My view is that the single biggest driver of return in venture capital is the name of the shop - is that also the case in Growth Equity?
Top companies get so much inbound from VCs (incl. unsolicited term sheets), that they get to be selective about who enters their cap table, and that tends to be your typical Sequoia / Andreessen Horowitz. Having a top VC in your cap table helps those companies in many ways, from easily securing follow-on capital when needed, to helping them in their sales cycles. This virtuous circle is a powerful driver of returns for top VC shops. If you’re not in the to decile of VC firms, you get the “crumbs” and your ptf companies get less benefit from having your name in their cap table.
Do the same principles apply to growth equity stages companies? I would think not, and assume that these companies look less at the “hype factor” and more at the deal that is in front of them.
Grateful for views here.
Based on the context provided, it's not explicitly stated whether Growth Equity is as biased as Venture Capital (VC) or whether the name of the shop is the biggest driver of return in Growth Equity as it is in VC.
However, it's mentioned that the landscape of Growth Equity is changing with traditional private equity firms moving downstream and Tiger Cub funds extending to tech VC/Growth equity. This suggests that there might be a shift in how deals are evaluated and the types of companies that are considered.
It's also noted that the lines between different types of funds, such as TA/Summit and late-stage growth like TCV, are starting to blur due to the increased competition for deals. This could potentially impact the perceived prestige or influence of certain firms in the Growth Equity space.
As for whether Growth Equity stage companies look less at the "hype factor" and more at the deal in front of them, the context doesn't provide a clear answer.
Remember, every company and situation is unique, so it's always important to do thorough research and due diligence.
I think you would be surprised at the amount of blunders these “top VCs” have by just getting into the best companies off their “name”.
You are definitely right as several reports by Preqin and a few others have showed that top VC funds have stickier returns than say.....top PE.
I think it might be a little early to tell on the growth equity side?
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