What GPs and LPs say to each other behind closed doors

VCs are often seen as the startup funding scene’s rock stars. (At least, that’s how some would certainly like to be seen.) But if there’s one thing I’ve learned in the first eight months of this job it’s this: Venture capital is one link in a chain—VCs give money to founders, and ask for money from limited partners, the blanket term for the people and entities who invest in their funds. So, behind every VC lies the money behind the money, if you will.

Earlier this week, I sat down with a roomful of these LPs, along with a number of general partners at VC firms, to have a candid chat about the state of affairs in the business. The conversation at Fortune’s Brainstorm Tech conference in Park City, Utah, was held under Chatham House Rule. That means that comments can only be printed after they’ve been fully scrubbed of any clues possibly revealing the speaker.

Here are a few of the choice comments and insights aired by some of the participants, whose identities must remain top secret.

VC “platforms” are BS. That was the spicy take of one attendee, who claimed that VCs courting founders by touting a platform are full of it. Definitions of a platform in a VC context vary by firm, of course, but generally, it involves some kind of resource or service beyond the act of handing a startup founder the check. Why are these platforms bogus? This person’s hot take was: Founders just want to focus on building their companies, and don’t necessarily need or want constant support and services from the VC’s platform team. The most valuable support is often simply having access to the partners, they said.

(Though the room simmered in disagreement, this attendee was awarded a bottle of Stuzzi hot sauce in recognition of their moxie.)

The money flood has spawned an explosion of VCs. “Assets under management have over the last ten years gone up by 6x,” one person noted, providing the premise on which they teed up the next question: “The number of investors in 2013 was 6,000. How many do you think there are now?”

I naively guessed “double.”

“60,000,” the person shot back. “I spend 75% of my time raising,” they groused. “I’m almost out of the investment business now because of the competition.”

Family offices offer hassle-free capital, but big money is always big money. One person early on said that, for LPs deciding on a VC to invest in, it’s “just as much work to underwrite a smaller fund as it is to underwrite a big fund.” After the panel ended, I was approached by an investor who deeply disagreed. The case this person made was this: Some family offices and institutions will write a check for a few million with limited scrutiny—if you’re an emerging VC with a good reputation, a solid track record, and they like you, a few million dollars is a small bet (for them). But for even the most footloose and fancy-free family offices, a $25 million investment typically requires much more scrutiny and diligence. Track record becomes even more important, and the amount of work for those LPs to build conviction increases, too.

J.D. may not be as good a friend to tech as he might seem. One person said of Republican VP candidate J.D. Vance: “We’re headed in the direction of anti-tech populism…If you read the articles about the pick of J.D. Vance, the money class, the billionaires that hedge funds were all advising not to pick Vance, because of his positive comments about Lina Khan’s crackdown on tech. But the Republican Party is the populist party. It’s no longer the party of corporate America.”

You, reading this, likely agree with one of these at most. If you agree with all, I’m floored—persuade me and I’ll personally present you with hot sauce by the end of the year.

The undercurrent of all this was clear: It’s a tense time for venture. But what’s actually the problem? Even in a room full of people who have overlapping problems, I’m not sure anyone agreed. Some say venture is ailed by too much capital or too much competition. Others say there’s limited diversity of thought, or sweeping uncertainty—economic, political, and otherwise.

I’m not a VC or an LP, I’m just a writer. But here’s another idea: As people approached me in hushed tones after the panel, seeking to quietly share their unpopular thoughts, I began to think VCs struggle to talk to each other, and perhaps similarly struggle to talk to LPs. The first step to solving any of these problems is conversation, which needs to be candid, frequent, and vulnerable. So, this was a start.

There was plenty more vim, vigor, and spice at the session. But I’ll leave it at that—though my inbox is always open for any of your hot takes. Perhaps some incredibly hot sauce awaits one of you.

See you Monday,

Allie Garfinkle

Twitter:

Email: alexandra.garfinkle@fortune.com

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VENTURE DEALS

- Saronic, a Austin, Texas-based company that designs and manufactures autonomous surface vessels for defense, raised $175 million in Series B funding. Andreessen Horowitz led the round and was joined by 8VC, Caffeinated Capital, Elad Gil, NightDragon, and others.

- Coast, a New York City-based fuel and fleet spend management platform, raised $40 million in Series B funding. ICONIQ Growth led the round and was joined by Thomvest and existing investors Accel, Insight Partners, Vesey Ventures, and Avid Ventures.

- EneCoat Technologies, a Kyoto, Japan-based developer of perovskite solar cells for solar panels, raised 5.5 billion Yen ($34.1 million) in Series C funding. Woven Capital led the round and was joined by INPEX and Mitsubishi HC Capital.

- Artificial Agency, an Edmonton, Canada-based AI-powered platform designed to infuse generative behavior into video games, raised $16 million in funding from Radical Ventures, Toyota Ventures, Flying Fish, Kaya, BDC Deep Tech, TIRTA Ventures, and others.

- Momento, a Seattle, Wash.-based data infrastructure platform, raised $15 million in Series A funding. Bain Capital Ventures led the round and was joined by The General Partnership and angel investors.

- Accion Digital Transformation Fund invested $10 million in Los Andes, an Andean, Peru-based lending, savings, and insurance service provider.

- Juno, a San Diego, Calif.-based provider of child disability insurance, raised $8.5 million in Series A funding. Spero Ventures led the round and was joined by Floating Point, newark venture partners, and WVV Capital.

- itselectric, a Brooklyn, N.Y.-based producer of electric vehicle chargers designed for cities, raised $6.5 million in seed funding. Failup Ventures and Uber Technologies led the round and was joined by Halogen Ventures, The Partnership Fund for NYC, Pulse Fund, and others.

- Tribe AI, a Brooklyn, N.Y.-based AI services company, raised $3.3 million in seed funding. Bryce Roberts from Indie led the round and was joined by others.

- Kudos, a Los Angeles, Calif.-based disposable diaper company, raised $3 million in a seed extension from Precursor Ventures, Xfund, and Oversubscribed Ventures.

- Arvo Tech, a Columbus, Ohio-based employee tax credit provider, raised $2.5 million in Series A funding. Bandon Partners led the round and was joined by existing investors.

PRIVATE EQUITY

- BBB Industries, backed by Clearlake Capital Group, agreed to acquire All Star Auto Parts, an Orlando, Fla.-based provider of alternative automotive replacement parts. Financial terms were not disclosed.

- Diversis Capital acquired Infotech, a Gainesville, Fla.-based provider of software for infrastructure construction. Financial terms were not disclosed.

- PestCo Holdings, a portfolio company of Thompson Street Capital Partners, acquired United Pest Solutions, a Seattle, Wash.-based pest services provider. Financial terms were not disclosed.

- WP Engine, backed by Silver Lake, agreed to acquire NitroPack, a Sofia, Bulgaria-based SaaS company designed to improve site speed and performance metrics. Financial terms were not disclosed.

- ZRG, backed by RFE Investment Partners, acquired Jamesbeck, a New York City, San Francisco, and Los Angeles-based recruitment firm for investment management talent. Financial terms were not disclosed.

EXITS

- Dechra Pharmaceuticals agreed to acquire Invetx, a Boston, Mass.-based veterinary pharmaceuticals business, from Novo Holdings for up to $520 million.

- Garda Group agreed to acquire Heras, an Oirschot, The Netherlands-based provider of fences and other perimeter security products, from Equistone Partners Europe. Financial terms were not disclosed.

- H.I.G. Capital acquired a majority stake in Best Trash, a Richmond, Texas-based solid waste platform, from Amberjack Capital Partners. Financial terms were not disclosed.

- Shamrock Capital acquired a film, television, and music portfolio from Vine Alternative Investment Group. Financial terms were not disclosed.

- SPIE Group acquired a majority stake in OTTO Life Science Engineering GmbH, a Nuremberg, Germany-based provider of engineering, procurement, and construction services for pharmaceutical and biotech facilities, from Equistone Partners Europe. Financial terms were not disclosed.

- Van Genechten Packaging agreed to acquire Dot2Dot, a Gdańsk, Poland-based packaging producer, from Abris Capital Partners. Financial terms were not disclosed.

OTHER

- Blend acquired nuvu, a Bogotá, Colombia-based data engineering firm. Financial terms were not disclosed.

IPOS

- Ardent Health, a Brentwood, Tenn.-based hospital group, raised $192 million in an offering of 12 million shares priced at $16 on the New York Stock Exchange. The company posted $5.5 billion in revenue for the year ending March 31, 2024.

- TWFG, a The Woodlands, Texas-based personal and commercial insurance company, raised $187 million in an offering of 11 million shares priced at $17 on the Nasdaq. The company posted $179 million in revenue for the year ending March 31, 2024.

FUNDS + FUNDS OF FUNDS

- Kingswood Capital Management, a Los Angeles, Calif.-based private equity firm, raised $1.5 billion for their third fund focused on middle-market businesses with operational improvement potential.

PEOPLE

- Coalesce Capital, a New York City-based private equity firm, hired Austin Heiman as a managing director. Formerly, he was with ABRY Partners.

- DCVC, a Palo Alto, Calif. and San Francisco-based venture capital firm, hired Milo Werner as a general partner focused on climate investments. Formerly, she was with Engine Ventures.

- Obvious Ventures, a San Francisco-based venture capital firm, promoted Kahini Shah to partner.

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