PitchBook News - Why seed investors leave comfy VC firms

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The Weekend Pitch

June 23, 2024

Presented by Deloitte

(Chloe Ladwig/PitchBook News)

Becoming a GP at a major venture firm is a golden ticket for life. The initial whiplash can be extreme: You'll find yourself skiing in Aspen on the weekdays (the weekends are just too crowded, after all), swapping Aritzia for Balenciaga, and shopping for timeshares in Sun Valley.

It's a luxurious life. So why would anyone ever leave? I've been digging into that question for the last few weeks, as I noticed more and more examples of dealmakers at blue-chip firms spinning up their own funds.

Vic Singh, who spent the last 15 years building seed VC Eniac Ventures, announced that he was starting a new firm last month. Cowboy Ventures' former partner Amanda Robson is raising her own seed fund. A trio of star GPs—Kristina Shen of a16z, Ethan Kurzweil of Bessemer and Mark Goldberg of Index Ventures—have left their respective firms to co-found a new venture fund.

I spoke to three others, all partners at established firms, who have recently left their lucrative jobs to raise a first-time fund—despite 2024 being the most unforgiving LP fundraising landscape in the last decade. All asked to keep their plans confidential because of regulations that limit how private funds can be advertised.

Leaving a well-established firm to launch an upstart fund is daunting in the best of times. Not only does it typically come with a short-term salary cut, it also means tough conversations with both founders and LPs, often with no guarantee that your old firm will sign off on your investment track record.

But increasingly, seed investors are buying into the trade-off because they want the upside: they're taking more financial instability in the short run and betting that it'll pay off in the next bull run.

I'm Rosie Bradbury and this is The Weekend Pitch. You can reach me at rosie.bradbury@pitchbook.com or @_RosieBradbury on X.

Trivia

The enterprise SaaS vertical has leveled out, according to our latest Emerging Tech Research. But with its broad focus on catering to a wide swath of business needs, enterprise SaaS hasn't enjoyed a resurgence yet. How much deal value was generated in Q1 2024, according to PitchBook data?

A) $9.7 billion
B) $18.3 billion
C) $12.2 billion
D) $14.5 billion

Find your answer at the bottom of The Weekend Pitch!

PE healthcare investors pile into pharma services

(Phuchit/Getty Images)

Over the past two years, pharma services has emerged as the hottest area of healthcare for PE investment. The sector covers contract and outsourced services for the biopharmaceutical industry. Our Launch Report: Pharma Services kicks off with breakdowns of the sector's four segments: outsourcing, clinical services, consulting services, and manufacturing and distribution.

Three key trends have powered growth and investment in pharma services: scientific advancements, a growing emphasis on specialty drugs and consolidation opportunities for outsourcing organizations.

Infrastructure shines bright among other real assets

In Q1 2024, real assets fundraising was light—but by no means stagnant—reaching $26.8 billion following an active Q4. The capital raised was overwhelmingly allocated to infrastructure vehicles due in part to their dependable cash flows amid the high interest rate environment, while other sectors like oil and gas experienced a decline, as reported in our Q1 2024 Global Real Assets Report.

After a massive $106.8 billion in Q4 commitments, a natural fundraising lull occurred in Q1, leading to a 74.9% quarterly drop in raised capital.

Of the 13 infrastructure funds that closed, nine were core, core plus or debt vehicles, indicating some preference for lower-risk, lower-return strategies.

While natural resources are seeing more activity in the public markets, private investors continue their pivot away from the sector following peak prices reached around the global financial crisis.

A collaborative approach to boosting enterprise SaaS

VC dealmaking in the enterprise SaaS market has leveled out. Deal value settled at $12.2 billion in Q1—a 15.5% drop from the previous quarter—while deal count ticked up around 3% to 666.

In our latest Emerging Tech Research, senior analyst Derek Hernandez highlights how startups in the emerging analytics collaboration space are innovating—allowing business intelligence to be enhanced by enabling users to share insights across a wide spectrum of perspectives. The report also highlights the startups in that space, like Deepnote, that are attracting investor attention.

Quote/Unquote

(Courtesy of Vecna Robotics)

"It remains a challenging fundraising environment, particularly for companies with several years of operating history. In some ways, it's easier to sell a visionary idea as a pitch when you don't have any operational history than comparing yourself against your forecast."

—Craig Malloy, CEO of autonomous forklift startup Vecna Robotics, speaking to PitchBook after raising a $100 million Series C.

Stay tuned

Keep an eye out for these insights and research reports coming out this week:

2024 US Venture Capital Outlook: Midyear Update
Q1 2024 UK Snapshot
Q2 2024 Allocator Solutions
Q1 2024 Digital Health Report
2024 European Private Capital Outlook: Midyear Update
Analyst Note: The Foundational Model Horse Race

Trivia

Answer: C)

In Q1, $12.2 billion in deal value was generated across 666 deals within enterprise SaaS. You can read more about the key trends, deals and emerging opportunities driving the space by reading our latest report on the sector.

This edition of The Weekend Pitch was written by Rosie Bradbury and Jacob Robbins. It was edited by James Thorne and Ron Prichard.

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PitchBook News - Why seed investors leave comfy VC firms

Trivia

PE healthcare investors pile into pharma services

Infrastructure shines bright among other real assets

A collaborative approach to boosting enterprise SaaS

Quote/Unquote

Stay tuned

Trivia

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