Thu, Aug 25, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Private Equity Strategies

Insiders View: Venture Capital Investments Have Changed Slightly, But Still Provide Value

Tuesday, July 23, 2013

By: Bailey McCann, Private Equity Strategies

Since its consolidation, venture capital has had a hard time gaining traction with investors. Following the crisis, many were wary of making investments that come embedded with a significant, if not likely, blowout risk. Yet, veterans in the space say that dealflow is strong, and opportunities abound.

It may not be the go-go years of the 1990s internet boom, but some VC transactions are still making waves. What’s bubbling below the surface is how those transactions have changed. Instead of building the internet as we know it, VC funding is now going to niches and disrupters like Air BnB or Uber, which turn common services like hotel bookings or hailing a taxi into peer, based transactions.

VC investments too, are smaller as new technology has enabled super lean startups to qualify for VC attention. Larger investors in the space note that they’re looking at smaller funds that make investments on the order of thousands of dollar investments in many companies instead of million dollar investments in just a few.

Hall Capital is one of those investors. They’ve been in the VC space for a number of years as part of their overall interest in private equity. Hall Capital is an outsourced CIO with approximately $25.1bn under management, $10.4bn of that is in alternatives. The firm builds global multi-asset class investment portfolios for families, endowments, and foundations and provides a platform of pooled vehicles.

“With the low cost these days of starting a new technology company, the challenge with venture investing is fund size. We have been investing in recent years with smaller funds that are better able to target small seed stage investments,” Rachel D. Kort, managing director and member of Hall Capital’s Portfolio Management practice, tells Private Equity Strategies.

Despite taking a fairly conservative stance when building their portfolios, Hall Capital still sees value in venture capital.

"We expect a lot of portfolio companies in seed investing and VC to return zero, but we see significant value in the few successes,” says Simon Krinsky, Director of Portfolio Management at Hall. “"With seed investing, like many VC strategies, you make a number of investments and you expect that probably only one or two will be very successful and end up making the fund."

He notes that in order to realize value now, investors have to make the right size of investment at the right time, based on proven, fundamental venture strategies. That may look like a $200,000 investment in an unproven company, rather than waiting to make a $2 million investment when it’s more developed. “In the US we've gone back to emphasizing seed and traditional VC investments over large and mega-buyout strategies, balanced against some later stage funding, particularly in the emerging markets."

 
This article was published in Opalesque's Private Equity Strategies our monthly research update on the global private equity landscape including all sectors and market caps.
Private Equity Strategies
Private Equity Strategies
Private Equity Strategies
Private Equity Strategies


Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. LatAm hedge funds surge in 1H to +24.4%, emerging markets assets rise[more]

    Komfie Manalo, Opalesque Asia: Hedge funds investing in Latin America posted strong gains through mid-2016, reversing declines in four of the past five years, including the last three years, to lead all areas of hedge fund performance through the first half of 2016, according to the latest HFR Em

  2. Asia - LGT Capital Partners: Alternatives set for continued rise in Asia[more]

    From Asianinvestor.net: More flows are likely into insurance-linked strategies, private equity and trend-following strategies/CTAs, given the benefits of such investments, argues LGT Capital Partners. Despite the numerous quantitative easing programs and bailouts of recent years, the quest for

  3. Investors yank money from hedge funds after poor performance[more]

    From Marketwatch.com: A growing exodus from hedge funds extended to two of the biggest names in the industry Tuesday, Tudor Investment Corp. and Brevan Howard, as disenchanted investors increasingly shun what was once the hottest place to put money. The funds’ problem is clear: They just aren’t perf

  4. Banks look at hedge funds differently - and it should matter to allocators[more]

    From Valuewalk.com: Looking at two bank reports on the same topic can often yield interesting results. There are times when bank research is best viewed from the standpoint of how their analysis does or does not correlate with one another. Regarding hedge fund allocation decisions, one bank appears

  5. Legal - Hedge fund’s fixer kept deals flowing with bribes, U.S. says, Big four banks sued by U.S. hedge funds over BBSW, Lessons for hedge fund managers from the government's failed prosecution of alleged insider trading[more]

    Hedge fund’s fixer kept deals flowing with bribes, U.S. says From Bloomberg.com: With the Miami villa, stopovers at New York’s Plaza Hotel and millions channeled in bribes to win mining deals, Samuel Mebiame was the relationships guy in a corruption scheme that spanned continents, accord