Next in The Seed Series we talk with Beezer Clarkson Managing Director on the Sapphire Partners team, an investor in early stage venture funds globally.
This interview is a departure for The Seed Series as we typically interview early stage investors General Partners (GPs), and not Limited Partners (LPs) the investors in venture funds.
Sapphire was first structured to invest directly in growth stage companies.
We talk about Sapphire Partners approach to investing in funds, how there is no ‘fast’ in venture, and about #OpenLP.
Gené: How did Sapphire move from investing in growth stage companies to investing in venture funds around 2011?
There was a team of direct investors and when they were thinking about accessing the early stage, predominantly Series A, they decided what would be interesting, would be to be an LP in funds because then you touch many more early stage portfolio companies.
How is Sapphire Partners set up to invest in early stage funds?
Beezer: We specifically constructed our vehicle with the thinking of what do the General Partners (GPs) want.
If our goal is to invest in the best early stage venture funds, they will be the best because they invest in great companies.
Gené: How do you assess a potential fund investment?
We will look at when you’ve made investments, how many of them have become a 5x or 10x return, and how many of those need to be true.
Most people say they start being conscious of the impact of ownership of their checks around the $40 million fund size.
Beezer: From an entrepreneur’s perspective, I’m sure it can be great news, as it represents more opportunities to find someone who will fund their companies.
And some LPs just don’t do seed funds, or not first time ones, or ones under a certain size.
Gené: How much do you invest annually in early stage funds?
Gené: How much do you like to invest in each fund?
Beezer: For a series A fund that’s a couple hundred million to four or five you are looking at checks that are $10 to $15 million.
Gené: Are those funds committed to existing firms that you’ve invested with in the past?
Beezer: There’s not been a year we have not invested in somebody who’s net new to us, whether or not they’re also net new to the world.
Gené: Are there funds you invested in that you can disclose?
Beezer: So we’ve got some funds like Amplify, Data Collective, Union Square Ventures, that have talked about us and Point Nine.
Gené: Do you look for new fund areas where you do not have exposure?
Beezer: We’ve joined a fund this year that I can’t name.
Beezer: The bulk of the returns will start coming back to an LP at somewhere between years eight and ten to be conservative.
The feeling of fast in venture is actually the growth of the companies, and not the management of the funds.
It’s almost like people don’t want to feel alone in the wilderness and they’re looking for context and best practices from others.