The year started with expectations (and signals) of a reset for venture. LPs scrutinized valuations and venture-backed companies were scurrying to recalibrate burn rates, growth targets, and fundraising plans, hoping to grow into overly optimistic valuations. As 2023 unfolded public markets rallied and fundamentals held up, delaying the anticipated reckoning. Midway through the year we see swirling crosscurrents in venture that need to be carefully considered and monitored. Managing Partners Catherine Crocket and Bruce Ou summarize the key trends in venture and aspects of the current landscape that make it an attractive period for experienced LPs.
GroveStreet advisor and Harvard Business School professor, Josh Lerner and his team of research colleagues have developed a new, simulation-based private equity forecasting model. The approach preserves the simplicity and intuition of the widely used, decades old deterministic model pioneered by Dean Takahashi and Seth Alexander at Yale, while addressing some of its shortcomings. An abstract on the new model can be found on the HBS website, which includes a link to the full article in the Journal of Portfolio Management.
GroveStreet collaborated with Josh’s team to put the new model into practice for investors. Combining GroveStreet’s two decades of private equity experience and data with the new forecasting model, we jointly developed a highly customizable tool that provides allocators with a probabilistic range of outcomes rather than point estimates for how their private equity programs may develop. The approach affords decision-makers broader perspective and deeper insights about how their portfolios may evolve. Click here for a video that describes the model and our collaboration in more detail.
GroveStreet Principal Mario Miranda and Managing Director John Merrill author a whitepaper on the tailwinds underlying US manufacturing and the corresponding opportunity for private equity investors. COVID interrupted a decade-long recovery in US manufacturing and highlighted the need to strengthen supply chains. While the road towards reshoring will be complex and long, emerging tailwinds present an opportunity for buyout managers. These tailwinds and the associated opportunities for investors merit close attention. View full whitepaper
GroveStreet Managing Partner, Bruce Ou, spoke at the Asia Venture Capital Journal (“AVCJ”) Private Equity & Venture Forum Japan ’23. Bruce’s session tackled the topic of “Accessing Global Opportunities.” Bruce shared his assessment of the current investment environment for venture capital and lower mid-market buyout, observing that there are a lot of uncertainties in the marketplace given the cross currents in the macro landscape. On venture he commented that “the music has definitely slowed” as a result of these uncertainties but acknowledged that he harbors some concerns that “a new DJ may appear and turn up the music again.” The ‘DJ’ or potential catalyst for renewed excess is of course AI, which GroveStreet is monitoring closely.
GroveStreet Principal, Patrick Sherwood, joined other LPs and emerging GPs in a discussion on “The Evolution of the Emerging Manager” at the RFK Human Rights Compass Investors Conference. Investing in emerging managers has long been a part of GroveStreet’s approach to building private equity portfolios. Patrick outlined how GroveStreet goes about identifying and assessing talented new GPs. He also made the case for allocating to emerging managers in the current environment where there is rapid innovation in both technology and healthcare and the current macroeconomic challenges require a distinctive combination of skills and perspectives.
GroveStreet Managing Director, John Merrill, spoke at Invest Canada ‘23 on the evolution of best practices in biotech and healthcare investing. Since the inception of the firm, GroveStreet has been a consistent investor in the space backing many of the leading biotech firms just as they were being formed. While transformational innovations in biotech and healthcare present an array of compelling opportunities to long-term investors, caution and selectivity remain of paramount importance to allocators.