E89: How a Fund of Funds backed by one of the world's largest insurance companies is revolutionizing venture capital

Episode Summary

Executive Summary: The episode explores AXA Venture Partners’ role as a global venture LP, its geographic allocation, and how it evaluates GPs and emerging managers. The discussion argues that venture capital is experiencing a “flight to quality,” making fundraising harder for new managers, but also that early-stage venture remains attractive if managers under-promise, over-deliver, and show durable team quality, ownership, and execution.

Main Topics: AXA Venture Partners overview and LP platform: AXA Venture Partners was launched with backing from AXA’s long-standing insurance and investment platform and invests globally across the US, Europe, and parts of Asia, with a focus on venture and related secondaries/co-investments. Geographic allocation and market opportunity: The firm’s portfolio is concentrated where it sees the most venture opportunity: the US is the largest share, followed by Europe, with Israel and parts of Asia making up the balance. Why first-time fundraising has collapsed: The guest attributes the sharp decline in first-time fund formation to risk-off behavior and a broad “flight to quality/brands,” where LPs concentrate capital in familiar managers and stronger perceived opportunities. How AVP underwrites GPs: AVP emphasizes high ownership, early entry into top companies, team quality, and partner-level attribution as signs of differentiated managers, especially when track records are limited. Emerging manager mistakes and fundraising discipline: The biggest mistake cited is over-promising relative to strategy and history; the advice is to size funds conservatively, align claims with actual capability, and build credibility over multiple funds. Team dynamics, attribution, and succession risk: The conversation examines how LPs identify whether one or two partners drive most of a fund’s performance, how roles evolve over time, and why incentives and succession need to be clearly structured. Venture secondaries as a growing theme: AVP sees venture secondaries as increasingly important due to longer holding periods, fewer exits, and LP liquidity needs, and views it as a meaningful area of focus going forward.

Key Arguments: AXA Venture Partners was seeded by AXA, a massive global insurance group with deep institutional investment experience, giving the platform credibility and long-term capital support. The firm invests where venture opportunity is strongest: more than half in the US, roughly a quarter to 30% in Europe, and the rest in Israel/Asia plus venture secondaries and co-investments. High ownership in the best companies, achieved early, is one of the clearest signs of GP differentiation because it reflects real access and execution. The collapse in first-time fund formation reflects LPs’ defensive behavior in uncertain markets, not just a pure judgment on quality. Investing only in established brand-name funds can be rational for allocators with limited venture focus, but for dedicated venture investors it can mean missing alpha from first-, second-, and third-time managers. Venture should be treated as a specialized asset class requiring full-time attention; half-measures or passive exposure are less effective. The current retrenchment from early-stage venture is viewed as partly irrational because venture has historically produced strong long-term returns and the future still supports large, capital-efficient technology companies. LP diligence on emerging managers is heavily people-driven: team chemistry, execution ability, role clarity, and long-term consistency matter more when data is sparse. Fund performance attribution often concentrates in a small number of partners, but LPs must distinguish between true value creation, tenure, role specialization, and succession dynamics. The biggest emerging-manager mistake is mismatch between fund size, strategy, and prior proof points; conservative positioning and transparent communication build trust over time. For fund two and later, LPs focus less on headline markups and more on whether the manager delivered on prior promises, maintained ownership discipline, and can explain deal-level decisions. Venture secondaries are growing because exits are slower, companies stay private longer, and investors need liquidity options. London is strategically useful as a hub between the US, Europe, and Asia for maintaining close GP relationships and in-person diligence. Data Points: AXA organization age: 200+ years - AXA was described as having been created over 200 years ago. AXA global footprint: 50+ countries - The insurance group was said to have expanded globally across many countries. AXA workforce: Hundreds of thousands - The group was described as employing hundreds of thousands of employees. AVP launch timing: 2015–2016 / about 8 years ago - The venture platform was seeded by AXA around 2015–16 and described as launched about eight years ago. US allocation: Over 50% - AVP said the US forms over half of its venture activity. Europe allocation: 25%–30% - AVP said Europe represents roughly a quarter to 30% of its activity. Other regions allocation: About 15% - Israel and parts of Asia plus secondaries/co-investments were grouped into the remainder. First-time fund raises in 2024: 28 funds - The guest referenced that only 28 funds raised first-time funds in 2024. First-time fundraising decline: Down over 90% - A statistic cited for first-time fund fundraising falling from 2023 to 2024. First-time fundraising 2023: $13.4 billion - Baseline amount referenced in the fundraising comparison. First-time fundraising 2024: $1.6 billion - Amount referenced in the fundraising comparison. AVP investment funnel conversion: Below 5% - The guest said the percentage of funds invested from its funnel is below 5%. Five largest venture funds market share 2022: 21% - Referenced as comparison for market concentration. Five largest venture funds market share 2023: 20% - Referenced as comparison for market concentration. Five largest venture funds market share 2024: 45% - Showed dramatic concentration in capital flows. Example seed fund size: $500 million - Used as an example of over-ambitious emerging-manager positioning. Example target ownership: 25%+ - Used in the example of a seed fund claiming unusually high ownership targets. Example target return: 10x - Used in the example of a seed fund promising exceptional returns. Venture secondaries growth window: 12–18 months - The guest said the space has grown a lot over the past 12–18 months. GP meeting cadence in Europe: At least once a quarter - AVP said it tends to see European GPs at least quarterly. GP meeting cadence in the US: 2–4 times per year minimum - AVP said it comes to the US multiple times annually.

Pivotal Quotes: "The percentage of funds that we invest in based on our funnel is below 5%." — Ian: Explaining how selective AVP is when reviewing new managers and venture funds. "It's the over-promising, under-delivering. It's when people don't right-size their fund to their strategy." — Ian: Answering the question about the number one mistake emerging managers make. "Venture capital has proven itself as a great asset class going back to the 1970s." — Ian: Arguing that retreating from early-stage venture is largely irrational over the long run.

Implications: LP capital is concentrating in proven managers, making fundraising harder for new teams. Emerging managers need tighter fund sizing, clear attribution, and honest positioning. Venture secondaries and disciplined early-stage strategies may become more important as exits stay slow.