VC limited partners brace for sobering annual meetings

• Axios chatted with three limited partners, who agreed to share their perspectives without being named.

Flashback: Since the downturn began almost two years ago, the free flow of cash and astronomical startup valuations have been replaced by tight belts, slow check writing and valuation cuts.

The big picture: LPs are expecting thorough information about portfolio markdowns, whether they should expect more, and the future of those whose valuations are holding steady.

• "Dialogue last year was a lot about burn rate in the portfolio.… The dialogue this year is more nuanced and taking it to the next level," says one investor from a large private asset allocator.

What they're saying: "Everybody that I'm talking to has one company that they're really excited about from an operations perspective, but terrified about from a financing perspective," the head of a fund-of-funds tells me.

• With funding continuing to be harder for startups, there's a growing concern that even solid businesses will soon struggle to raise new cash. "I worry you'll see those A- and B+ companies not be able to raise," he adds.

Between the lines: The same investor was also a bit surprised to hear predictions that the venture market won't thaw until 2025 — not 2024 as many hoped for a while.

• Heightened expectations of a recession are also impacting fundraising plans, he says.

Acronym of the year: "Every AGM we have been to this fall has talked about AI in some capacity," says the same investor.

• "Either how they have been investing in it already, or how it is being used by their companies, or how AI funding is driving valuation spikes and what their perspective/investing strategy has been around it," she adds.

Yes, but: While exciting, all the AI talk is also setting off LPs' alarm bells.

• "I'm always suspicious of [general partners] because they're always slinging some new trend that they only understand an iota more than me but that iota is important because it makes them sound smart," the fund-of-fund chief explains. "Two years ago, it was crypto."
• Meanwhile, an investor from a large pension institution notes that he's comfortable only with three funds in his portfolio deploying significant cash into AI startups, while the rest make him nervous. "[They're] just dropping term sheets into anything ending with .ai."

Investors agree that seeing venture capitalists in person, meeting the founders of the startups they've backed, and catching up with fellow limited partners are their favorite part of attending annual general meetings.

Yes, but: There's also the complaints.

• Not getting presentation documents ahead of time, and frantically trying to jot down everything.
• Not sitting at a table and having to perch laptops on their lap while holding a beverage for hours. There's also rushing to recharge their computers in the corner during breaks.
• Sitting through endless presentations about every single company in a firm's portfolio (the "portfolio company death march," as one calls it).

The bottom line: Fall's annual meetings, like a good decorative gourd joke, come back like clockwork every year.