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JANUARY 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, see beyond the headlines, 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:
Role of Venture within Family Offices
The boom in single-family investment offices is being fueled not only by the tremendous worldwide increase in private wealth, but also by the desire of families to acquire independence and have more say in the decision-making than they currently have. 

Different ‘flavors’ of family investment offices exist today – some are ‘single-family’ offices investing on behalf of one wealthy household and its descendants, while others might aggregate the wealth of ‘multi-family’ clients. These structures are typically set up to manage inter-generational wealth creation and management, with some more legally elaborate and structured than others that rely on the decision of (typically) one principal.

 
Source: Capgemini, RBC Wealth Management

Within these family offices, venture capital should be an important part of alternative investment allocations for several reasons. First, venture capital is a large, visible market with the unmatched potential for outsized returns. What other asset class offers the chance to make 100x+ your investment? 

Second, venture capital offers insights into future public market leaders. Just look at the returns of Amazon over the last 20 years versus traditional retailers'.

Finally, venture capital offers the opportunity for strong next-generation engagement within the family. What’s more exciting to the next generation: a chance to invest the next Uber or researching an investment in a strip mall or IBM?

Yes, venture capital can be risky, and 
navigating the ecosystem can be opaque. But with a consistent and focused strategy, venture capital can provide meaningful returns. Endowments have long known this, and most currently allocate 5% of their portfolio to venture capital. Family offices have similar long investment time horizons, and diversification needs should take a similar approach. 

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: 
Softbank Reaches Agreement on Venture Deal for Uber
At the end of 2017, Uber and its shareholders reached an agreement with a group of investors led by Softbank for a combined $10 billion secondary and primary share sale. The investor group that also included Sequoia, General Atlantic, TPG, and Tencent Holding will purchase $8.7 billion from existing investors at a $48 billion valuation. Softbank also will invest $1.25 billion in new capital at a $69 billion valuation. The investor group now owns 17.5% of Uber, with Softbank specifically at 15%.

Why This Deal is Interesting
Shareholders Took a Discount to Gain Liquidity: The $48 billion selling valuation is estimated to be a 30% discount to the last round valuation. In all likelihood, the recent public issues surrounding Uber, plus the large selling interest from existing shareholders, created the opportunity for the new investor group to receive the significant discount. Notably, the $1.25 billion to be invested in new capital is being done at $69 billion, effectively flat to the last round. The primary valuation either shows the liquidity discount selling shareholders needed to take or is an effort to keep the current valuation of Uber at its last round.

Venture Investors Did Extremely Well: Benchmark Capital reportedly is selling 15% of its holdings for $900 million. These proceeds represent a 75x return on its $12 million total investment. Benchmark still holds shares worth at least $5 billion, meaning Benchmark’s total investment produced a realized and unrealized return of approximately 500x. Other selling shareholders include First Round Capital, Menlo Ventures, and Google Ventures, all of whom will receive proceeds in the hundreds of millions of dollars and have returns in excess of 100x their original investment. Needless to say, the LPs of the venture funds and individual angel investors of Uber have done extremely well.

New CEO Makes his Mark: The deal is a huge step for new CEO Dara Khosrowshahi as the deal also resulted in corporate governance reforms. Co-founder Travis Kalanick, who had been at the center of Uber’s controversies, reduced his ownership in the company. The outsized voting power of early investors is also being revoked. Finally, Benchmark will drop its legal case against Kalanick, removing a big distraction from the company.

Softbank Bets Big on Ride-Hailing: With its stake in Uber, Softbank now holds stakes in 5 of the world’s largest startups in the ride-hailing sector, including the market leaders in China (Didi Chuxing), Brazil (99), Southeast Asia (Grab), India (Ola), and now the U.S. 
Interesting Learning in Numbers: Early-Stage Deal Sizes are Rising
Source: Pitchbook NVCA
The rise in early-stage venture capital deal sizes relative to angel/seed deals suggests that either early-stage investing has excess capital availability or that there is an opportunity gap in seed investing that has yet to be met. 2018 should provide evidence to which of the two trends it might be.
Events & Happenings Near You
February 9, 2018 - MIT Venture Capital & Innovation Conference, Cambridge, MA
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 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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