Landing the Value of Corporate Venturing

“Then what makes a beautiful human being? Isn’t it the presence of human excellence? Young friend, if you wish to be beautiful, then work diligently at human excellence. And what is that? Observe those whom you praise without prejudice.”

These words from Epictetus’ Discourses could have been written more than 2,000 years ago with David Swensen, head of Yale University’s $31.2bn endowment, in mind.

Swensen’s great insight from joining Yale in 1985 was that investors paid a premium for liquidity. This allowed him and other long-term investors to reap better returns – an average of 12.4% per year for the three decades to mid-2020 – by moving more heavily into venture capital and other alternative investments.

Almost a quarter of Yale’s endowment, so almost $8bn, is in venture capital. But as Swensen lead other investors into private capital markets so they have started to blur with public markets for liquidity. Legal services provider Aumni’s unique data on venture transactions and terms as part of the GCV Digital Forum (see table below) in January identified clear increases in value for those more liquid startups using secondaries.

As the secondaries market matures this encourages further the flow of capital from mutual and hedge funds as well as the traditional endowments and family offices, which has made private markets effectively as deep for new issuance as public stock markets with a record $125bn of venture capital deals in the first quarter. Corporations and universities had traditionally partaken through their pension and endowment funds but the search for returns as well as strategic imperative is now driving more direct investment.

Hence the drive for corporate and university venture funds to invest directly in startups as well as commit to VC funds. But to do this well requires learning from best.

Swensen was a natural teacher through publishing his book, Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment, and teaching generations of investors, such asMIT’s Seth Alexander, Princeton’s Andrew Golden and Lei Zhang, the founder of the Asian private equity giant Hillhouse Capital Group, the Financial Times noted in its obituary of Swensen, who passed away this week at 67 of cancer.

For those direct investors navigating the now more liquid private investment world having other teachers steeped in decades of insights is a gift and the GCV Institute’s Landing the Value of Corporate Venturing course next month is honoured to have many of them share their wisdom.

This Deep Dive Series of courses are three-month-long interactive learning journeys designed to advance the professional development of senior CV team members in the Corporate Venture Business Development (CVBD)/Portfolio Development and Venture Investment (CVC) functions.

The course is almost sold out after the sell-out of last month’s opening Essentials for Enterprise course but details can be found on the institute website.

The next intake of the course is: 

• Kick-off June 29
• Immerse Live Online days (July 12, 14, 16)
• Mentored challenge project (report back in early September)
• Start time:  US/Europe courses: 8AM PDT, 10AM CDT, 11 EDT

Source: Aumni, presented by James Mawson at GCV Digital Forum, January 2021