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Posted Sep 1, 2023

Succeeding in today’s VC market: Perspectives from two venture capitalists

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Even though VC fundraising activity has fallen dramatically, entrepreneurs are pinching every penny until it squeaks, and the market is seeking its elusive “new normal,” venture capitalists are still going about their business. Juniper Square’s Danny Bloomstine caught up with Jake Fingert, managing partner at Camber Creek, a strategic VC firm that invests in technology companies targeting the real estate industry, and Abubakr “Mali” Malida, investor relations and operations manager at Alpha Partners, a growth equity firm focused on accelerating private technology companies, to discuss how firms can succeed at fundraising in this uncertain environment, along with what LPs are looking for and how best to serve them.

Here are a few highlights from those two conversations:

Be extra transparent

The current environment has increased LP interest in performance metrics and analytics. Both venture capitalists mentioned the importance of transparency and proactivity in sharing information. Fingert noted that Camber Creek has implemented processes and systems that allow deep and sophisticated analysis of performance at both the firm- and company-level. This allows the partners to engage in in-depth discussions with their LPs.

Malida added that LPs are keenly interested in portfolio valuation—in part because they want to know about distributions. “That topic has always been of interest to the LPs, but they’re even more sensitive to it now,” he said. His LPs are eager to know the details of portfolio performance, such as the companies’ financial health, cash runway, path to profitability, and exit timeline. Sharing details of evaluation approaches, and even internal policies and procedures, has proven to be increasingly important in building strong relationships with their investors.

Build meaningful relationships

Both Camber Creek and Alpha Partners also go beyond the typical reporting materials and provide ad hoc reports when their portfolio companies reach major milestones. Each also hosts quarterly Zoom events where they report on firm-level performance and often have some of their portfolio CEOs recount their views of the market. Alpha Partners augments its annual investor meeting with a seminar on growth equity investing, followed by presentations by some of their portfolio companies. The goal, Malida noted, is to stay in touch with LPs and be ready to address any questions they may have, whether it be macro or micro. He added that the firm “focuses on adding value beyond fund performance and returns.”

Malida noted how what’s old is indeed new again. “Since we can travel, unlike in 2020 and 2021, we’re making a concerted effort to attend conferences and meet people face-to-face,” he said. “We find LPs seem to feel more comfortable with GPs they’ve met in person. Even if an LP may not be able to invest in the current fund—this goes back to the distributions drought, which means LPs have less available capital to invest—we’re talking about a very long-term relationship.”

These relationships, both GPs commented, can endure for multiple decades. Fingert recalled a comment from his father, one of Camber’s first LPs: “People will see if you’re operating in the right way, if you’re doing the right things [in an uncertain environment]. And if you are, they'll want to work with you.”

Own your lane

Fingert, whose fourth fund closed in 2021, believes that a distinct strategy is as important as a good track record when it comes to raising capital. “Ten years ago, you could raise a fund based on a good track record [alone]. But now, a track record is table stakes,” he notes. “You need to have a clearly articulated strategy that will give you a serious advantage in your category.”

The future is (actually) bright

Unlike the Nasdaq crash of 2001, when the validity of venture capital as an asset class came into question, both GPs noted the enduring conviction about the category, even amidst this year’s struggles. Right now, Fingert sees that a number of LPs “seem to be taking a wait-and-see attitude” as they watch the behavior of their GPs, but he expects they “will start getting back into the market in 2024, certainly in 2025.”

Malida also talked about the potential of international investors: “LPs [around the world] will still want to invest in the U.S. VC ecosystem due to its long-term record of returns. Moreover, a lot of global investors seem to see the U.S. as a safe haven.”

Malida agreed with Fingert, who notes that, despite some headwinds, many of their LPs recognize that “now is a great time to be in the market, investing in great companies at great prices. It’s up to the GPs to make the most of it!”