A Conversation on Venture Capital Investing

In this bonus episode of The Yield, Peter Kerr, CFA, Director of Product Marketing for Yieldstreet, is joined by John Wuestling and J.D. Hall from Greenspring Associates, a $13B venture capital firm, for a conversation around venture capital investing, current market opportunities and why companies are staying private for longer. (Please note: On September 20, 2021, StepStone Group Inc. (Nasdaq: STEP), completed its previously announced acquisition of Greenspring Associates).

Key Takeaways:

[1:19] Greenspring Associates — an overview and an announcement. 

[3:30] The traditional life cycle of a venture capital investment company, from idea to IPO.

[6:27] How has venture capital investing changed in the last two decades?

[9:08] Why might a founder want to stay private longer?

[10:55] Unpacking the $60 billion secondary investment market.

[14:40] Opportunities that are available within previously launched funds.

[16:26] The pros and cons of the SPAC market.

[19:46] Greenspring’s competitive advantage starts with the power of its platform.

[24:40] The metrics that help with understanding valuation in terms of market capitalism.

[28:04] Market niche and investment specialization is not the main goal at Greenspring.

[33:25] Shifts that are happening in the venture capital market from the investor side.

[36:06] The truth about the unicorn of VC investing.

From idea to IPO, what exactly does the traditional life cycle of a venture capital company look like? Whether it’s ideated in someone’s garage or well into the monetization of an asset, the venture capital investment journey is just a bit different for every company. John walks listeners through the typical journey, from a basic idea to a $40 million asset that is gaining significant momentum all the way to achieving IPO status. 

The financial crisis brought with it many lessons learned, including the age at which companies may want to consider going public. In recent years, more and more companies seem to be waiting longer before going public, and according to J.D., there are plenty of reasons why. From increased access to capital to a greater ability to invest in their company without tapping into the public market, many private companies have proven that staying private longer has worked for them. As a result, a secondary market has emerged, allowing early investors to realize returns on their investments.  

Enter venture capitalists. The secondary investment positions that they fill have grown to nearly $60 billion and are positioned to triple in value in coming years. The investment opportunities available in this growing market include direct investing as well as with previously launched funds. Not only is the direct secondaries market providing notable opportunities, but the fund secondaries are also as well. And no conversation about these investment opportunities would be complete without mentioning the SPAC market, which John describes as the recipient of a supply and demand market that is different from any other. 

Together, J.D. and John highlight the powerful platform at Greenspring as well as the metrics that help them with valuation in terms of market capitalism. Overall, their goal is to normalize whatever financial environment we’re in with a larger historical period of time in an attempt to overcome any major swings that may come along. Their aim is to experience organic growth independent of the public sector. They share several of the goals and angles that they consider when evaluating companies of any size, as well as the metrics and growth milestones that the companies they work with. 
Positive shifts are happening in the venture capital market from the investor side as well.  As John puts it, “there are some really amazing investment opportunities for qualified clients, qualified purchasers, accredited investors out there and it’s high time we kicked down the barriers to accessing them.”  On the whole, there are investment opportunities for every level of risk and return in today’s market.  And with companies like Greenspring and Yieldstreet working to break down those access barriers, investors have the opportunity to realize a greater level than ever before.

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