The slap fight between VC emerging managers and mega funds is getting tired.
Yes, EMs, you are correct. The top 10% of you will (almost always) outperform the top 10% of the mega funds on a multiples basis.
But mega funds are not selling the same product as emerging managers. They are selling access to the companies that will be "generational". They'll be the names everyone knows, they'll dictate the technological changes ahead, and crucially they are likely to remain private for a very long time.
So if you're a major LP looking to invest billions, the pitch of owning generational names in their late-stage private phase is attractive! Even if the multiples may pale in comparison to the very best of the emerging venture managers.
(BTW, it's gotten much harder to pick the "very best" of emerging managers these days. There are thousands and thousands of funds and it's easy to miss the right managers)
So maybe we just say both strategies can work. If all you want is unicorns and mega-wins, investing in the expensive seed rounds and the largest funds is a viable path.
If you want to outperform on a multiples basis, and take chances with out-of-favor seed companies, emerging managers are your best bet.
Slap fight paused until further notice 🙏
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