Alumni Ventures’ Fall RIA Educational Series

Frequently Asked Questions

FAQ

• Where is the transcript for this webinar?

  Speaker 1:

  The qualitative side is that adding venture can also provide advisors and the investors benefits beyond the portfolio performance piece. Many—in some of our conversations with organizations, like with you on the phone—many of the investors have interest in the general growth of the innovation economy. They are former executives themselves, their investors are investors—investors in new technology trends. They want to be aware of products and services and how that might be changing industry dynamics, whether it’s their own companies or just the general interest.

  It also allows and enables these advisors to have differentiated solution sets. The world has certainly evolved past traditional stocks and bonds and mutual funds and ETFs, and the growing list of open-ended alternative investment funds. Adding some of these newer alternative solutions—venture being one of them—newer to the wealth management space, not necessarily newer to the investing universe, but certainly newer to the wealth management space, can help differentiate your solution to your clients.

  And lastly, like all private equity and private market solutions, venture is a long-term asset class. And this allows you to build long-term relationships with your clients. You can work through the planning process and work through the portfolio growth process and building value and building those long-term relationships that we think venture can play a role in. And we would certainly like to be your partner to help deliver that solution.

  We are, as we talked about, a venture asset manager. We come to the wealth community. We think we have great solutions, but we know it begins with education. We build a lot of our effort to support our wealth management partners that we work with around understanding our asset class, understanding our approach, and understanding how we drive value through education. We have many events that we structure around our growing community, which provides access to our portfolio companies, to our investment professionals, our thought, our thinking around where the opportunities are.

  And then we do a number of events where we like to bring in our partners—both our direct investors and others—to get to know us directly and meet with the other members of the team, and then also meet with our portfolio companies.

  We have a handful of ways that we could work with you if you are interested. We have a core diversified solution that covers—sort of as David outlined—our approach across the different sectors and entry points of venture. We have more of a mid-stage follow-on strategy, and we have a variety of thematic programs if you wanted to get a specific industry or sector exposure of interest.

  That sort of concludes our direct remarks. We did get a couple questions. Certainly the chat box is open, but I’m just going to look in the box. I see three that we can address, and if others come up, certainly we’ll address them here. But if you have any questions you’d like to ask not in this forum, we would certainly encourage you to reach out to us. You can contact us through [email protected] and we will certainly return back to you with any comments on this presentation or any other questions you might have.

  The first question I’m going to push over to David—following the comments on where we are in the market. The question is on: where are we seeing valuations today from the peak of the ’21–’22 period to now? What’s been our experience with valuations with our portcos, and how are we seeing that in our underwriting?

  Speaker 2:

  Yeah, yeah, good question. So thanks, Jack. Well, as I mentioned, I characterized the first point—and the way I’d characterize it—as much more investor-friendly. So we’re seeing lower valuations, lower entry points. We had a seed deal we were looking at—it was the first time in a while it was single digits as kind of the valuation in terms of what’s a pre-money—and hadn’t seen that in a long time, a bunch of years. So I call that—that’s helpful, right? It’s right-sized, a little bit more normative.

  The businesses are as sound as ever. So it’s not really like we’re taking undue risk or anything with these businesses. It’s just more reasonable terms, more reasonable valuation. It’s really—there’s a pendulum in this market, and it swings. I’ll just describe it—on one side is entrepreneur-friendly. On the other is investor-friendly. And for years it’s been on the entrepreneur-friendly side.

  2018, 2019, 2020, 2021—everybody was being extra friendly with entrepreneurs. Multiple term sheets, higher valuations, etc. And that led to a bit of a bubble. But certainly less—I would call it less ideal governance, valuations that made sense. That swung back the other way—and it’s swung back rather rapidly, right?

  So right now we’re still seeing very strong on the investor-friendly side. Harder to raise capital for companies. It’s okay. It’s more balanced. It’s more fair. Companies appreciate the capital, I think, longer. And in these markets—this is where those “recession babies,” while we’re not in a recession directly—these phases of venture capital form fantastic companies.

  So we’re really excited about where the market is now—and where it’s been really for the past year—and where it is now and continuing.

  Speaker 1:

  Great. We have two questions. One is an investment question, one’s an operations—but I’ll take the operations question first, then I’ll send the one back over to you, David.

  So the operations question is: Are our solutions…?

  So the quick answer is no. Our solutions are traditional private market funds. Our direct-to-investor business operates slightly differently than our institutional business, but in both cases they are traditional private funds with 10-year lives, with extensions. We’d be happy to explain that in more detail if anyone wants to learn a little bit more about how either side of our business works—on the direct investor side, which is largely oriented towards accredited investors, and our institutional business.

  And then on the other investment question—David, I’ll pass to you. I think we’ve addressed this a little bit, but it asks: How does AV invest in general? Are we sector specialists or are we generalists?

  Speaker 2:

  I suppose the answer is a bit of both, right?

  So first, our model overall at Alumni Ventures—and with each of our funds, really setting aside the sector funds (and that’s what I’m going to come back to)—is a generalist model. We are looking to build diversified portfolios—and diversified across geography, sector, and stage, as well as lead investor.

  So we’ll do, from one alumni fund, 25 deals or so—all with top-quartile venture firms on the boards, leading the rounds—but it can be different sectors. That’s by design. We want to make sure that we’re not taking sector risk on, or political risk, or geographical risk—by building a portfolio that doesn’t have those dynamics. So that leads us to be generalists as we build a portfolio.

  That said, we all have various expertise that we can lean on and tap into for a little more depth around sectors.

  Just as a quick example—I co-run the Health Tech Fund, right? For a long time now, for over a decade, I’ve been in the health tech investing space. And at my prior firm I did it almost exclusively for a few years. So healthcare IT, med tech, med devices—not so much life science—but all the rest. So a pretty deep area of expertise for me that I can tap into, for example, both in the deals we’re seeing for an alum fund but also related to health tech.

  Similarly, we’ve got colleagues with really, really great depth on AI, or financial services/fintech, or other areas like that—deep tech in particular. So we can share notes. If we come across a very interesting AI deal or deep tech deal, I can run it by my colleagues and get their opinions and tap into the Alumni Ventures network.

  We have 10,000 experts at least now across the network that we can tap into for diligence and expertise to augment what we’re seeing and thinking. So it’s kind of a combination of—we think about it as T-shaped, right?

  All of us as investors should be T-shaped. We need to be broad and sort of generalists—we’re a co-investor. We need to understand the deal dynamics, the dynamics among the investors—new and old—what are the terms, what are the valuations, etc.? How does the round composition come together? But we also, of course, want to be the depth there in some sectors—whether that’s individual or across the board.

  So across the team, we have great depth in addition to generally having that generalist model in our portfolio building. Hopefully that’s helpful. Happy to go into more detail.

  Speaker 1:

  I’ll do one final question to see if there are any questions that the group wants to ask, but those are the three that came through.

  While we’re waiting, I will just remind those on this line—if you would like to continue this journey with us—we will do our next session, Lessons in Underwriting Venture Deals, in mid-November. I think it’s about literally a month from today or tomorrow. We’d welcome your participation in that, which will get into our views on the underwriting process. We’ll use some deal examples that we’ve done ourselves.

  And then, as I mentioned, in December we’ll look a little bit more into the broad trends driving the market and influencing where we’re putting capital, as well as where we’re seeing other people move capital.

  Not seeing any other questions pop up at the moment, so I will thank everyone that joined us. Appreciate you taking out part of your day to listen to us, and hopefully this provides some insights into the venture marketplace. As you think about your own portfolio needs for your clients, we think venture could be a great tool to add to your toolkit, and we’d be happy to explain more how we could help you do it.

  With that, have a great afternoon.