For those of you interested in the full presentation from Clearstone Ventures’ William Quigley on why he thinks we’re due for a venture capital revival (complete with cute title slide reference to the Sequoia “RIP: Good Times” presentation from back in 2006), we’ve embedded it below. Quigley draws on the recent fundraising numbers from venture funds to make the argument that VCs are due for some outsize returns — mostly, due to the disinterest of institutional investors in the sector. Quigley makes a good argument, as through multiple up and down cycles here in Southern California there most definitely have been some outsized returns on investments from those counter-cyclical investment fund.
The issue which venture funds face is that limited partners have been hit by the economic downturn, and as a result have become very conservative in their asset allocations. Those limited partners (Calpers is a poster child for the issues facing VCs) have suffered from their own fundraising ability. As few entrepreneurs seem to realize, those venture firms they are going to for funding themselves also have to go through their own, fundraising with institutions, family offices, and other sources of capital. The question is, if you follow Quigley’s argument for venture capital — is do the limited partners those VCs turn to for money also understand the opportunities available?