Friday Letter: Takeaways from our NY conference

There was talk of emerging managers, ESG and diversity at our in-person conference in NY. One fund manager is quietly optimistic about diversity in VC.

It’s been a busy week for me. I flew from San Francisco to New York, where I am now as I write this. I came here to participate in a live event, our two-day PartnerConnect East conference at the Harvard Club, held this past Wednesday and Thursday.

This is the same conference Venture Capital Journal has put on nationwide for the past 10-plus years for fund managers and advisers. We took a pause from hosting this in-person during the pandemic, obviously, but judging from the interaction and networking I saw, the LPs, GPs, advisory services and others in attendance were happy to meet up at an event again.

At PC East, we didn’t avoid the obvious. Many expressed how unusual it was to conduct an in-person event again and not via a computer screen. But there’s an analogy about riding a bike that is apt here. Speakers and moderators alike remembered how to participate in panel discussions and to network around a buffet table in between sessions, like we never forgot how. (However, I admit I forgot business cards are a thing, and that you hand them out and ask for them at conferences when meeting people.)

Here are some of my impressions of the event, from the panels I attended and moderated as well as my chats with people. Comments are minus the attributions, as per our Chatham House Rule that we follow for such events.

Emerging managers, ESG and diversity came up a lot as talking points at the event.

One speaker was asked about investing in diverse emerging managers.

“It’s absolutely growing,” they said. “The challenge in venture though is the size of the funds. All of us can look at the data and say, ‘Wow, it’s really attractive place to play.’ But some of these larger institutions are structurally limited from supporting them with check-size constraints. They simply can’t write a check small enough to invest in an emerging venture fund manager.”

Separately, a fund manager talked about what it’s like to work in the current climate.

“You have to be on top of everything. I do everything for the fund, all the fundamental stuff all the due diligence, interacting with the founders. And because the market is hot, we’re seeing a lot of us getting early markups,” the emerging fund manager said. “It’s pushing me toward the direction where fund two will be larger, and I’ll be able to professionalize and bring on more of the team. Even though it’s a lot of work now, it’s all progressing towards the right direction.”

The topic of diversity came up frequently, as well – and not just gender or ethnic diversity. One fund manager said they look at geographic diversity, a focus a lot more firms have picked up during the pandemic when it became easier to meet potential investments elsewhere.

“We just go where others are not going,” the venture fund manager said. “In the US, most venture capital goes to companies within three states – California, New York and Massachusetts – and then 75 percent of that goes California. So there’s a huge set of companies out there that people just aren’t seeing.”

The fund manager added their firm is typically the first institutional check in their portfolio companies.

“I’m finding companies in Memphis, Tennessee; St Louis; Baltimore – all over the country. That’s how I compete.”

In terms of diversity investing, a VC noted that they’re seeing more programs pop up focused on diversity and inclusion, including scout programs.

“The scout programs are giving individuals an opportunity to start building a track record and a lead into a venture career. Where this trend is going long term, honestly, I’m still skeptical. Right now, post the killing of George Floyd, we heard a lot about diversity. Now as we keep going, we’re starting to hear more and more about ESG while diversity is starting to quiet down a bit, but I am quietly optimistic.”

Let me know what you think. You can hit me up at agoldfisher@buyoutsinsider.com.