Article: Why Institutional Investors Should Double Down on VC

In this article, Why Institutional Investors Should Double Down on VC, Dan Malven of 4490 Ventures summarizes the findings of a working paper, “Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds,” researched and written by Robert S. Harris, Tim Jenkinson, Steven N. Kaplan & Ruediger Stucke, and published by the National Bureau of Economic Research (NBER).

 

The paper, published in November 2020, contradicts the conventional wisdom that only a small handful of marquee VC managers are worthy of investment by institutional investors.

Instead, using a data source that was previously unavailable to researchers, the researchers found that VC firms’ outperformance is much more broadly distributed than previously understood. The decades-long belief has been that only top-quartile VC funds outperform public equities, but the data show that half of all VC fund managers outperform the public markets, and are therefore worthy of institutional investment.

The State of U.S. Early-Stage Venture: 1Q21

This time last year, the venture industry was upended by the COVID-19 pandemic. Most startups had trouble raising funds, even on investor-friendly terms. But by 3Q20, early-stage venture showed, and Q4 saw the industry come roaring back to have its in terms of markups.

In “The State of U.S. Early-Stage Venture: 1Q21,” AngelList Venture and Silicon Valley Bank report that that 2020 momentum has carried over, and outline the data and trends that have particularly marked the first quarter of 2021.

2021 Trends in Entrepreneurship Report

The Trends in Entrepreneurship Report brings together expertise and data from academia, industry and policymakers to highlight relevant topics facing entrepreneurs and investors today.

Our aim is for this information to guide leaders in their decision-making, as well as to highlight gaps in research and policy for leaders in academia and government.

 

The 2021 report, produced by the Kenan Institute of Private Enterprise and the UNC Kenan-Flagler’s Entrepreneurship Center, explores the following:

    • Initially, we explore the state of startups, small businesses and investments after a year – and global pandemic – have passed.
    • Then we dive into one of the hottest areas today: health innovation. We highlight trends related to
      COVID-19, as well as other relevant topics, such as how AI and machine learning are impacting innovations in health.
    • After that deep dive, we zoom out to explore broader trends related to investment structures, the impact of
      economic recovery funds distributed by the government, and other capital formation specific to entrepreneurs and small businesses. One of the major highlights is the disparity in funding as it relates to support for underrepresented groups in entrepreneurship.
    • We then take on the theme of diversity, equity and inclusion in entrepreneurship, highlighting some of the
      massive experimentation of the past several years to create more inclusive ecosystems through case studies and models, with a hope to inspire action and research related to these topics.
    • We conclude by examining factors inside organizations related to teams and talent, and how those elements play into the ongoing success of organizations.

2021 NVCA Yearbook

The annual NVCA Yearbook documents trends and analysis of venture capital activity in the United States from the past year and capturing historical data and information about venture’s role in fueling entrepreneurship in America. It provides statistics on the size and impact of the U.S. venture industry, investments into startups, capital raised and managed by venture capital firms, and exit activity either through an initial public offering (IPO) or merger and acquisition (M&A).

Key Takeaways: 

  • Global VC Investment – While global venture investment has increased, the share going to U.S. startups has declined, from 84% in 2004 to 51% in 2020.
  • 2020 U.S. IPOS – 103 venture-backed companies went public in 2020, accounting for 22% of all U.S. IPOs last year. These 103 companies represented $222b in value at IPO. VC-backed companies comprised 42% of all U.S. IPOs from 1974 to 2014.
  • Assets Under Management – Venture capital compared with other asset classes: $74.5b raised via VC funds in 2020 to deploy to promising startups
  • Median U.S. VC Fund Size – The median size of VC funds in the traditional venture hubs of California, Massachusetts, and New York is $100M. Outside those states, the median is $24.6M.

Report: Why New Black Venture Capital Will Generate Outsized Returns and Help Close the Racial Wealth Gap

Why New Black Venture Capital Will Generate Outsized Returns and Help Close the Racial Wealth Gap” – a new report by Culture Shift Labs.

 

About Culture Shift Labs:
Culture Shift Labs (CSL) is a diversity and innovation consultancy that provides services under three pillars: Advising, Strategy, and Activation. Since 2006, we have been a recognized leader in integrating social and financial returns in ways that improve businesses and society. Our Knowledge + Network Formula powers those outcomes in tangible ways

 

2020 VC Human Capital Survey

What does the venture capital (VC) industry workforce look like in terms of demographics? What is the current state of VC diversity, equity, and inclusion (DEI)? The VC Human Capital Survey, powered by Deloitte, National Venture Capital Association, and Venture Forward, answers these and other questions for VC firms seeking to expand the diversity of both their teams and portfolios.

The third edition of our VC Human Capital Survey assesses the state of the US VC industry workforce, with a special focus on DEI. Results from this edition were benchmarked against findings from the first and second editions, which were originally conducted in 2016 and 2018. Conducted in 2020, this third edition requested firm demographic information (e.g., investment stage focus) and demographic information for each employee (e.g., gender and race). Additionally, firms were asked to provide information regarding their talent management practices and DEI programs.

While there have been other industry assessments of VC diversity, this survey provides a more holistic perspective. We gathered data from VC firms of all types and sizes, examined DEI for a variety of groups across all types of positions, and assessed firm talent management strategies. (Learn more.)

Report: Guidance and Best Practices for Investors on Diversity & Female Entrepreneurship

Guidance and Best Practices for Investors on Diversity & Female Entrepreneurship is a report published by the British Venture Capital and Private Equity Association.

The report was commissioned by the Alison Rose Review and HM Treasury, and includes tactical guidance for investors to create an inclusive pipeline and portfolio. It was inspired by broad recognition in the investment community that diverse and inclusive portfolios have substantially lower risk and better performance.

 

High-level, the report recommends:

  • Implementing specific tactics to recruit diverse talent to your investment firm
  • Adopting specific practices to create an inclusive culture at your investment firm
  • Using tried-and-tested strategies to remove bias from the investment process
  • Engaging with portfolio companies using validated tools and tactics
  • Signing up to the Diversity VC standard

Fairview Capital’s 2020 Market Review of Woman and Minority-Owned Private Equity and Venture Capital Firms

This 2020 report by Fairview Capital examines the state of woman and minority-owned private equity and venture capital firms.

The following report shares key trends and data observed by Fairview in 2020.

  • The universe of woman and minority-owned firms now totals over 500 and continues to grow rapidly
  • New firms are raising smaller pools of capital and first-time funds represent a larger proportion of the opportunity set than ever before
  • New firm formation activity is most significant in venture capital, a segment of private equity that has proven highly resilient
  • Diverse managers continue to feature a natural diverse multiplier effect at the portfolio company level, while at the same time, firms explicitly targeting woman and minority entrepreneurs are at an all-time high
  • The need for intentionality and genuine programmatic approaches to backing woman and minority-owned firms is at peak levels

Institutional Investors Must Help Close the Race and Gender Gaps in Venture Capital

In this Harvard Business Review article by Ilene H. Lang and Reggie Van Lee, the authors discuss the role of institutional investors in addressing the race and gender gaps in their investment portfolios.

Recruiting for diversity in VC (TechCrunch)

Like many industries with a high concentration of wealth — and the careers that help professionals accumulate it — investment firms have a severe dearth of diversity in their ranks.