Interviewed LPs Are Both Wary And Excited By Venture Investing

Raising a venture capital fund is no easy task, but funds continue to be formed under difficult conditions.

So clearly money is available and LPs are willing to commit it. The question is how to find the cash and approach who has it?

Here are several comments from today’s Venture Capital Journal’s Venture Alpha conference that may help guide you. You will find some encouraging and others discouraging.

But then that’s a reflection of the fundraising market:

Bret Jepsen

Jepsen (pictured) is a director at the San Francisco Employees Retirement System and says the pension fund allocates just under $1 billion to venture.

“We still see venture capital as a strong part of our program, with the caveat you have to choose your managers carefully,” he says.

To take advantage of opportunities in seed investing, Jepsen says he set up a separate fund of funds account to look at small funds of say $20 million to $30 million in size.

Andy Hayes

Hayes is a private equity investment officer at the Oregon Office of the State Treasurer and sees his allocation to venture remaining unchanged.

“I don’t know that we can grow it,” he says. “It’s hard to deploy the capital.”

That’s because the money manager has a small professional staff to monitor investments. Commitments also must be approved by a board that sometimes is uncomfortable with long horizon investments.

Institutional seed funds, he adds, are too small for consideration.

George Arnold

Arnold serves as a managing partner at the fund of funds Knightbridge Advisors and sees venture capital as a contrarian asset class. That keeps some LPs away.

“Venture capital is a very difficult asset class” because of the necessity to “understand what’s happening inside portfolios,” he says.

But it can be lucrative. Arnold says his goal is to outperform public markets with returns of 2x capital invested.

That should drum up new converts.