LP interest in venture grows, particularly the early stage, survey finds

A Probitas survey finds that more LPs are investing in venture compared with last year,

Limited partners are becoming more interested in venture capital, according to the latest institutional investor survey by Probitas Partners.

Last year, 33 percent of survey respondents said that they did not invest in VC, while this year the number fell to 25 percent, showing growing interest in the asset class.

In a separate report called LP Perspectives Study 2020, venture funds have had no trouble raising record amounts of capital from limited partners, but a considerable number of LPs remain skeptical of VC, according to the LP Perspectives Study 2020, which was produced by the research and analytics team of Private Equity International, an affiliate publication of Venture Capital Journal.

Probitas, a global advisory firm and placement agency, surveyed 92 LPs, including fund-of-funds, insurance companies, endowments and foundations, and public pension plans. More than half of the survey respondents are institutions based in North America and the rest are LPs from Europe, Asia and Australia.

The increase in the number of LPs allocating to venture capital corresponds to near-record VC fundraising activity. At the end of Q3, a report by PitchBook and National Venture Capital Association was estimating total 2019 VC fundraising to surpass $40 billion, which would be the second-highest year for venture fundraising of the decade.

Probitas’ survey showed that LPs are most interested in early-stage venture with 59 percent of respondents saying that they invest in early-stage funds. But few LPs indicated a clear focus on industry or theme funds, with only 24 percent of survey respondents saying that they invest in tech-only or life sciences-only funds. Other VC investment themes with marginal LP interest are fintech-only funds, which 8 percent of LPs in the survey focus on, and AI-only funds, which garnered interest from 5 percent of survey respondents.

Endowments and foundations continue to be the biggest supporters of venture. Only 8 percent of these LPs said they do not invest in the asset class, Probitas’ survey found.