Managing Partner, Rebellion Ventures | Building AI Super Capability with Autonomous Operations and AI Agents
How does the performance of new and emerging boutique VC funds compare to large established VC funds? What factors explain these performance differences? We just released a new white paper that answers these questions with hard industry data: "𝐒𝐮𝐩𝐞𝐫𝐢𝐨𝐫 𝐑𝐞𝐭𝐮𝐫𝐧/𝐑𝐢𝐬𝐤 𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 𝐢𝐧 𝐍𝐞𝐰 𝐚𝐧𝐝 𝐄𝐦𝐞𝐫𝐠𝐢𝐧𝐠 𝐁𝐨𝐮𝐭𝐢𝐪𝐮𝐞 𝐕𝐂 𝐅𝐮𝐧𝐝𝐬." ℹ️ This paper aggregates and summarizes performance data, findings, and perspectives from VC industry data providers and analysts (e.g., Pitchbook, Cambridge Associates, Preqin) and LPs. ❌ Historically, many LPs viewed large established VC funds as the premier targets for investment due to their long history and known brands. 💡 However, 𝐢𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐝𝐚𝐭𝐚 𝐫𝐞𝐯𝐞𝐚𝐥𝐬 𝐭𝐡𝐚𝐭 𝐧𝐞𝐰 𝐚𝐧𝐝 𝐞𝐦𝐞𝐫𝐠𝐢𝐧𝐠 𝐛𝐨𝐮𝐭𝐢𝐪𝐮𝐞 𝐕𝐂 𝐟𝐮𝐧𝐝𝐬 𝐭𝐲𝐩𝐢𝐜𝐚𝐥𝐥𝐲 𝐨𝐮𝐭𝐩𝐞𝐫𝐟𝐨𝐫𝐦 𝐥𝐚𝐫𝐠𝐞 𝐞𝐬𝐭𝐚𝐛𝐥𝐢𝐬𝐡𝐞𝐝 𝐕𝐂 𝐟𝐮𝐧𝐝𝐬. New and emerging boutique VC funds typically deliver higher IRRs and return multiples than large established VC funds. Most of the top-performing VC funds in the industry are small, new and emerging boutiques. 📈 Interestingly, 𝐭𝐡𝐞 𝐬𝐮𝐩𝐞𝐫𝐢𝐨𝐫 𝐫𝐞𝐭𝐮𝐫𝐧 𝐩𝐫𝐨𝐟𝐢𝐥𝐞 𝐨𝐟 𝐧𝐞𝐰 𝐚𝐧𝐝 𝐞𝐦𝐞𝐫𝐠𝐢𝐧𝐠 𝐛𝐨𝐮𝐭𝐢𝐪𝐮𝐞 𝐕𝐂 𝐟𝐮𝐧𝐝𝐬 𝐢𝐬 𝐧𝐨𝐭 𝐚𝐬𝐬𝐨𝐜𝐢𝐚𝐭𝐞𝐝 𝐰𝐢𝐭𝐡 𝐚 𝐡𝐢𝐠𝐡𝐞𝐫 𝐫𝐢𝐬𝐤 𝐢𝐧 𝐭𝐞𝐫𝐦𝐬 𝐨𝐟 𝐝𝐨𝐰𝐧𝐬𝐢𝐝𝐞 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞. In fact, data shows that the bottom quartile of large established funds has worse returns than the bottom quartile of new and emerging boutique VC funds, meaning that the downside risk can be worse in a large established fund. 💪 𝐓𝐡𝐞 𝐬𝐮𝐩𝐞𝐫𝐢𝐨𝐫 𝐫𝐞𝐭𝐮𝐫𝐧/𝐫𝐢𝐬𝐤 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐨𝐟 𝐧𝐞𝐰 𝐚𝐧𝐝 𝐞𝐦𝐞𝐫𝐠𝐢𝐧𝐠 𝐛𝐨𝐮𝐭𝐢𝐪𝐮𝐞 𝐕𝐂 𝐟𝐮𝐧𝐝𝐬 𝐜𝐚𝐧 𝐛𝐞 𝐞𝐱𝐩𝐥𝐚𝐢𝐧𝐞𝐝 𝐛𝐲 𝐟𝐢𝐯𝐞 𝐤𝐞𝐲 𝐟𝐚𝐜𝐭𝐨𝐫𝐬: 1. New and emerging boutique VCs have smaller funds which are easier to earn high returns with. 2. They are more specialized, providing advantages in sourcing, selection, and value-add. 3. They allocate all or most of their capital to seed/pre-seed, which can enable higher multiples than multi-stage investing. 4. Their economic incentives are more dependent on maximizing investment returns (rather than on management fees). 5. They are extra-motivated as newcomers to prove themselves. See the white paper for more data and insights. https://lnkd.in/dnkmibs3
Thanks for sharing Jukka Alanen
Great summary
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thank you for compiling/sharing Jukka!
Great content thanks Jukka Alanen
Well done Jukka Alanen 👏
Great paper. Our data also suggests these emerging managers are picking in aggregate more unicorns earlier than the capital accumulators