Discovery Park Ventures LLC

About Us

Discovery Park Ventures manages Venture Capital Fund of Funds. We make primary and secondary investments in US-based Venture Capital funds and co-invest in select portfolio companies.

We take pride in our Nordic roots and culture, and we work proactively with Venture Capitalists and entrepreneurs to share our values.

Sustainability: Employ responsible business practices and demonstrate respect for our environment
Innovation: Encourage creativity, resourcefulness, and new ways of thinking
Trust: Act with integrity and be worthy of the community’s trust

We are guided by the life philosophies of the Nordic countries:

Sisu is a Finnish concept described as stoic determination, tenacity of purpose, grit, bravery, resilience and hardiness

Lagom is a Swedish concept widely translated as "in moderation", "in balance", "perfect-simple", and “suitable”.

Þetta reddast is a very common phrase in Iceland. It loosely translates as “everything will work out in the end”.

Hygge is a Danish term defined as a quality of cosiness and comfortable conviviality that engenders a feeling of contentment or well-being.

Friluftsliv is a Norwegian word which translates to “free air life” meaning a philosophical lifestyle based on experiences of the freedom in nature and the spiritual connectedness with the landscape.

ESG

We firmly believe that socially responsible investing and high ethical standards are requirements for achieving long term value creation. We incorporate ESG factors throughout our investment process. We don’t believe in exclusions. Rather, we take a pragmatic approach when it comes to making investments in industries with ESG obstacles. Finding solutions to obstacles is what Venture Capital is all about!

Environment:

We not only seek environmental solutions in our own operations, but also strongly encourage our partners and their portfolio companies to do the same. We also obviously like to see our partners invest in portfolio companies who try to solve environmental issues.

Social:

We strive to create a sound workplace with good working conditions and environment for not only our employees but our partners and their portfolio companies as well.

Corporate Governance and Ethics:

We are transparent and accessible, and engage in honest and open dialogue with our relevant stakeholders and strongly encourage the same for our partners and their portfolio companies.

Philanthropy

Investing and philanthropy have historically been seen as opposites. One looks for pure financial gain and the other for good social change. Discovery Park Ventures seeks to generate social and environmental good while providing a high return. As our main objective is a financial one, we pledge at least 1% of our profits to philanthropy.

Our focus is on promoting educational, cultural and professional exchange between the United States and the Nordic countries. Both countries share a passion for innovation and entrepreneurial ambition. We strive to stoke that fire both with our investments and with our philanthropy.

If you have a great idea for a project or are already running an organization, please reach out to us at:

Better@DiscoveryPark.Ventures

Advantages of Venture Capital Fund of Fund

Access

Get exposure to the oldest and most vibrant start up community in the world, the United States.

Diversification

Benefit from successes in a wide variety of themes and industries.

Hedge

Startups tend to go after established companies’ markets and hence investments in Venture Capital will act as a hedge to Public Equity exposure.

Administrative and Cost Effectiveness

Investing in Venture Capital requires industry expertise and extensive due diligence. Developing and maintaining relationships with the right VC firms takes significant time, knowledge and networking.

Scaling

Fund of Funds make it easier to put more capital to work and we also give our LP's the opportunity to take advantage of excessive pro rata rights.

Investment Philosophy

Home Runs

Venture Capital returns have binary outcomes. Either you lose your investment completely or you win big with a home run. The majority of VC fund returns come from - at most - a handful of investments. The best performing funds have shown that 90% of their returns came from less than 20% of their investments. Unlike baseball, where a home run at most will earn you only four runs – a grand slam – Venture Capital grand slams can produce returns that are 100 times the investment. As Bill Gurley has said:

“Venture Capital is not even a home run business. It’s a grand slam business.”

To hit a grand slam, every investment must be made with the energy as if it were the next groundbreaking company. Swinging for the fences means that you will make misses. 65% of venture investments return less than the capital invested in them. But strike-out investments don't matter if a home run is hit. The best performing funds actually have more loss-making deals than the average funds.

Needle in Haystack

Unfortunately, the chances of hitting a home run are very slim. Finding a unicorn company, valued at over a billion dollar, is hard. The probability ranges from 0.07% to 2% and there is no general playbook for finding unicorns.

If we use the playbook of managing the probabilities and invest in many Startups, we would need to invest in 50 businesses to stumble upon a 2% chance of finding a unicorn. This approach has been tried by accelerators, yet accelerator graduated businesses have less successful follow-on outcomes (18%, compared to a 50% average), hinting that there is a quality to quantity trade-off in venture investing.

The playbook on the other end of the spectrum is to follow the philosophy of classic venture investing by making contrarian bets on Startups that display strong characteristics of team, addressable market, scalability, unfair advantage, and timing coincidence. This approach has found more unicorns but with more concentration comes more volatility.

Double Down

Andreessen Horowitz made a 312x return within two years from its investment in Instagram. From an IRR perspective, this was a home run, but unfortunately they were only able to invest once. Their investment of $250,000 which turned into $78 million of exit proceeds was not significant within the context of its entire $1.5 billion portfolio size. Being able, and having the foresight to add on to the winners without being lured into the sunk cost fallacy and throwing good money after poor, is as critical as to finding the winners. It’s like being able to hit the ball once more in the air.

By following-on, an investor can maintain its ownership percentage in the Startup. This provides governance and absolute dollar return advantages at exit.

Investment Strategy

Primaries

Our main strategy is to make primary commitments in Early Stage Funds. We enter partnerships with established firms that have raised multiple of funds, and new firms that are raising their first fund. We require our investments in first funds to be managed by seasoned investors who want to have their own venture.

There are about a thousand VC firms in existence in the US Venture Capital industry that have raised a fund within the last eight years. Of them, between 200 and 250 raise a new fund each year and 30 to 50 of them are first time funds. Average raise per fund is $200m meaning total capital raised is around $40bn to $50bn. Of the thousand firms in existence, we focus on the ones with an AUM of over $100m, which removes about half of them.

Kleiner Perkins sums up Venture Capital investing
“We believe that venture is a non-scalable, boutique craft. It requires incredibly dedicated practitioners with diverse and complementary backgrounds that span technology, operating, and investing. Above all, in an increasingly fragmented market, venture requires focus.”

What we would add is that Venture Capital requires a deep network. Discover Park Ventures relies heavily on its network to find deals and so do our partners in finding theirs.

Secondaries

As a complementary strategy, we make investments in secondaries. We invest in them to manage risks, and as a value creator.

Secondaries refer to buying and selling existing LP positions in a Venture Capital portfolio. Secondaries are different from typical VC investments, primaries. In secondary transactions, the buyer purchases either part of or the entire position from the investors who originally invested in a particular Venture Capital fund. This way the buyer now becomes an LP in that fund that owns positions across a number of different companies. It can also be the case that the seller is looking to relieve unfunded liabilities. Other more complex transactions may be direct private company secondaries, deals involving more than one fund or deals involving the use of leverage.

The secondary market exists because investments in VC are illiquid with long time horizons. The most common reason for a secondary sale is liquidity. In the early days, liquidity was mainly sought after because of distress but this has changed as the secondary market has matured. Portfolio Management is the main driver these days.

Advantages of secondaries are to help mitigate the J-curve of VC funds and get distributions sooner. Also, discounts to NAV historically have been in the 20-30%range. Both help with increasing the IRR. Research has also shown that the risk in secondaries is lower. The percentage of funds returning less than the investment was only 1.4% for secondaries compared to over 22% for global PE/VC.

Co-investments

Our second complementary strategy is to co-invest in our partnership portfolio companies. Through our primary and secondary fund commitments we are able to take advantage of excessive pro rata rights and invests in outstanding companies.

Venture backed companies are postponing their IPO’s and are having more of their value accretion as a private company. Getting access and being able to invest in these companies is a lot more difficult than participating in an IPO. By building relationships with these companies over the years through our partnerships and by being able to use their pro rata rights we get access to later rounds. As this is just a complementary strategy for us, we can be picky about investments, and as we have watched these companies grow up, we have a great informational advantage.

Portfolio Construction

Discovery Park Ventures searches for partners with unique talents such as operating experience, insights and vision. Much like our partners search for the same characteristics in founders of their portfolio companies. Both Venture Capital Investors and Startup Founders need the capability of being able to anticipate the next important technology development and its repercussions on the market place.

We mitigate risks while building our portfolios by diversifying. Our framework is based on following factors:

Theme
We relentlessly and enthusiastically pursue partnerships that are investing, supporting and capitalizing on big, hairy, audacious ideas. These ideas are found in a wide variety of fields like, genomics, AI, block chain, bioinformatics, and we strive to create a diversified portfolio of these themes.

Examples of Themes we invest in:
Enterprise Software
Genomics
AI

Industry
A theme usually affects more than one industry. For an example, AI is finding use cases in basically every industry by optimizing processes. And block chain solutions are being used in payments, marine insurance, and health care patient data. We manage our risk by being exposed to different industries.

Main industries we invest in:
IT
Biotech
Medical Devices
Consumer

Stage
As a company goes through the different life cycle stages, its risk profile changes. A seed investment has a very different risk-return profile than a pre-IPO investment. Our focus is to have exposure to Early Stage companies but as our funds mature our exposure to the later stages increases

Manager

Navigating the complex landscape of Venture Capital requires seasoned experience and a deep network. But Venture Capital is a high risk high reward endeavor and unfortunate events outside of the investors control happen and we manage the risk by partnering with different managers. We also invest in first time funds where research has shown that returns are on par with non-first time funds. But we always look for seasoned hands to navigate the ship.

Vintage
Where you deploy capital is obviously important but also so is also when. Certain vintages have better outcomes than others, so we make sure to invest in several vintage years.
We strive to invest over at least three vintage years and we also get exposure to more vintage years through secondaries.

Investment Process

If you are interested in learning more about our Investment Process please get in tough with us.

Find out more

Infusing American Entrepreneurs with Nordic Values

Why invest in a Venture Capital Fund of Fund?