20VC: More $ Raised This Year Than The Past 15, War Chests Being Built & Decline In First Time Funds: So What The Heck Is Happening In Venture with Beezer Clarkson, Managing Director @ Sapphire Ventures

Beezer Clarkson is Managing Director @ Sapphire Ventures where she leads Sapphire’s investments in venture funds domestically and internationally. Prior to joining Sapphire, Beezer managed day-to-day operations @ DFJ’s Global Network, which had $7 billion under management across 16 venture funds worldwide. She has also spent time at Omidyar Network created by Ebay founder, Pierre Omdiyar, Hewlett Packard and Morgan Stanley. Beezer also runs the incredible openlp.com which is really opening up the world of LPs and if you have not checked that out, it really is a must! In Today’s Episode You Will Learn: 1.) How did Beezer make her way into the world of limited partners? 2.) $27bn was raised by 137 funds in Q1 + Q2 of 2016, what does this mean for the theory that venture is a game of the have's and have nots? How does this compare to previous years? 3.) How is the constriction in capital affecting first-time funds? How many were raised so far this year? What were the common characteristics in those that were successful? 4.) How is the Series A market performing this year? Does the data agree with the common thesis of the rise of the late stage 'private IPO'? Does this lack of liquidity concern Beezer? 5.) Why is Beezer so bullish on the future ahead for tech? How does Beezer think Brexit will affect the wider market? Items Mentioned In Today’s Episode: Beezer’s Most Recent Investment: SaaStr Fund As always you can follow The Twenty Minute VC, Harry and Beezer on Twitter here! Likewise, you can follow Harry on Snapchat here for mojito madness and all things 20VC. Angelloop is the leading post funding management platform for private market investors and their portfolio companies. They help investors manage and track their portfolio companies on the cloud while providing them with access to their investments performance data. Angelloop helps founders of startups track their performance, manage their cap table and keep their investors in the loop. Investors get free access while their portfolio companies pay only $49/Month. Use or share the promo-code 20MinVC to get your portfolio companies online with a two month trial. This episode was supported by Wunder Capital, the leading online investment platform that allows individuals to invest in large scale solar projects across the U. S. Wunder’s solar investment funds allow you to earn up to 11% annually, while diversifying your portfolio, curbing pollution and combating global climate change. Do well by doing good and sign up for a free account here and join the thousands of people that are already achieving their investment targets.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  You are listening to me, Harry Stebbings, at H Stebbings on Snapchat, and welcome back to another week in the world of the 20 Minute VC. Now, you might remember from a few months ago, we had the fantastic Beza Clarkson on the show from Sapphire Ventures. There, we heard her investment thesis, what she looks for in a fund manager, and much more. And if you haven't heard that show, it really is a must. But the other day, Beza and I were chatting about the stats and the data of the VC ecosystem. And we realised that this discussion and the roundup of this stats and analysis would make a fantastic podcast. So stay, Beza and I deep dive on the data and discuss the implications of this data for VC. And I'm thrilled to say this will be part of a series. Once a quarter, Beza will join me and we will break down the latest funding activity and what it means for the players in the ecosystem. I'm so excited for this going forward.

• 0:44Harry Stebbings?

  And as for Beza, if you missed the last episode, Beza is Managing Director at Sapphire Ventures, where she leads Sapphire's investments in venture funds domestically and internationally. And prior to joining Sapphire, Beza managed day-to-day operations at DFJ's Global Network, which had $7 billion under management across 16 venture funds worldwide. She also spent time at Omidyar Network, created by eBay founder Pierre Omidyar, Hewlett Packard, and Morgan Stanley. And Beza also runs the incredible openlp.com, the go-to place for LP articles and resources, which really is opening up the world of LPs. And if you haven't checked that out, it really is a must. I also want to say a huge thank you to Beza. What most of you don't know is that Beza's been of incredible support and advice to me in my own journey, and I'm so grateful to her for that.

• 1:28Harry Stebbings?

  But before we dive into the data today, one of the keys to doing well in this game is communication. And that's where Angel Loop come in. They're the experts in facilitating communication and data sharing between companies and investors. On the platform, founders can track their performance metrics and send out updates in real time to their investors on the state of their business. In turn, those investors can then help their founders with introductions, follow-on funding, and much more. And Angel Loop is free for all investors and only $59 for companies each month. Right now, they're offering a free two-month trial with the promo code 20minutavec. And you can check it out at angeloop.com or in the show notes. And the 20 Minute VC is also supported today by Wunder Capital, the award-winning online investment platform that allows

• 2:10Harry Stebbings?

  Individuals to invest in solar energy projects across the US and earn up to eight point five percent annually while diversifying your portfolio, curbing pollution and combating global climate change. All you have to do is create an account for free at wundercapital.com forward slash twenty minute VC, all in letters. That's wondercapital forward slash twenty minute VC. Do well by doing good with wonder capital. But now it's time to hand over the mic to the wonderful Beesa Clarkson, Managing Director at Sapphire Ventures.

• 2:43Speaker 01

  You have now arrived at your destination.

• 2:46Harry Stebbings?

  My word, Beesa, absolutely fantastic to have you on the show again for the very sp- special first episode of Beesa's Breakdown. But thank you so much for joining me today.

• 2:55Speaker 02

  Thank you for having me. It's a pleasure to be here.

• 2:57Harry Stebbings?

  Now, I'd love to start with a little question on, for all those living under a rock and didn't listen to your first time on the show and who don't know you already. Tell us where you are now and your role with Sapphire.

• 3:08Speaker 02

  Sure. So I'm a Managing Director at Sapphire Ventures. And for those not familiar with Sapphire, we are an international venture firm that has two lines of business. One line of business is a growth fund that invests directly into growth stage companies. So is what it sounds like. And the second one is an evergreen vehicle out of which we invest in early stage venture funds in US, Europe and Israel. So that makes us an LP and I manage the latter and oversee our fund investing.

• 3:34Harry Stebbings?

  And I want to start with with a bit on kind of the fund investments now. And we're going to kind of break down stats throughout this episode today. But I want to start by discussing a common accusation of venture that is a game of the one percent. So starting with, say, the amount of funds raised or invested into VC funds. We had twenty seven billion in the first half of this year going into one hundred and thirty seven funds. What do you think this means for the theory of the haves and the have nots?

• 4:01Speaker 02

  Well, I do think this is a year of haves and have nots. In fact, I think two thousand and sixteen is one for the books. It is a really interesting year full of a whole bunch of different data that's going to play out over time and a whole myriad of ways. We've actually now, at the end of Q three, we pulled some numbers thanks to our friends at PitchBook and there's been thirty three. Raised by one hundred and fifty seven funds. This is just in the U. S. And what's really interesting about this is we haven't seen this much money raised in one year. And of course, we're not even done with this year yet since two thousand and one. So that is a long time, but the number of funds that have been raised is down significantly. So even if we do a Q four that looks like Q three, you're still not going to be at.

• 4:41Speaker 02

  Maybe you'll be at two hundred funds, but we haven't seen this few funds raised in a year since going back to about somewhere around two thousand and ten, two thousand and eleven. So you have a lot of capital, but not going into as many funds as it has gone into historically. Hence the haves and have nots paradigm.

• 4:56Harry Stebbings?

  I I guess then the logical next question is, do you think this concentration of capital is fundamentally good or or not for the ecosystem that we all love so much?

• 5:06Speaker 02

  You know, it's hard to think of it as super concentrated, to be honest, because even though this year you've seen this shift into more larger funds being raised than statistically, a much bigger year, more five hundred million dollar funds being raised in a decline of these sub one hundred million dollar funds. But this is coming on the back of a number of years of thirty billion ish raises where you had a lot of micro funds raised. So even though there is concentration this year, it doesn't mean to say there's been concentration every year. And all that capital gets used at different times. There's a number of funds that raised this year that haven't even deployed yet. So the concentration might not be as acute as we think it is just from looking at the funds that raised. Does that make sense?

• 5:45Harry Stebbings?

  It does. Absolutely. In terms of kind of not deploying yet, this is a gap in my knowledge, which I'm thrilled that you'll be able to fix for me. When should funds start raising again? You know, founders, they have the nine month runway when they should start to look to raise it more, maybe their series A or B. When should funds start to look to raise again?

• 6:03Speaker 02

  The end goal is to make sure you're not out of the market. Funds start thinking about fundraising when they can see when they will be done investing their current fund. And there's usually some guidelines in the L P A, which is a legal document that guidelines for the relationship between the L P s and the G P s. And it will say that a new fund can't be raised before X, Y, and Z occur. Sometimes it's how much money is deployed in a fund or timeframe. But the bottom line is if I'm a fund and if I'm investing my fund and I know I'm going to be done with all the capital for new investments at the end of Q four. I want to have my next fund already lined up by then so that I can keep investing the next quarter and not miss a beat because entrepreneurs want me to have money.

• 6:42Harry Stebbings?

  I do want to go back to the kind of smaller amount of funds that are raised to huge fund sizes. And I'd love to hear, in terms of your role as an LP into those funds, how this affects the competitive landscape for you in terms of really getting into those best deals and the best funds?

• 6:58Speaker 02

  Well, so for us in our platform, we focus on Series A and we tend to use what we call the right size fund. So we don't always do many funds that are over 500 million. In fact, we've only done one historically. So we're not necessarily playing in a lot of that market that was very busy this year. So for us, that's good or bad, but it hasn't, we haven't engaged in a lot of those discussions. What's been much busier is all of the funds that are sub 500 million. And even if they haven't all closed this year, that doesn't mean to say there are not a number of funds fundraising. In fact, there was a recent pre-con report that said there is some 500-plus micro funds in the market right now globally. And there's also quite a few number of funds that have, the numbers of funds that have closed this year that are, just call it 150 to 450 are also up.

• 7:42Speaker 02

  So the concentration of capital is not just in the over $500 million funds, but in many funds edged up in size in general. So for us, you know, we, we compete to get into those funds along with other LPs. Some of our existing managers came back and so we had existing relationships to build off of. In general, though, our pacing has remained the same this year. We haven't deployed significantly more capital. We've just been keeping on doing what we're doing, so it's worked out well.

• 8:06Harry Stebbings?

  What's the thesis behind not being in the, the super funds of the Andreessen's and the Kleiners of the billion plus? I mean, for me, it's a worrying situation of fund economics. But, but for you, what's the thought process behind it in terms of not wanting to necessarily back over 500 or 600 million dollar funds?

• 8:23Speaker 02

  A couple of things. One, since we're focusing on funds that are predominantly Series A exposure, many funds, when they get into the 700 billion dollar fund size, are not predominantly Series A. They're doing other stages. And because on our platform, we have our own direct growth fund, we try to work in a complementary way. So we're investing in early-stage funds and then we do direct growth out of our direct growth fund. So for us, we're not looking for that kind of exposure. All LPs pick the kind of exposure they want. Some want everything from seed up to buyout. Some folks just like private equity, some folks just do venture. It's, it's a range. And for us in our LP work, we focus on Series A and that's predominantly done by most funds, most fund managers in slightly smaller than 500 million dollar funds.

• 9:07Speaker 02

  Doesn't mean to say we can't follow them up the stack, but we have historically not done as much of that.

• 9:11Harry Stebbings?

  And talking about those kind of sub five hundred million dollar funds, one aspect that I have a huge passion for is is the first time funds. So talk to me about the how the constriction in LP money, as we said there with the kind of concentration, how it's affecting first time fundraisers.

• 9:26Speaker 02

  It looks like it's been a tough year for first time fundraisers, I have to say. There are a number of first time funds that have closed this year are are at a new low, which is disappointing if you're a fan of first time funds.

• 9:38Harry Stebbings?

  Thanks, love you.

• 9:38Speaker 02

  Unfortunately, I wish I had better news. What I can say is through Q three, we have thirty, we have thirty one that we counted and it's it's sometimes, you know, we go through and we curate the data, we pull it from a number of sources and then we curate it. Because sometimes funds close one year and then do a final close a second year. So the numbers are a bit squishy, but we've counted about thirty one and this is down. You know, last year, just to give you some context, there was ninety four first time funds raised in two thousand and fifteen and a hundred and twenty in two thousand and fourteen. So this has been a bit of a trickier year.

• 10:07Harry Stebbings?

  This is depressing reading for me, yeah.

• 10:10Speaker 02

  It is depressing reading. It doesn't mean to say the game is over by any stretch. Like I said, things come in cycles and this year there was a real, if you remember, the beginning of the year had a real capital market challenge to it. And there was a lot of dynamics that pushed funds and LPs, the established funds raised and the if you are in a fund, so the established fund has an established LP base and they come back to market. There's a very natural need for the LPs to focus on that, which can take time and attention away from working with newer managers to their platform, right? E- existing funds as well as first time funds.

• 10:42Harry Stebbings?

  Absolutely.

• 10:42Speaker 02

  So maybe we'll see a change next year.

• 10:44Harry Stebbings?

  We spoke about the kind of capital markets there and slightly meta picture. And with the the mega funds, is there the perspective that the mega funds were aware of the kind of changes in the macroeconomic cycles? And were raising a war chest to to cover themselves essentially? Is there ever that thesis in the back of your mind?

• 11:02Speaker 02

  Certainly, that is a thesis that has been bandied about. I mean, what you had was a beginning of the year where Q4 of 2015 into 2016, the stock market was a roller coaster ride, right? And people didn't know if a massive recession was coming or if things would write themselves quickly. And so LPs showed a really notable preference for experienced managers that had weathered downturns, had existing LP bases and track records, which is a very rational thing to do in an uncertain market. It's also good to have money to deploy if valuations are going down in the age-old adage of buy low, sell high. So GPs who have been through ups and down cycles also understand this. And if their pacing of investing was such that they could come back to market, they did, which again is entirely logical. What also it contributed to, though,

• 11:47Speaker 02

  is if you have a number of funds coming back to market to raise, it can motivate other people to raise because in years past, right, in 2009, 2010, or back in '01, '02, when the market really collapsed, money literally does not exist anymore to be invested if you're an LP that has public stocks and public bonds and that evaporates. You literally do not have money to make your other commitments. So some managers came back, making sure that they got to it before money went away. And it ended up 2016 wasn't that, anywhere near that kind of a year. But in Q1, you just didn't know. So a lot of people came back to market. You can read into it any way you want, pessimistically or optimistically, but they came back to market in logical reasons and war chests were built up. And you saw that in the size of the funds being increased.

• 12:29Speaker 02

  You saw that in the number of larger funds versus the number of smaller funds. You saw that in the number of opportunity funds that were raised. And you saw it across the board. You saw it in direct companies. You had companies raising in Q4 2015 that aren't going to come back to market until 2017, which is also a very smart thing to do if you're a company and you're like, hmm, maybe I can raise now because it might be, who knows what it's going to be like in 2016. I mean, this behavior was just very prevalent.

• 12:55Harry Stebbings?

  And I I do wanna go back to to my my passion, the the first time funds. And we mentioned that the small number that did raise recently. What were the characteristics of those that did raise? Were there kind of commonalities in those that were successful?

• 13:08Speaker 02

  Sure. Well, you you'd see things that are potentially obvious, but were there in spades this year. Was that of the funds that have raised, they're notably a people that have existing venture experience before. I mean, the largest fund that was raised this year was Eight Partners, which is Joe Longsdale's new fund, and obviously, he's an experienced investor. They raised for over four hundred million. That is, you know, usually first time funds are sub a hundred million, so that was an outlier. But all of the post hundred million dollar funds were people that had experience. They may or may not even had existing LP bases from other funds that they could pull from. It's first time fund manager doesn't necessarily mean they're starting from a starting stop. They could be coming from somewhere else and no LPs, and that's a great way to anchor your fund the first time.

• 13:50Harry Stebbings?

  With the deterioration or diminishing amount of first time funds, do you think this goes contra, and it'll be interesting, especially with your kind of Series A hat on, do you think this goes contra the thesis of there being too many first time funds and the seed market being overcrowded?

• 14:05Speaker 02

  Well, it's certainly gonna be putting fewer of them into play this year. That doesn't mean to say all the ones that raised last year and the year before still aren't there. If people are investing on a two to three year timeframe, there's still plenty of funds. There should be plenty of funds with plenty of capital. Of course, if they spent it all, that's a different story, but you can't tell that from from the numbers that we have quite yet. So there doesn't seem to be evidence of people saying there's no capital. I would say this year does not feel like there's a capital shortage here. In fact, there's clearly a ton of capital in the market. So so we haven't seen that yet. Maybe it'll play out more in coming years. If the new small funds coming back to market are unable to raise, you might see that coming down. But you also still have capital in the hundred and fifty to two hundred, three hundred million dollar funds that could decide to go back

• 14:48Speaker 02

  into seed, right? It's not game over. They don't have to not do it.

• 14:51Harry Stebbings?

  And then as a Series A investor, then, how have you seen the Series A market performing this year?

• 14:57Speaker 02

  Well, you definitely see deal count and the number of funds done. Seed, Series A growth is down across the board. So it's Not just in the A, but Series A is also down. People have slowed their pacing notably. What's interesting is that deal value is still holding up, which says to us that there is a very similar trend going on on the direct investing that you're seeing on the LP side, which is namely investors on the whole seem to be exhibiting a flight to quality and acting with more caution and waiting to see more more metrics before investing. And it's playing out on the direct side and it's playing out on the LP side.

• 15:30Harry Stebbings?

  In terms of kind of flight to quality and those that are quality, we've seen obviously the huge growth stories and and they're entering often now the private IPO stage. So talk to me about this and is this kind of supposed rise correlated by the data? And then for you as an LP, obviously like everyone, you know, it needs cash on cash returns. Does it concern you the continuation of the private IPO?

• 15:54Speaker 02

  So I'm going to answer some chunks and when I fall off a question, bring me back in.

• 15:59Harry Stebbings?

  Got it.

• 15:59Speaker 02

  Yes, you definitely see it in the numbers because even though we're down on deal count for the year, there's already been some forty billion that has gone into US venture backed companies this year through Q three, which really isn't that much below. I mean, sixty billion went in last year, but two thousand and fourteen was fifty billion. So we're still in the zone. I mean, there's less. I guess I should say hard to raise is a relative term. And what's driving that is that there are, there have been some larger later rounds into well-known companies and that pushes the whole overall numbers way back up. And to your question about the private IPO, it's definitely put some tension into the market with, there's been a lot of discussion this year around how healthy is it to delay an IPO and what that means and should companies be coming back into the exit market?

• 16:41Speaker 02

  And from what our banker friends tell us, there are a number of companies now lined up that are looking to IPO. And while the stock market was frozen the first bit of the year, it seems to be thawing, which we're positive on, right? That's always a healthy exit market is always a good thing, right? Both on the M and A side as well as the IPO side. So we're optimistic that things will shift going forward. We have heard from a number of companies themselves that their thinking about being a public company is also changing and the sentiment is becoming more positive and they see the value in it. The crystal ball is still a little blurry for the future, but we think that there could be more of a move away from the private IPO into companies going public and moving down that path and sort of a reversion to what it used to look like before.

• 17:25Harry Stebbings?

  Absolutely. I was reading about earlier today, Snapchat contemplating going public and filing for IPO with. Goldman and J P Morgan, I think, if I'm right. But intrigued, why do you think then they're so diverse? Is it the regulatory aspects? Is it the kind of public pressure hurdles? Why do you think we have seen this build up of tension in the bottleneck pre-IPO?

• 17:45Speaker 02

  Well, there was a number of companies where capital was made available to them to stay private. And when you're private, there isn't all, there is a very different set of regulatory work. You don't have all of the pre-IPO work to go through. You don't, you're not a public company. There's different scrutiny. There's some slightly different considerations are taken into place. So if people had capital available to them from all the crossover investors, the mutual funds, the hedge funds, all those folks that were coming into the market, two thousand thirteen, fourteen, part of fifteen, and providing them with the suitable capital so that they could stay private, it was a logical choice. There is still far more money available always in the public market than there is in the private market because you have access to trillions. It's just larger and eventually companies seem to be recognizing that there is a, there

• 18:28Speaker 02

  can be a logical transition and many of the crossover investors also have left the market. Given the challenges in the public market, they pulled back pretty heavily end of two thousand fifteen into two thousand and sixteen. So some of that capital that was available to private companies is no longer available, which, you know, shifts your focus. There's certainly still companies that are staying private and they're very, you know, publicly talking about it and they're raising money from global sources. So it's not that it's stopped altogether, but there's definitely been less available.

• 18:55Harry Stebbings?

  And would you say that this kind of seamless transition from private to public that might be opening up is one of the main reasons you're so bullish on the future ahead for tech as a whole?

• 19:05Speaker 02

  It's certainly one of the inputs. I guess I think about the future of tech in two ways, as both inputs and outputs. And the exit side is the, one of the outputs. But the input side's also where, is where all the dynamic fund bits come in, like the innovation and all the disintermediation and the new ideas. And if you think about it, companies get started in good and bad years and it takes seven to 10 years, potentially longer if you go through this private IPO stuff, for them to exit. So all of the future of tech is driven by companies being created today. You know, who knows what the exit market looks like when they come through. And then for the exits that are occurring today, sure, I mean, the. Opening IPO market creates a lot of healthy dynamics. You know, most companies, just to keep in mind, don't IPO. The vast majority get bought.

• 19:48Speaker 02

  Or so M and A is the vast majority answer of how most companies exit. So that's still a really vital part of the market. But a healthy exit market helps maintain a healthy M and A market because it presents competition.

• 20:00Harry Stebbings?

  And then I'm going to tread in some dangerous political waters here, which I normally always tend to avoid. And I'm going to ask one question and it's, how do you think Brexit will affect the market and the European market and the wider market?

• 20:15Speaker 02

  It's an excellent question. I was going to ask you how Brexit's going, given you're based in London.

• 20:20Harry Stebbings?

  Oh, this is sort of, sort of, sort of, no way.

• 20:24Speaker 02

  But I would say, here's a, here's a general, here's a general thing. Markets don't always tend to do well in uncertainty. And you certainly saw some blips this year when Brexit was first happening, when the markets paused because they weren't sure how to price that in. It was not anticipated, right? And as the more information comes out and public markets can price that, what they expect to have happen in, that sort of works its way through the system in that way. What's, what's always really hard for folks is when they just don't know. And then markets sort of can act like, sort of separates out from the rational and irrational.

• 20:54Harry Stebbings?

  Do you think it'll be harder for European funds to raise? Or maybe let's be more specific, for UK funds to raise with such kind of macro uncertainty surrounding their tech environment?

• 21:06Speaker 02

  You know, certainly we have a European portfolio, some funds in London, some funds in other countries in uncontinental Europe. And we've certainly been talking to them. And so far, they feel like people are working their way through it. And we haven't seen, although I'm still sort of looking at some numbers for 2016, we haven't seen a notable drop off. So I would say so far, so good. And some of these things might actually take time to play its way out. And, and the other caveat I'd add is if you're an established fund with an established LP base, that's going to give you a lot of strength and backing. And your LPs know you and they, no one ever knows what the future holds. And when you're an LP, you're investing in what's called as a blind pool. And certainly nobody knows what the world looks like five years down the road from any sort of level. So you back managers that you

• 21:51Speaker 02

  Feel can figure out how to weather ups and downs and Brexit will be one of those things that people will have to figure out how to manage.

• 21:57Harry Stebbings?

  But I want to dive into a quick fire round with you now. So I say a short statement, you know how this goes, your immediate thoughts, 60 seconds or less, how does that sound?

• 22:04Speaker 02

  Sounds good.

• 22:05Harry Stebbings?

  Opportunity funds, only increasing or a fad?

• 22:09Speaker 02

  They've increased this year. We'll know if it continues on when we get to next year, but this year it's notable. So in the past, when we've looked at it, and just in case people aren't familiar with the term, opportunity funds, as we at Sapphire define it, are funds that a manager raises to invest in their own portfolio companies at a later stage, which is different from a growth fund that could invest in companies that they didn't do. And so by our account, again, it's not a perfect system because opportunity funds aren't labeled like GPs, opportunity fund for only doing our companies. And you kind of have to read the docs and try to figure it out. But on average, we've been seeing about five or so of these opportunity funds raised per year since 2011, and this year there were 14 closed.

• 22:50Speaker 02

  That as we saw it, which spiked the numbers to over 2 billion in opportunity funds, which is just, it's a significant event. I have a hard time seeing that that will continue because it's so notable and so off from historical trends, but time will only tell.

• 23:04Harry Stebbings?

  And then let's start with a positive approach and then we'll go to a slightly more negative. Where do you see the opportunity when you look at this data?

• 23:12Speaker 02

  Fred Wilson wrote a blog recently called The Hard Raise, and it was just so great for so many levels. But one of the things it really brought home was that a hard raise can actually work out incredibly well. And he talked about how Yun Square's first fund took 18 months for him to raise and it was incredibly hard, but how the the process itself and the self-reflection and the hearing no a ton of times and what that forced you to do to figure out your story and who you were and what you were going to do made it so much better. Like he just sort of put it out there, like hard raises aren't bad. So if you look at the data and you say, well, there's fewer funds this year and companies are having a bit of a harder time raising, like all of that can work out for the better. I mean, this is if people, for people who haven't read the blog, it was a great blog, so I'm not going to repeat it here, but.

• 23:52Harry Stebbings?

  We can link to it in the show notes. But then, okay, and then taking a slightly negative term. What concerns you with with some of the data? Mine's first time funds going down. What's yours?

• 24:01Speaker 02

  Yeah, so with my pessimist hat on, I say there is a lot of capital in the market. Because the exit market cooled the end of last year into this year, it kind of pushed this rational sort of more cautious investing approach, which helped manage some of the more bubbletious valuations that were happening.

• 24:17Harry Stebbings?

  Bubbletious.

• 24:20Speaker 02

  Just to use a term. But there's so much capital available if the exit markets open up, which is a healthy, wonderful thing. I see how there is this potential for a lot of money to come rushing back because you still have a very low interest rate environment, which means people are still looking for something to drive returns. So I don't know how long the calm will last. Ironically, if the exit market becomes healthy. So those interforces of those things can be worrisome because bubbles are challenging. They're not great.

• 24:47Harry Stebbings?

  Does changes in the interest rate market concern you?

• 24:49Speaker 02

  Not necessarily. They obviously have a number of different factors they impact, but one of the things this low interest rate market has been doing has been, for a lot of investors, it creates a lot of focus around venture that has not always historically been there because they're trying to find a way to find alpha because all the other instruments that used to deliver it are just lowered because of the lower interest rate.

• 25:08Harry Stebbings?

  And then I want to finish today on one of my favorites, which is your most recent investment and why you said yes.

• 25:14Speaker 02

  Sure. So after all this discussion of how we do, how our sweet spot is Series A, and on our last blog I talked about a Series A investment we made, we recently committed to Saster, which is a little bit before Series A.

• 25:26Harry Stebbings?

  Talk to me, talk to me. What is Saster Bees and tell me more.

• 25:29Speaker 02

  Here's our first time fund for you, just for you guys. So Jason Lemkin, who is a SaaS investor, and he comes in at the post-seed level. So he himself looks for certain metrics and performance in companies and has a sort of methodology to which he invests, which we found very attractive. Raised his first time fund this year called Saster, and it plays off into the community that's also called Saster. And what he's able to do is he's built this community in a very short period of time. We've known him for a number of years now, both as an entrepreneur in his first company and then through his time as a VC. He's built this community of Saster from a handful of folks, you know, a handful of years ago to, what, 10,000 people coming to his conference this year. It's this enormous global movement.

• 26:10Harry Stebbings?

  Will you be there?

• 26:11Speaker 02

  Of course, I'm there every year. Yes, so he's an example of a post-seed fund that we did as a first time fund. It was not a first time investor. Excited about the SaaS space. We're excited by, this is an example when we talk about a differentiated fund. Saster to me is a great example of that because the community he built, that's just really hard to replicate and it will deliver a significant amount of deal flow to him. And he still has to, you know, earn his right into the companies and all those things, but it's, when LPs talk about differentiation, sometimes it's hard to understand what that means, and this is just a great example. So this is awesome example of a time when we went earlier than our Series A, which we do selectively, of course.

• 26:49Harry Stebbings?

  Absolutely. And as I said, no better than Jason. It's such a pleasure working with him. But Beza, it has been so wonderful to have you on the show today. Thank you so much for joining me and I really appreciate you taking the time.

• 27:01Speaker 02

  Oh, thank you for having me.

• 27:04Harry Stebbings?

  Now, I do want to make a special point today in saying how fantastic it was to have Beza on the show and how excited I am to start Beza's breakdown once a quarter, where we'll deep dive on all the stats and data for the venture ecosystem and how grateful I am to her for all she's done for me. And if you love the show today with Beza and want to stay in the world of the 20 minute VC, then you can add me on Snapchat at H Stebbings with two Bs. You can also check out the incredible Open LP blog on openlp.com or sign up for the newsletter on the 20minutevc.com. That way you never have to miss an episode or an update from us. However, before we leave you today, and if you're a founder or investor, Angel Loop is a must. It's the leading post funding management platform for private market investors and their portfolio companies. Angel Loop help investors manage and track

• 27:46Harry Stebbings?

  their portfolio companies on the cloud while providing them with access to their investments' performance data. Angel Loop helps founders of startups track their performance, manage their cap table and keep their investors in the loop. And investors get free access while their portfolio companies pay only $59 per month. Use or share the promo code 20minvc to get your portfolio companies online with a two month trial. Also, do not forget to check out Wunder Capital, the award winning online investment platform that allows individuals to invest in solar energy projects across the US, earning up to 8.5% annually while diversifying their portfolio, curbing pollution and combating global climate change. All you have to do is create an account for free at wundercapital.com/20minvc, all in letters.

• 28:29Harry Stebbings?

  That's wundercapital.com/20minvc. Do well by doing good with Wunder Capital. As always, I so appreciate the support and you can always email me on [email protected], all in letters. And I'm so excited to bring you Wednesday's episode with Leon Wong, general partner at Spectrum 28.