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Alternative Market Briefing

As venture capital overheats, investors stress caution

Friday, June 14, 2019

Bailey McCann, Opalesque New York:

As venture capital valuations continue to rise, delegates at the recent Opalesque North America PE/VC Roundtable argue that we've reached a point in the cycle where it is prudent to be very selective about investment opportunities. The combination of rising valuations and rising dry powder puts pressure on VC managers to invest, which could lead to less discipline. Some managers are turning to specialization in response to higher valuations, they argue that this route can ensure discipline and more consistent returns.

"Venture capital is very interesting for us, but it's one of those areas right now that is very expensive, so it's hard for the underlying funds to find things and investments that are not already fully priced," said Christopher Zook, Chairman and Chief Investment Officer at CAZ Investments. He adds that as investors, they're willing to invest in an opportunity that is fully priced as long as the business model executes, which makes it important to work with managers that can be trusted and have a long track record of success in venture capital.

His thoughts were echoed by Ronen Schwartzman, CIO at the Cooper Family Office. "We absolutely pay attention to the valuations of the companies we invest in and will not invest at any price," he said.

Schwartzman looks for strong managers but has also built relationships with other family offices and will invest early in specific deals as well. "We typic......................

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