Getting access to top tier venture capital firms can be challenging as most of the fund allocations are dominated by large established institutional limited partners. Venture capital firms are also subject to macroeconomic trends in the market, which may affect the various stages of their investment cycle that includes fundraising, deal structuring and negotiation, valuation, portfolio management and exit.
Many venture capital firms have shut down as they struggle to grapple with macroeconomic conditions, failed or mistimed investments and under-performance of their investment returns. To this end, the Johns Hopkins Private Equity & Venture Capital hosted John Avirett, Partner at Greenspring Associates (“Greenspring”), at the Carey Business School on Apr 21, 2016 for a session on “Building a Sustainable Platform for Venture Capital” to understand what it takes to become a successful venture capital firm.
Greenspring Associates was founded in 2000 and has established offices in Owings Mills, MD and Palo Alto, CA. The firm manages approximately $3.9 billion in capital commitments across a variety of solutions and customized investment mandates. In late 2015, Greenspring raised $430 million to invest in promising information technology companies called Greenspring Global Partners VII. Seventy percent of the fund will be invested in venture capital managers that invest in early stage information technology companies. The remaining thirty percent of the fund will be invested directly into expansion stage IT companies with high growth potential.
Greenspring Associates has built an investment platform focused on venture capital through three avenues: fund investments, direct investments and secondary investments. These various funds look at different opportunity sets within the venture capital world and the firm strives to be the best in breed of venture capital by building and leveraging on its core expertise.
Through its fund-of-funds investment vehicle, Greenspring provides its limited partners with access to a select group of upper quartile venture capital firms. Because of the strong and deep relationships developed with the top venture capitalist firms, Greenspring gains good insights into their deal flow and portfolio companies. This helps to build trust if Greenspring decides to make a direct investment in the company’s subsequent rounds of financing. John described this synergy as the “flywheel effect” in which the firm’s different fund approaches as each of them contributes and strengthens the entire platform.
Some of the notable direct investments made by Greenspring includes GrubHub (IPO-ed in April 2014), Cvent (acquired by Vista Equity in April 2016), and CloudFare (a website security and performance optimization platform).
Building a sustainable platform for venture capital requires a tremendous amount of innovation, discipline and entrepreneurship. Greenspring continues to look for new fund strategies that can leverage its investment platform and some of the current interesting ideas include a micro venture capital fund and impact fund.
The Johns Hopkins University Private Equity and Venture Capital club is among the most active of the School’s clubs. We provide a forum for students, alumni, faculty, staff and industry professionals interested in all aspects and stages of Private Equity and Venture Capital, and help them develop the skills and knowledge necessary to build careers in these sectors. Visit our website and sign up for our mailing list at http://www.jhupevc.com.