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Venture secondaries are only 0.3% penetrated, representing a $100B opportunity
“Venture is 0.3% penetrated. So in that market, our estimation, we've done some analysis, 50 to a hundred billion, just In what we're doing.”
Traditional venture operating partners lack full status and check-writing power
“Probably the biggest difference is they're not full partners, and sometimes they're not in the full partner meetings, and they don't have the check writing capability in that if there's a follow-on or some financing, they have to go back to the partner group o…”
Traditional venture capital operates on an 'IPO or bust' ethos
“Since the dawn of venture capital, it's been IPO or bust. You're going to have these, we call them needle movers, these iconic companies that really define venture capital and define venture capital firms. The quest is about that versus we've got really good c…”
Orphaned mid-stage portfolio companies represent a dislocation across the VC industry
“I tested this with a lot of my peers and found that this was not just unique to NIA. This was really, this dislocation was happening across venture, which also made sense.”
Unlike VC, buyout private equity thrives on multi-tiered secondary sales
“On the flip side, if you go to the buyout world, it's this evolution of man, the lower middle market folks. Get companies, and they sell to the middle market folks, sell to the large cap folks, and you have that virtuous cycle. And actually, you have situation…”
Early venture secondary LPs expected steep discounts for high-quality assets
“Two pushbacks from new LPs. One, this was such a foreign concept. They'd never seen such a big venture secondary that wasn't a closeout fund or something else. That was one. The second is they were trading in discounts that were far greater than the discount f…”
Scaling past $10M ARR requires replacing hero sales with operational machinery
“Where you really need to institutionalize. You're going from a hero sale to more systems and processes. You probably need a CRO or a COO. Need a lot more metrics focused, and you need that machinery and that instrumentation layer to get formed.”
NewView underwrites growth investments to 3x to 5x returns
“You underwrite to a three to five X. You have a lower loss ratio to compensate. Maybe the upside isn't as a true power law early stage franchise.”
CEO and board alignment is the best hedge against secondary friction
“What we try to do really is make sure we have a really good relationship with the CEO. It's blessed by the CEO. It's blessed by the board. They see the value add capabilities. And that is the best hedge against any friction in us being able to transact.”
NewView avoids bidding at 80% discounts to protect VC GP relationships
“We won't go and say, we'll do it at an 80% discount. It just doesn't make sense for us because we'd rather not engage on that particular company because it Could be insulting to the GP.”
A 5% secondary discount can be more valuable than a 50% discount
“Discount is important, but I can show you a five percent discount on a company that's far greater than a 50%.”
Financial sponsor M&A will be a vibrant VC exit channel
“We've exited by financial sponsor M&A. That's going to be a very vibrant area over the next decade. And these folks like Vista, Tomo Bravo, and others are arming themselves with tens of billions.”
VC fundraising deadlines create a massive secondary market opportunity
“I would say that a real opportunity is just the explosion of venture firms realizing, okay, I have a fundraising calendar in 23 and 24. I need to do something about it, and that probably is the biggest opportunity, I would say, that's really emerged.”
Viswanathan: Venture secondaries market grew two orders of magnitude in 20 years
“If you fast forward 20 years, we spend a good chunk of our time focused in that market. It's changed in that it's probably two orders of magnitude larger in terms of market size.”
Downturns serve as referendums on startup product-market fit
“Saw a lot of business models that up until then was masked with capital, and that's something that every downturn is a referendum on product market fit. Whereas before, when you had that run-up, capital or some other factor masked that,”
VC generated 5x to 10x returns in two years during 1999
“I remember having conversations with folks and they thought, oh, if I invest in venture, I'll get a five to 10 X in two to three years, because in 1999, in the early part of 2000, that was actually happening.”
Investors must build a 'goodwill bank' to ask founders tough questions
“Building a relationship, coffees, dinners, lunches, whatever, with the CEO, with the management team, because what you're doing is you're building trust and respect, and you're building this goodwill bank such that when tough times happen, you have the agency …”
Venture-backed startups stay private 10 to 12 years, up from seven
“Companies, for sure, were staying private longer. Instead of seven, eight years, it was 10 to 12 years.”
Private equity secondaries market penetration doubled to 2% over a decade
“In private equity, it's about two percent penetrated, and that's doubled in the last decade from one percent to two percent.”
NewView concentrates 80% to 90% of capital in B2B software
“I'd say 80, 90% of what we do is B to B software and fintech, which is where I grew up investing in.”
NewView primarily targets software companies with $10M to $50M in ARR
“The 10 to fifty million zip code in terms of ARR or scale is a sweet spot for us. I'd say half, if not more, of what we do is there.”
Most NewView investments grow over 50% annually and remain unprofitable
“Most of our deals are well above 50%, many well of a hundred percent. Are unprofitable.”
NewView allocates 10% to 15% of its fund to early-stage bets
“Now, having said that we do leave, I'd say a small percent of our fund called 10 to 15%. We'll go early where it's a space we know really well, or a team we know really well, and we're willing to take that leap of faith and go earlier.”
NewView Capital gives operator partners fiduciary and check-writing capability
“We have five partners. Three of them are operators. One finance, one product, one go to market, and they're not operating partners. They're full partners. They have fiduciary capability. They have check writing capability. They're fully integrated”