10 observations on private equity and venture capital

1. Over the last two decades, the private equity news and business has often been dominated by the largest funds: Blackstone, Apollo, Carlyle, Madison Dearborn, etc.

2. In the last decade, there has been an explosion of smaller funds, ranging from $50 million to several billion dollars.

3. Many of these smaller to midsize funds, $50 million to $10 billion, have performed incredibly well, many over a sustained period of time. Examples of these funds are Frontenac, LLR Partners, CP Founders, Vistria, Gauge Capital, Silver Oak and a lot more.

4. This next size level of funds has provided tremendous opportunity for private equity professionals, advisory firms, middle market firms and companies seeking investments.

5. The funds with the biggest dollars often make the most money for their firms. It is a simple law of larger numbers: 2 + 20 percent of $50 billion to $200 billion is more than 2 + 20 percent of $100 million to $10 billion.

6. However, a lot of small to midsize funds and venture capital funds have performed extremely well.

7. There has also been an explosion of venture capital funds. The venture capital funds are often smaller than the mega funds. We often see venture capital funds that have $50 million to $1 billion. Venture capital can have higher risk, but in periods where things go well can outperform the private equity funds investing in more mature growth companies. See: 7Wire Ventures, Andreessen Horowitz, LiveOak, Flare Capital and more.

8. When investing in venture capital, the investment sizes can be small at the seed stage but grow as one moves through the Series A and B and so forth. One needs to be prepared to back up the initial investments.

9. There has also been great growth in seed and venture capital funds that make a lot of relatively small investments. For example, we just interviewed a fund that has made nearly 200 investments over 5 years at small dollar amounts.

10. There is increasing growth in women-owned and women-led venture capital funds and slower growth in women-led private equity funds.


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