700M Lose Their Predominant Series A Focus
“One, since we're focusing on funds that are predominantly Series A exposure, many funds, when they get into the seven hundred billion dollar fund size, are not predominantly Series A. They're doing other stages.”
Only 31 First-Time VC Funds Were Raised Through Q3 2016
“What I can say is, is through Q three, You know, we go through and we curate the data, we pull it from a number of sources, and then we curate it, because sometimes funds close one year and then do a final close a second year, so the numbers are a bit squishy,…”
Joe Lonsdale's 8VC Was 2016's Largest First-Time VC Fund at $400M+
“I mean, the largest fund that was raised this year was Eight Partners, which is Joe Lonsdale's new fund, and obviously he's an experienced investor. They raised for over four hundred million.”
US Venture Capital Deployment Reached $40B Through Q3 2016
“There's already been some forty billion that has gone into U.S. Venture-backed companies this year through Q three”
Startups Will Abandon Private IPOs for Traditional Public Exits
“We think that there could be more of a move away from the private IPO into companies going public and moving down that path and sort of a reversion to what it used to look like before.”
Crossover Investors Sharply Pulled Back From Private Tech in 2016
“Given the challenges in the public market, they pulled back pretty heavily end of 2015 into 2016. So some of that capital that was available to private companies is no longer available”
14 Opportunity Funds Raised Over $2B in 2016
“On average, we've been seeing about five or so of these opportunity funds raised per year since 2011, and this year there were 14 closed, as we thought, which spiked the numbers to over two billion in opportunity funds”