Who are NextGen VCs?
NextGen VCs are a new class of early-stage investors emerging amidst a set of tectonic and transformational shifts in the venture capital industry. We are witnessing a historic moment as NextGen VCs are redefining the venture capital industry and changing the underlying motives, relationships and practices within Venture Capital. These new fund managers are often masterful marketers of their firms and personal brand; they are also deeply passionate about positively impacting the world through their actions and their portfolio companies.
A Changing Industry
As we are seeing the atomization of venture firms that have faltered in their succession of partners, an increasing number of solo capitalists are launching enduring venture capital firms around the world. Simultaneously, we’re seeing a gradual shift in the type of VCs founders are opting to work with and NextGen VCs are a perfect fit for the changing preferences of startups and founders.
NextGen VCs we work with at VC Lab are often built on and share three common guiding pillars:
- These VCs are highly networked individuals who are domain experts in the funds’ area of focus. This enables them to source great deal-flow and raise capital efficiently.
- Furthermore, NextGen VCs are ethical investors who place an emphasis on having a positive impact on the world.
- Lastly, as part of their thesis, they utilize their domain expertise to add value post-investment by forming deep and long-term working relationships with founders to bring products and services to market. As such NextGen VCs are able to be laser-focused and hands-on in the companies they invest in.
Not only are these a defining characteristic for NextGen VCs but they’re also proving to be a competitive advantage against traditional firms. Consequently, in conjunction with the changes we are seeing in venture capital, early-stage founders, particularly in Pre-Seed to Series A, are now opting to work with highly specialized and networked domain experts who are uniquely placed to add value post-investment, over providers of undifferentiated capital.
NextGen VCs have a focused strategy to both capturing and creating value in the market. They use their deep-rooted networks to both add value to portfolio companies and run effective fundraising campaigns for their VC firms.
These VCs often run a lean operation and are able to transform their vast networks to source compelling deal-flow. This is another component of their growing appeal to limited partners. Another appeal is due to the fact that smaller funds often achieve higher return multiples than their larger counterparts.
NextGen VCs are also following an evolving model of venture capital. For example, we are seeing the use of Venture Partners become an increasingly popular partnership model for NextGen VCs. By partnering with other well-connected industry experts, they are leveraging more nodes in the network to source deals and fundraise. Furthermore, these VCs are building new ecosystems to support previously overlooked spaces and committing to support them in their growth.
NextGen VCs strategy is often that of value add and venture building. Speaking with VC Lab, Andy Zain who is a NextGen VC and Managing Partner at Kejora Capital, South East Asia’s Number 1 performing fund, explains that their ‘hands-on synergy’ thesis is what has enabled them to succeed and go from $5m to $600m AUM in 8 years.
However, this strategy is not new. Some of the most successful venture firms in the world have used aspects of this strategy to become market leaders. For example, Don Valentine, founder of Sequoia Capital, has stated in his talk at Stanford University, that their strategy when starting out was to back big markets and also focus around a particular pre-defined category while supporting the growth of that ecosystem.
NextGen VCs are now taking the mantle and continuing to redefine the strategy and value proposition of venture capitalists around the world.
What does NextGen mean for you and how do you think the industry will be impacted by the new class of VCs?
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