Kevin Dowd’s Post

"Multiples" are essential tools in venture capital for quickly analyzing company value, but their role is hotly debated, especially among younger investors. Multiples help investors understand market trends and provide context by comparing terms to peers, though they are not precise valuation methods. As we go forward, over-reliance on crude comparisons risks creating market bubbles and harming returns, underscoring the need for more sophisticated valuation approaches. #VentureCapital

Are you paying attention to what’s going on in VC? "Continuation Funds are attractive for GPs. They might lose a little bit on the fund being restructured with a purchase discount to NAV, but they should make it back on the continuation because their carry will get calculated on the reset value of the portfolio." Secondaries are on the rise. If you’re in VC and you don’t know secondaries, now is the time.  👇 Learn more from my conversation with Hans Swildens from Industry Ventures published on OpenVC

The present state of the venture capital market remains challenging, as the availability of capital remains limited. Will this trend persist in Q4? Our latest Quarterly Outlook explores: https://okt.to/7qbAMy

A recent post by an Australian VC boasting outsized returns in excess of >4x led me to consider the question: Just what is the probability of an investor selecting a Venture Capital fund that beats a passive investment in the Nasdaq100 over a 10 year period? As you can see in the chart below I mapped the opening day price for each year of the Nasdaq100 and the advantage an active (lucky) approach would deliver since 1973 vs the #venturecapital benchmark of 3x What I discovered was there was a 50% chance of the average VC fund beating the passive approach over the past 4 decades - and a 17% chance if the passive investor got lucky through active management So the chances of VC beating passive come down to a coin toss But that's not quite right because this assumes venture capital returns follow a bell shaped distribution... they do not... they follow the all too familiar power law of their investment portfolios Apply the power law and you discover 50% of funds deliver a negative return and just 7.5% of funds achieve the VC benchmark or higher... it's the outsized returns of a handful of funds that makes the asset class so special So now when we do the maths and we discover your 50% chance of being in the 7.5% of funds that deliver >3x is in reality just 3.75% Or, put another way, you have a 1 in 27 chance of picking a VC who has the happy knack of consistently beating a 10 year investment in the passive index and I think this is perhaps something to think about the next time you are standing in front of the roulette table, contemplating a bet on the horses or maybe just listening to the collective wisdom of the self proclaimed unicorn whisperers... Just how hard is it to consistently pick a winner... most of the time?

The present state of the venture capital market remains challenging, as the availability of capital remains limited. Will this trend persist in Q4? Our latest Quarterly Outlook explores: https://okt.to/s7w5OJ

💡 In Q1 of this year, US VC funds amassed a record $311.6 billion in dry powder. However, the majority of this capital (73.1%) is concentrated in funds from the 2020-2022 vintages, which closed during a period of heightened market volatility and uncertainty. As a result, many VCs are taking a more cautious approach to deploying their cash reserves, focusing on supporting existing portfolio companies and being highly selective with new investments until public and private market valuations align more closely. This "wait-and-see" strategy has led to a slower pace of dealmaking, with VCs deploying just $227.9 billion in capital across all stages in recent quarters, even as the overall dry powder figure continues to climb. Learn more about the state of venture capital in our newest PitchBook-National Venture Capital Association Venture Monitor Report here: https://lnkd.in/gQVKSaWt

The present state of the venture capital market remains challenging, as the availability of capital remains limited. Will this trend persist in Q4? Our latest Quarterly Outlook explores: https://okt.to/iHj3LF

The present state of the venture capital market remains challenging, as the availability of capital remains limited. Will this trend persist in Q4? Our latest Quarterly Outlook explores: https://okt.to/fhIlKb

The present state of the venture capital market remains challenging, as the availability of capital remains limited. Will this trend persist in Q4? Our latest Quarterly Outlook explores: https://okt.to/EQ8vij

🚀 Is the VC winter thawing? 📈 A new Preqin report reveals a ray of hope amidst the venture capital chill. Despite a tough year with a 3% dip in VC funds, we're seeing a shift from the steep 20% drop of 2022. Uncertainty mixes with cautious optimism among investors. Are we on the verge of a VC spring, or is the frostbite of high interest rates and recession fears still a threat? Dive into the latest insights and join the discussion on the future of VC. #VentureCapital #MarketTrends #InvestmentInsights #PreqinReport #EconomicOutlook LinkedIn, let's debate: Will 2024 be the year of recovery or caution? 💼🔍