Mark Suster on Venture Fundraising, Liquidity and Exit Prices

Mark Suster argues that venture valuations in 2021 exceeded earlier bubbles and predicts a lengthy correction. The Upfront Ventures general partner joins Harry Stebbings to discuss fundraising, exits and investment discipline; his forecasts are views from 2024, not established outcomes.

At the start of Passover, Suster reflects on Jewish history and the holiday’s meaning to him. He expresses concern for people held hostage in Gaza and cites estimates of deaths among them. His historical account and figures are his own remarks at the time of the interview.

Suster says he entered venture in 2007 after founding two software companies and selling the second to Salesforce. He wanted to be a general partner making investments, rather than remain an operator inside a large company.

Stebbings asks whether founder experience differs from managing a division. Suster says building from zero taught him the uncertainty of payroll and fundraising while still needing to motivate employees. He thinks leaders must compartmentalize problems so the whole team can continue operating.

He says the hardest venture moments can involve conflict with people rather than just losses. He describes an unnamed alleged embezzlement and settlement, but the interview supplies no independently verifiable case details; the allegation should not be treated as an adjudicated finding.

A managing partner, Suster says, must protect the team from some of the stress of fundraising. His phrase “lemons ripen early” means rejections tend to come quickly while commitments take longer, making persistence important.

Both agree that an investor asking for more traction can be a polite way to decline, though Stebbings notes that some prospects also stay noncommittal. They criticize lengthy diligence followed by a disclosure that the investor was not ready to invest at all.

Suster explains his “lines, not dots” framework: repeated meetings show a trajectory, including responses to setbacks, rather than only one point in time. He says limited partners can similarly learn from a manager’s decisions, resilience and conduct across market cycles.

He recalls approaching a Morgan Stanley contact six times before a seventh meeting led to a $22.5 million commitment to a $195 million fund. He says the anchor helped bring in other backers and that the fund later had strong prospects; his expected return is a prediction, not a completed cash outcome.

For a first close, Suster favors getting a viable amount committed early rather than waiting for the entire target. In his example a $20 million close could let a manager begin making investments and establish a record, although the fund might never reach its larger goal.

He suggests setting a realistic initial target and explaining honestly why the fund closed at that size. An early backer might receive an economic incentive, such as lower fees or carry, if needed. Stebbings notes the risk of presenting a small target and then building a substantially different fund.

Suster says institutional limited partners can provide continuity across funds, while friends and family may be less likely to reinvest. He acknowledges that money from either source can fund the same investments and that recognized institutional names may help attract others.

He argues investors often follow the crowd: money arrives after markets have risen and leaves after losses. He recalls buying public shares gradually during the financial crisis and then selling once he had a profit because he found the stress difficult. The example is a personal account, not a market-timing formula.

Suster says Upfront sold $1.2 billion of positions across 2018–2021, including $600 million in 2021, and invested almost $50 million in discounted secondaries in 2023. He cites high software revenue multiples as part of the reasoning, while acknowledging he did not perfectly time the market. These figures are his account.

In an upswing he generally sells no more than a portion of a position at once, he says, retaining exposure to companies he believes can compound. He recalls mixed limited-partner reactions to one sale, illustrating the tension between realizing cash and holding a potential winner.

Suster argues an IPO alone does not guarantee immediate liquidity: a large holder may be unable to sell a meaningful stake if trading volume is limited. He sees strategic acquisition as another constrained route and predicts private equity will increasingly buy companies or secondary positions.

His argument is that financial buyers must earn a return and therefore may demand prices disciplined by future earnings. That makes venture entry price important, he says. Whether private equity will provide enough exits and at what prices remains uncertain.

He contrasts the large number of private companies recently valued above $1 billion with a much smaller public software and internet universe. He estimates many will never exit above that value, and cites concentration among large investors. The figures and future outcomes are his estimates, not independently verified counts or realized results.

He cautions that a high TVPI based on financing marks does not itself return cash to investors. Drawing on a historical top-quartile fund example, he says paper gains can take years to reverse and predicts that the 2021 valuation correction could take several more years; the timeframe is speculative.

Suster says some managers have marked down portfolios while others may still be carrying values too high. He refers to a reported possible sale as an illustration; a press report is not a completed transaction or proof of another fund’s marks.

Stebbings points to expensive AI deals. Suster says investors often repeat cycles and cites premiums for generative AI investments, but offers no underlying dataset in the interview. He believes high entry prices can make returns difficult even when a company performs reasonably well.

Upfront was doing relatively little generative AI investing at the time, Suster says, and was putting more capital into space. He argues reusable rockets reduced launch costs and created opportunities for startups, particularly in Los Angeles. His cost, spinout and funding numbers are approximate claims and his firm has a commercial interest in the sector.

Stebbings worries software investors may misunderstand hard technology. Suster agrees specialist skills matter and describes Upfront as a fund with several themes and separate teams, including space and defense and healthcare, rather than investors covering everything equally.

He says space includes satellites, communications and earth observation, while other uses remain emerging possibilities. He worries about exit conditions across venture, not only hard technology. His examples of future markets are forecasts rather than established businesses.

Large acquisitions by major technology companies may face regulatory obstacles, Suster says, leaving IPOs, private-equity consolidation or smaller acquisitions as potential routes. He believes the pool of buyers is broader at lower transaction values, but does not claim every deal will find a buyer.

He praises Anduril and expects it could eventually become public, a prediction reflecting his view of the company and defense market. Asked about buying a category leader regardless of price, he respects that strategy’s practitioners but says it is not the approach or skill set he uses.

Upfront considers potential exit conditions and entry valuation, although it does not precisely scenario-plan every outcome, he says. Its median entry valuation was around $11–12 million pre-money, but he says it sometimes pays $20–25 million depending on team, progress and competition.

Stebbings asks whether lower entry prices create adverse selection. Suster disagrees and says relationships with founders before a company is formed can allow earlier investment. He says Upfront’s historical median initial check was about $3.2–3.5 million and ownership about 18–21%; these are fund-specific self-reported figures.

He says the fund typically deploys around 42% in initial investments and reserves the remainder for later rounds. He groups companies into clear losers, clear successes and those whose prospects need more time, while emphasizing that the categories can change.

Suster says some strong returns came from companies that others were slow to fund, and credits reserves with helping them reach later growth rounds. He cites six such deals returning $1.4 billion; the interview does not provide a full methodology or independently verify the total.

For follow-on decisions he reassesses the market, team and valuation. He recalls declining to invest at a $500 million valuation in a company he still liked, because he felt traction did not justify that price. He expects it to become valuable, but that expectation is not realized performance.

Suster estimates that his selection is roughly 70% founder-driven, while stressing that people and market both matter. He says one mistake is misreading a founder’s willingness to commit for the long term; an early sale may be desirable for a founder but insufficient for a venture investor’s target.

His biggest investing mistake involved repeatedly adding capital to an extremely fast-growing company that eventually returned zero, he says. He recalls an earlier $350 million sale offer that the founder declined. He attributes his overinvestment partly to ego and now tries to separate belief in a team from the price paid.

Writing checks is easy compared with generating returns, Suster says. He advises new investors to see many opportunities before deploying quickly: a larger comparison set can change which deals look exceptional. He presents this as a learning heuristic rather than a guaranteed formula.

He describes backing Ring and other hardware companies despite skepticism, arguing that hardware combined with software and services can create value. As an investor, he has a direct interest in these examples. He regrets Ring’s early sale while acknowledging the founder’s concern about competition from large buyers.

Turning to the 2024 US election, Suster says he worries about Donald Trump and would prefer an alternative to both major candidates. This is his political judgment, not an objective assessment of either candidate.

He also expresses concern about antisemitism and what he sees as hostility toward Jews on the political left. He connects these concerns to his understanding of Jewish history and Israel; his broad characterizations and historical claims are his perspective, and the interview does not independently establish them.

Discussing campus protests and historical persecution, Suster argues antisemitism has deep roots. He disputes claims about the Israel–Gaza war and criticizes university responses. These are contested political and legal issues; his statements are presented as his views rather than findings on the conduct of the war.

Suster says universities should allow discussion of ideas while protecting groups from targeting, and welcomes pressure from donors and parents for change. Stebbings agrees with his concern, and the conversation ends with thanks.