We are all busy wrapping up stuff before the summer break hits, and I just wanted to share some notes from the last SuperVenture event in Berlin and the numerous AGMs and conversations with fund managers that have happened in the last month.

1. Heard in the Adam Street’s presentation at SuperVenture: “how GPs manage liquidity in the boom cycle gives you an idea of their portfolio management skills”. Makes sense, and unfortunately we will see some managers suffering for not optimizing for liquidity in the boom cycle.
2. In another session at SuperVenture it was mentioned that the VC industry is not consolidated and there are too many VC firms in the US. Might be the case in some of the more developed European markets. We are starting to see consolidation in Europe (EQT -> LSP, Carlyle -> Abingworth, BlackRock -> Kreos, …) but more to come. Down cycles are good occasions for consolidation. And size matters when building strong VC platforms.
3. Heard through the grapevine: VCs are avoiding rounds in their portcos to avoid pricing them… raising debt, cutting costs to extend runways. Nobody likes mark-downs, but I fear that until prices are adjusted, everybody is looking at everybody and waiting to see who takes the first step: VCs look at entrepreneurs, LPs look at VCs… Price adjustment is a requirement for liquidity both for VCs investing in startups and for LPs investing in VCs (although there are other factors that hinder new commitments from LPs). Price adjustments are also key to revive the agonizing exit market.
4. Fundraising is difficult for everyone, from established firms to first-time teams. For the latter it might be a make or break moment, for established firms it might be a matter of adjusting size expectations. In any case, readjustment of target fund sizes and extension of fundraising periods are quite usual nowadays. Emerging teams should not be afraid of extending fundraising periods from 12 to 18 months because of potential negative signalling effect, in this macro environment LPs will understand. But most importantly, strategies need to be adjusted to the new fundraising dynamics. Adjust your strategy to deliver on your investment thesis and hopefully the next fund generation will be raised in a better macro environment. I had a very negative experience in 2008 with my first VC job were fundraising froze after Lehman Bros collapsed and our strategy was not adjusted, leaving the fund under-diversified and doomed.
5. Bust cycles are times for the aggressive cap table recaps: non-participating investors take 80-90% dilution. I have been there in 2009-2011 after the Great Financial Crisis. Not the Board discussions you want to have.
6. An interesting quote from the SuperVenture corridors regarding asset pricing: in public markets, you need to fool 20,000 people. In private markets you just need to fool four people and that sets the valuation of the company.
7. In a very nice dinner in a Berlin restaurant, I had a chance to discuss the topic of US vs European VC performance. All seemed clearly in favour of the US until I asked what would be the expected net return for a FoF composed of US VC funds: 2x net to LPs for growth VC portfolio and 2.5x net for early stage VC portfolio. Well well, then old Europe might be still in good shape from what I have heard from European VC FoFs… Also related to the topic of US vs European VC, many people in the dinner seemed to agree on the lack of peer pressure in Europe: “in the US, if I don’t sprint, 20 people will pass me”, and “in the US, VCs have peer pressure to perform very well, which is not happening in Europe. Partners at established firms don’t source deals, don’t talk to entrepreneurs until the last partners meeting”, said by a European entrepreneur having experience on both sides of the Atlantic. We also discussed on the fact that only well-heeled people can create a business and attract capital. A whole topic on diversity, inclusion, and privileges that I will not open now.
8. And after the dinner, a breakfast on the topic of the moment… AI. I remember joining the Computer Science department of my Uni as a sophomore and researching during my free time on…. yes, artificial intelligence. That was 1993, exactly 30 years ago. I programmed expert systems in Prolog and Neural Network theory was quite advanced at that time. I played at that time with genetic algorithms to generate buy/sell signals for the stock market (which didn’t make me rich of course), the kind of stuff you do when you are young. What happened in the last 30 years, asked me an LP? more computing power and more, much more data available. We had a great discussion on how more specialized generative AI models would prevail over generalist ones, and how we would have AI lawyers, AI programmers, AI assistants (it would be great if an AI platform could arrange all the steps to renew my kids’ passports), etc… Some companies are already requiring lower number of programmers to generate code as AI models can increase productivity dramatically. It looks to me as the AWS revolution which brought down the costs of starting up an internet business dramatically. Less barriers to entry mean more innovation. Great opportunities ahead!
9. And finally, a book recommendation that I have heard from multiple sources lately: Chip War. I am a bit ashamed I haven’t read it yet given my background in semiconductors but this could be a nice summer reading.

Have a great summer because the world needs you in good shape.