The Window Is Closing For LPs To Earn Their Place In History

By Marc Schröder 

I’ve said it before and I’ll say it again: Over the course of their careers, LPs have maybe two to three windows to buy at the bottom. Our current market is one of them.

We’ve all seen stories about how LPs are shying away from venture in the wake of macroeconomic trends, war, interest rates — the list goes on. The saying, “Those who fail to learn from history are doomed to repeat it” rings especially true in our current climate, and the window for LPs to nail one of those two or three career bottoms is beginning to close.

Marc Schröder, managing partner and co-founder of MGV

This opportunity does not come without risk, which is why those who capitalize on these moments are celebrated in history and why most miss it. It takes enormous courage and conviction to deploy capital in the face of headwinds like we’ve seen over the past year. But for those who invest on 10- and even 20-year time horizons, the question really boils down to: “Do you think technology will continue to be the most profitable and disruptive sector over our lifetimes?” If your answer to this is yes, now is a uniquely rare time to invest in the fund managers you think are capable of identifying the companies driving this trend.

As history has shown, it’s easy to invest when the market is booming and IPOs are flowing out like champagne in a nightclub. Ironically, many investors get crushed investing at the top when things seem most easy and obvious. Investing is all about timing, and those who have seen this cycle repeat tend to also be the most keen to lean into the risk presented by our current economic climate. Don’t get me wrong, it still remains to be seen when the official turnaround will come — but by the time that clarity is recognized, the opportunity will have passed.

LPs and investors of every variety are in a game of chicken with that slowly closing window. If history is any indicator, that turnaround will eventually arrive and the primary function driving capital deployment decisions is all about how close you want to cut it. History has also shown us that the window closes quickly and leaves many trapped — forced to decide between waiting for the next cycle or being forced to buy late and at prices they well know to be elevated. This is no easy task, especially when you’re beholden to boards and decision-makers that expect perfection.

My message to LPs is this: How close are you willing to cut it? If you’re really investing on decade time horizons, then it seems like you’d rather get through the window now and potentially weather a year or two (or less) of patience. The alternative is being late to the party and chalking up below-average returns as an investment in the wisdom to not make the same mistake a decade from now when history inevitably repeats.

Related reading:

VCs Who Wait Too Long For A Market Rebound Risk Losing Out On The Best Deals

Marc Schröder is the managing partner and co-founder of MGV, and is focused on working with world-class tech entrepreneurs and establishing the MGV legacy. Before co-founding MGV, Schröder served as the head of global sales at the Maschmeyer Group and was an investor at Seed + Speed Ventures. Originally from the Netherlands, he grew up in South Africa and graduated with a law degree from Bertolt-Brecht University.

Illustration: Dom Guzman