Banker exits to growth-stage VC shops boomed during Covid and the last days of ZIRP, but now that asset class has slowed down, with funds including Tiger, Insight, and Coatue giving back money and doing far fewer deals. Curious what you all think the future of growth VC is, particularly as a landing spot for bankers interested in software/tech investing. Have the past 2 years proven that it's basically just an absurdly high beta asset class whose viability rests solely on the strength of the IPO market? Is it too cyclical to justify pursuing a career there?
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Based on the most helpful WSO content, the future of growth-stage venture capital (VC), particularly in the tech and software sectors, is indeed influenced by market cycles and the IPO market's health. Here are some key points to consider:
Market Dependency: Growth-stage VC has shown a high correlation with the broader market conditions, especially the IPO market. The viability of this asset class often hinges on the ability to exit investments at higher valuations, which is easier in a buoyant market.
Recent Slowdown: The slowdown in the growth VC sector, as evidenced by major players like Tiger, Insight, and Coatue scaling back, reflects a broader market recalibration. This adjustment is partly due to changes in monetary policies and the global economic climate affecting liquidity and investment appetites.
Cyclical Nature: The growth VC sector can be highly cyclical. The recent boom and subsequent slowdown underscore its sensitivity to economic cycles. This cyclical nature can impact career stability and growth prospects in this field.
Career Considerations: While the sector offers exciting opportunities to work with high-growth tech companies, the inherent volatility means that career paths can be less predictable compared to more stable sectors. Potential entrants should weigh the high-risk/high-reward nature of growth VC and consider their personal risk tolerance and career goals.
Long-term Outlook: Despite current challenges, the long-term outlook for growth VC, particularly in technology, may still be positive. Innovation continues at a rapid pace, and sectors like AI, biotechnology, and green tech remain hotbeds for venture investments.
In conclusion, while growth-stage VC offers lucrative opportunities, it also comes with significant risks that are closely tied to market cycles. Aspiring bankers and investors should carefully evaluate these factors when considering a career in this field.
Sources: Breakdown of Post-IB Exit Opportunities, Venture Debt/Lending Industry and Career Opportunities, What is the future of investment banking?, Future of Banking?, VC Investing As an Investment Banker
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Ton of growth funds right now who haven't done a single deal in >12 months. Minority growth deals are basically dead and you see TCV doing $20M Series As now. The few growth deals you see are heavily competed as all these '21 vintages are desperately looking to deploy. Growth is very bull market driven - probably more cyclical than many other asset classes. But late stage rounds will come again - they always do. Either once the next cycle comes, or once the post-'21 startups who've raised at modest valuations mature enough to raise late stage rounds. If you're a junior I don't think growth is a good place to be right now. Try to go to tech / tech services PE rather or A/B VC if you want to do tech with deals.
Agree with your last sentence. Investments from '21 are in full-blown op's mode. Rest of our assets are in a holding pattern while we trim some fat. Things need to break to the upside or the downside very sharply or this awkward middle school virgin dance routine will continue. Earlier stage investors are starting to grow comfortable with getting crammed down and we are happy to oblige using cash in the vault.
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