Venture capitalists have raised record-breaking funds in recent years, but that doesn’t always mean the money is there for them when they want it. In extreme downturns, limited partners or LPs — the people and institutions that promise capital to venture capital firms, and then wire it when the VCs need it for their startups — have little choice but to answer the phone less. The alternative is to sell others of their positions — including in publicly traded stocks — at a steep loss, and they’d really prefer not to do that.
“The public markets end up being the ATM for the illiquid stuff,” says Chris Douvos of Ahoy Capital, an LP who has backed such firms as First Round, Data Collective, and True Ventures. When the markets are in free fall as now, the collective reaction of asset managers, he says, is: “Holy smokes, this kind of sucks.”
What happens next depends on how sustained and deep this downturn proves, but LPs seem to agree that the the industry could be in for a reckoning this time that’s beyond their control. They have little choice but to get practical fast.
Already, newer managers are seeing …read more
Source: Tech Crunch