Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
What’s the biggest benefit of late-stage VC?
“(The biggest benefit) of late stage venture capital is the uncorrelated nature of the asset class,” said Kevin Moss, president and portfolio manager at late stage venture capital manager Liberty Street Advisors (LSA). “Everybody’s looking for the capital gains of course, but this really differentiates the asset class… And history will tell you that periods of volatility provide some of the best opportunities, and when we see those periods we really like to deploy capital.”
Late stage, to Moss, is a company with $50 million or more, in revenue, top-line growth “of at least 30-40 per cent”, and a bevy of other high-quality investors around the table. But while tech companies have been the face of venture capital for the last decade, many companies are staying private for longer, and there’s no one sector where opportunities are concentrated.
“We really think about all sectors having some innovative area to it,” Moss said. “Technology spans all sectors, if you think about it. Even if you look at a sector like healthcare, technology is innovating there as well – digital health. You have education technology. Some of the sectors you wouldn’t typically think of as being technology led, they really are – it spans all sectors.”
“They must be innovative, they must be disruptive companies – cyber security, enterprise software, the private space economy. We probably have about 17 or 18 different sectors represented in our portfolio… Sectors do ebb and flow over time, and there could be a sector like AdTech that was a dead sector for a number of years but really came to life during Covid. We really want to be diversified not just by company type, but by sector as well.”
Turning to current market conditions, where markets are facing heightened uncertainty and volatility. This has led to a significant drop in the market’s appetite for new IPOs.
“Historically speaking, in private equity you’re going to see a trade sale two thirds of the time,” Moss said. “You’d be surprised by the number of companies that get bought before they ever enter the public market. For our portfolio though, it’s been about 50-50.”
“And it does wax and wane over time; there are times when the public exit environment is open and active, and there’s times when it’s not. In those cases, usually they counteract each other. Because the public exit environment begins to shrink, in many cases the trade sale or M&A environment grows.”
LSA’s due diligence process usually takes between two to three weeks, but there are times – when they’re seeking out a very popular company – that the space is crowded enough to warrant they move faster, with investments made inside a week of due diligence.
“That’s primarily because we’ve been watching the company already and we’ve done a lot of work… We have moved much quicker than (three to four weeks) when we’ve needed to,” Moss said. “… We really like to see other smart investors around the table. You’re not going to see us lead a deal – we want to see other investors already there that have continually invested round to round.”
