The sun was shining in Berlin as this year’s SuperVenture conference got underway, and the mood among attendees was no less bright, despite the global downturn in VC dealmaking.
Adams Street Partners’ Ross Morrison kicked off the conference, which drew over 800 participants, stressing that innovation is constant and the “huge amount of innovation going on within venture capital makes it such an attractive asset class.”
The future of fundraising, ESG practices and falling valuations also stood out as key topics on the minds of global GPs and LPs.
VC: The land of optimism
Like Morrison’s presentation, the first panel of the conference focused on the positive aspects of the global and European VC markets—not surprising given the discussion was called “Snap back to reality: Being bullish in a bear market.”
Balderton Capital general partner Suranga Chandratillake summed up the views, describing the general health of the tech market in Europe and overseas as “underhyped.”
“I’m overall very enthusiastic and optimistic about where we find ourselves in Europe,” Chandratillake said. “It’s easy to get caught up with cyclical financial realities and macroeconomics trends, which obviously are having an impact, but we’re still seeing a lot of new companies being started, and investments are at a very high level compared to any year prior to 2020.”
To mark down or not to mark down?
No one can deny that VC valuations have taken a hit over the past 12 months, and even if investors believe in the health of the venture market, startup price tags are likely to come down further.
“More valuations cuts are coming,” Techstars CEO Maëlle Gavet said. “I think for many VCs, markdowns are below where they need to be. For LPs who have invested a lot in VC, there may be a few more painful months as their GPs are finally taking the markdowns that they need to take.”
But Aleksandra Zorylo, operating partner at Point Nine, believes that GPs shouldn’t be too hasty when slashing portfolio valuations—even in the current market conditions.
“I don’t think we should just mark everything down just because the market has gone down,” Zorylo said. “For early-stage companies, if they’re still progressing well, then marking them down at below cost isn’t really going to move the needle on the fund side because it will be years until you really see those returns. You have to pay more attention at the late stage. But if the companies still have healthy margins, then I don’t think it’s always necessary.”
Be different
With VC fundraising having a dismal year in Europe and the US, panels offering tips on how to raise capital in today’s market were crowd-pleasers at SuperVenture.
“Be different” was the key piece of advice offered by Lo Toney, founding managing partner at Plexo Capital.
“It’s important, especially in today’s fundraising environment, to have some element of differentiation,” Toney said. “As LPs, we see so many firms come in saying the same thing, and we want to invest in something that stands out. Entrepreneurs are looking for more than just a check these days, so GPs need to figure out their superpower and add value.”
Spotlight on ESG
Investors are paying more attention to ESG than ever before with the spotlight on the climate crisis and corporate governance. New regulation has been introduced in Europe in recent years, including the Sustainable Finance Disclosure Regulation, which requires asset managers and other financial market participants to publicly disclose ESG information.
“We’re definitely seeing more of a focus on ESG,” Seedcamp director Antonia Whitecourt said. “We have had quite a few calls with LPs specifically about ESG, which is encouraging, and they want to collaborate with VCs to make sure that it’s appropriate, but we still have a long journey ahead.”
But building sustainable ESG practices for the VC market is not without its challenges, cautioned Camilla Richards, head of investor relations at Atomico.
“We’re a little bit building the plane as we’re flying,” Richards said. “A lot of startups and GPs don’t have the resources or data on hand to be able to comply with the requirements. I think we need to have more of a standardized approach to ESG on the part of the LPs to help with the huge resource and time requirements.”
Featured image courtesy of SuperVenture
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