Venture firms’ financial backers, often referred to as the “money behind the money,” are experiencing satisfaction at the moment. In many aspects, they find themselves in unexplored territory, while at the same time, it could be highly profitable. Generally, LPs tend to invest in various firms to ensure the diversification of their own portfolios. They provide financial support to both rising and well-known managers, as well as to companies that cover a wide range of industries and those that specialize in specific areas. The primary objective is to achieve substantial profits while reducing potential risks. This is the standard approach taken. Normality has been discarded. The rapid increase in valuations of OpenAI and Anthropic has led to a situation where nearly everyone is investing in these two companies, even within the same venture firm, which goes against the traditional convention of avoiding conflicting investments. There are no complaints being heard. The LPs I communicate with appear untroubled by this significant risk, considering the possible gains; they anticipate a windfall. However, they do recognize potential threats on the horizon, even if they characterize this as a “cautionary light” scenario, and they express concern about the rapid return of VCs to raise additional funds. I discussed these issues recently with Beezer Clarkson of LGT Capital Partners, a Zurich-based diversified asset manager, and Amit Bhatti of TrueBridge, a Chapel Hill firm specializing exclusively in venture investments.
