The Ledger
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Somerville: Generational Friction Will Cause Increased Infighting in VC Partnerships
“I think what you're gonna end up having happen is increased infighting in a lot of groups, because you have older GPs that have done very well that are staying on longer than they ever expected just because they're going to be needed to get funds raised in the…”
Somerville: Company secondary buyers lacking management relationships will get burned
“A lot of people that look at company secondaries Don't have a relationship with the management of these companies and don't get full information. So they're actually buying in a very imperfect way with not a lot of granularity on what actually the company is d…”
Somerville: No Tech IPOs Will Occur in the Next Two Years
“Company side, people, I think, think of a little bit differently philosophically, but at the same time, they know that there's not going to be an IPO in the next two years, and A lot of those constituents are smaller, they're high net worths, they're individua…”
Somerville: International and Middle East LPs Will Increasingly Fund Growth Venture
“I do. I think there will be a lot higher level of international participation and particularly in the growth funds just because on the growth side, you know, if you want to write a 50 to a hundred million dollar check, I mean, even in the early stage funds, if…”
Somerville: VC Asset Valuation Methodology Is Permanently Changed
“I never thought valuation policy would change as much as it did have public comp reliance option pricing modeling inserted, broad scale discretionary markdowns. I just think how people will value these assets has probably been forever changed on a go forward b…”
Somerville: Rapid 2020-2021 VC Deployments Face Multi-Vintage Returns Crisis
“You're not going to provide any vintage or diversification, and those funds will probably end up being challenged if they were concentrated in, in parts of, like, 20, 21, and you didn't smooth it out enough, and if you manage to do two or three funds within a …”
Somerville: Micro VC funds will face harder fundraising as LP market saturates
“It will increasingly become harder to raise subsequent iterations or to scale, and I think you've started to see that with even some groups that have a track record now and have done a pretty decent job struggling to find new LPs on the institutional side to c…”
Somerville: DPI will become crucial as LPs struggle to evaluate true TVPI
“Showing DPI is going to become more and more important. Mostly because LPs will struggle to evaluate what true TVPI is”
Somerville: Secondaries Will Be Essential for Early-Stage VC Liquidity
“And as a result of that, and as a result of the limited liquidity options, the secondary part of venture is going to be very significant for a long period of time. And I think pretty interesting and also a compliment from a duration standpoint If you're doing …”
Somerville: LPs will downsize fund commitments rather than abandon top managers
“I think what you'll see is smaller investment sizes in the managers that they like. In the ones they really like, they'll just stay the same instead of growing. And in the ones that are on the fringe or in their, you know, respective penalty boxes, as you may …”
Somerville: Massive venture valuation step-ups won't return near-term
“I don't think you're going to see massive upticks like we saw before where companies were raising it, you know, two X last round after six to nine months. I think we're not close to that environment nor will be in the near to medium term, but”
Somerville: VC Will See More GP-Led Restructurings Through 2025
“Venture is always slower to adopt some of these structures and I think we'll see a lot more of it in the second half of this year and the following two years.”
Somerville: LPs will demand fees on invested, not committed, growth capital
“For more branded, more established groups, I think there'll be more of a focus, particularly in the growth funds around invested capital instead of committed just because of the uncertainty of deployment and when that capital goes out the door, I think that wi…”
Somerville: Venture capital will re-concentrate focus on the US over emerging markets
“I think it depends on the region, but yes, I think there will be more of a re-emphasis on the US but certain, certain areas like people are much more excited about India and there continues to be interest in investing there.”
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: 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: 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”