210. Crisis Coverage w/ Chris Douvos - LP Lessons from '01 and '08, The Denominator Effect, Capital Calls & Fundraising in a Down Market

Chris Douvos of Ahoy Capital joins Nick on a special Crisis Coverage installment to discuss the LP Lessons from '01 and '08, The Denominator Effect, Capital Calls & Fundraising in a Down Market. In this episode, we cover: What is the denominator problem/effect? Why does it matter? How do LPs react when they face the denominator problem? How quickly do LPs tend to rebalance their investment portfolio? What's the implication to VCs? How should VCs react when their investors face the denominator problem? LPs lose access to future funds if sell position as secondary? When VCs make capital calls at times like these, what's the ripple effect down the line for these LPs? What were some of the typical LP reactions you've seen from the dot com bubble and the 2008 crisis, that you expect to see again? Can you talk more about the thought process of LPs during a crisis like this? Are they rushing to liquidate? Are they putting that money somewhere else? VC capital calls - guidance? What's the impact on VCs that are fundraising? What type of VCs have had success raising in a down market?  What are some best practices/principles for managing LP relationships in a time like this?(Chris was in PE, as Co-head of PE Investing at the Investment Fund for Foundations in 2008 crisis) What was the biggest lesson you've learned from previous crises in 2001 and 2008? VC's metrics are dependent on the market, like PME. What's the impact of the current situation on the VCs performance metrics? Is there some downward pressure for VCs to lower the Net Asset Value (i.e. the valuation of portfolio companies) to reflect the current market situation? Can you explain the disconnect between VCs that want to actively invest (because of lower valuations) and the LPs who are rushing to liquidate? What does this mean for later-stage startups that were thinking of IPO-ing in the near future? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.