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FEBRUARY 2018
Good morning, 

Welcome to Laconia Venture Asset Management’s monthly newsletter where we provide useful information regarding venture capital for family offices. We are looking forward to sharing and hearing from our readers. Please respond with questions and suggestions for our next monthly newsletter. 
Laconia Capital Group Family Office Breakfast Series

Laconia Capital Group, a full-service venture capital firm, hosts a series of breakfasts to discuss the unique benefits, challenges, and strategies of venture capital. These breakfasts provide an opportunity to take a deep dive into the venture asset class and learn how to execute within it in a thoughtful, strategic, and lucrative way. These are intimate events with limited attendees to provide an up-close and interactive look at the venture asset class. 

Interested in learning more? Sign up here.
Topic of the Month:
VC for FO: Insight into the Future
The venture capital industry has been a catalyst for innovation and job creation in the United States and around the world. Over the last couple of decades, venture investments in innovative companies have been instrumental in providing insights into public market trends and future public equity investment opportunities.

With the acceleration of innovation and availability of capital, the longevity of successful companies has never been shorter. In 1964, the average tenure of companies in the S&P 500 was approximately 33 years. As of 2016, that number has decreased to 24 years, and S&P 500 forecasts the average shrinking further to just 12 years by 2027. 
 
Over the last couple of decades, the largest companies in the S&P 500 have been replaced by new venture-backed corporations. Our research of the top companies in the S&P 500 over time highlights that the shrinking lifespans of companies are in part driven by technology shifts, economic downturns, and continual business model innovation. 
As the S&P 500 average lifespan continues to decrease, we believe that the emergence of Amazon vs. traditional offline retailers and AirBnB’s displacement in the hospitality industry provide compelling public market opportunities now and in the future.

Amazon vs. Brick and Mortar Retail
A decade ago, the future and growth of offline retail looked bright. Amazon was valued at a mere $17.5bn, while some of the largest brick-and-mortar retail companies including Sears, JCPenney, and Macy’s accounted for a majority of the retail market share.

As investment in venture capital has indicated, disruption often comes without warnings. Over the last decade, offline retail sales have fallen significantly, and retailers have shut down department stores as consumers have increasingly sought to purchase goods online.  The figure before showcases, how the industry changed between 2006 and 2016 and further highlights venture capital investments’ significance in providing market insights. It’s worth noting that Walmart, the best performer among retailers, has also been the most aggressive with its online strategy, having recently acquired Jet.com, Bonobos, and Moosejaw, among others.

While venture capital can be difficult to navigate, the implementation of a consistent and focused strategy can provide strong portfolio returns and future public market insights into the economy. If you are interested in learning more about the role of venture capital within family offices, feel free to contact us at lvam@laconiacapitalgroup.com.
Spotlight Deal of the Month: 
Instacart raises $200 million
Earlier this month, grocery delivery startup Instacart raised an additional $200mm, boosting its valuation and providing additional resources to compete against Amazon.  The new funding values the company at $4.2bn, up from the $3.4bn valuation in its prior round of funding. While Whole Foods was an investor in previous rounds of funding, the company has chosen not to participate in the most recent funding round following its acquisition by Amazon.

Why is this interesting? Whole Foods was a key partner for the startup. In 2016, Instacart signed a multi-year delivery deal with Whole Foods when the grocer invested $36 million at a $2 billion valuation. With its acquisition of Whole Foods, Amazon, which has been steadily easing into grocery delivery, will now be testing free two-hour delivery of Whole Foods groceries to Amazon Prime customers in certain U.S. cities, making it a potential direct competitor of Instacart. However, these situations are not uncommon in today's start-up world. For example, Google led a $1 billion investment in Lyft while also being a shareholder in Uber. As noted last month, Softbank has investments in multiple ride-sharing companies around the world. The start-up landscape is constantly shifting, and companies have to maintain flexibility as they continue to grow and thrive. 

From a venture capital investment perspective, the new funding was led by two new investors, Coatue and Glade Brook, who are known as strong late-stage investors with previous investments in Snap, Jet, Lyft, WeWork, and Alibaba. The up round reflects the continued strong demand for fast-growing, industry-changing companies even in the wake of strong competition like Amazon. Instacart is estimated to have over 500,000 customers and $2 billion in revenues. More importantly, despite the potential loss of Whole Foods as a partner, Instacart still has 165 partners including Costco and Krogers, all of which view Instacart as a competitive response to Amazon.

Finally, the recent Instacart funding continues to demonstrate the massive potential returns that venture capital investments can deliver. At $4 billion, Instacart's current valuation is 160x the initial Series A valuation of $25 million from 2013 with an estimated IRR of 275%. Among the Series A investors were at least 6 family offices/individual investors.
Interesting Learning in Numbers: Early-Stage Deal Sizes are Rising
The rise of venture capital deal sizes over the last couple of years has led many angel and seed investments to become more institutionalized.  As a result, the bar has risen in terms of KPIs for early-stage investors.  We believe that the fall in angel and seed activity provides an opportunity for investors to bootstrap operations for startups relying on pre-Series A funding.
Events & Happenings Near You
March 6, 2018 - LVAM Breakfast Series (Filled), NYC, NY
March 9 - 17, 2018 - SXSW, Austin, TX
March 16, 2018 - Wharton Private Equity & Venture Capital Conference, NYC, NY
April 9 - 11, 2018 - LendIt FinTech Conference, SF, CA
April 17/18 - LVAM Breakfast Series (Limited Spots Available), Greenwich, CT
April 18, 2018 - Empire Startups FinTech Conference, NYC, NY

 
Click to Join LVAM Breakfast Series
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Laconia Capital Group · 132 W 31st Street · New York, Ny 10001 · USA

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