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CIO Academy: Introduction to Venture Capital Investing: Why Now?

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Venture capital
CIO Academy
Private equity

CIO Academy: Introduction to Venture Capital Investing: Why Now?

by Dave Lowery, Head of Alternatives Research, HSBC Asset Management, Trisha Mayr, Principal, Private Markets, HSBC Asset Management, Patrick Sixsmith, Managing Principal & Head of Co-Investments, Private Markets, HSBC Asset Management and Thibaut Charron, Private Markets Investment Specialist, HSBC Asset Management
Nov 29, 2024

  • Venture Capital (VC) is a financing method where capital is invested in startups or young businesses in exchange for ownership shares. VC firms, also known as General Partners (GPs), raise funds from Limited Partners (LPs) to invest in companies with high growth potential, particularly in innovative sectors like software, fintech, and biotechnology
  • VC differs from private equity buyouts in terms of company types, ownership stakes, risk profiles, and investment strategies. VC investments are typically higher risk but offer the potential for outsized returns, often relying on a few successful investments to drive the overall portfolio performance
  • The VC industry has seen significant growth, with assets under management (AUM) projected to reach USD3.8 trillion by 2028. North America remains the dominant region for VC activity, although interest is growing in emerging markets too
  • The fundraising market has slowed since its peak in 2021, with a notable decrease in deal values. But the number of deals has relatively stabilised now, indicating a focus on smaller investments. The exit market has also contracted, but successful IPOs suggest potential recovery
  • However, we believe that for knowledgeable and experienced investors with the appropriate risk tolerance, now is an opportune time to invest in VC, as valuation corrections may allow access to top-performing managers and high-quality companies at favourable prices

 

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