The Ledger
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Somerville: Creation of new Series A venture firms is static or declining
“And we actually had a slide at our annual meeting, and surprisingly enough, the number of A-round firms that come into existence has been rather static to slightly down.”
Somerville: Future Series A VC firms will predominantly originate from micro VC funds
“And so I do think the ones that choose to compete in that category will do so, for the most part, coming out of seed micro as a beginning point.”
Somerville: Evaluating VC Funds Requires 5-7 Year Forward Performance Projections
“What you need to build a view on is what projected performance can look like five to seven years from the point of assessment, and that requires having an understanding of the underlying companies, understanding what's showing traction, what that could mean, w…”
Somerville: Venture funds face scaling limits unlike buyout and growth equity
“Yeah, I mean, I think within venture, there's still limits to scaling that you don't see in large growth equity or in elements of buyout. I think there still is a limit You don't see a ton of multi-billion dollar funds, and even the funds that are above a bill…”
Somerville: Venture firms will continue raising opportunity and select growth funds
“Then you will see the continued emergence and raising of opportunity select and growth funds, and to the extent that those are backing companies that they're already in and building bigger positions behind it as a life cycle partner, I think it very much can m…”
Somerville: There is a shortage of dedicated Series B VC investors
“Yeah, I think there's definitely a shortage of dedicated B round investors.”
Somerville: Fund lifespans will extend as companies remain private longer
“Going back to companies staying private longer, that means that the life of funds will also stay in existence longer, and LPs of all different varieties have different tolerance for illiquidity and desire to stay into a fund into years. 10 to 15”
Somerville: Healthy VC firms plan generational transition 10 years ahead
“Generational transition is something that is very difficult for any firm to navigate, and so it being done gradually with a good plan in place where people are thinking about it even 10 years before it's going to happen is the mark of a good firm with a health…”
Somerville: High-Ownership Unrealized Winners Outweigh Early Liquidity for LPs
“For us, it's great unrealized positions with high ownership behind it that will ultimately matter at an aggregate level at the end of the day. So it doesn't matter necessarily if it's realized or unrealized.”
Somerville: Denominator effect forces LPs into secondaries to rebalance portfolios
“The denominator effect is effectively when you have both a public and a private book, the public side has gone down more significantly. The private side has come down, but not at the degree or the speed that you've seen the public side go down. And what you're…”
Somerville: Single 2021 Quarters Outpaced All 2022 VC Liquidity
“Twenty-twenty-one had quarters that exceeded all of twenty-twenty-two from a liquidity standpoint”