Why Launch Ocampo Capital Now?
Feb 29, 2024
Friends of Ocampo Capital,
In my last post, I shared a bit about my background and how I came to develop Ocampo Capital. As I shared:
Ocampo Capital is a trajectory amplifier: it advises, supports, and invests in consumer companies, aiming to help them achieve their aspirations.
In this post, I am sharing a bit about the model, and why I believe now is an opportune time to be officially launching Ocampo Capital.
Trajectory Amplification at Ocampo Capital
The trajectory amplification model at Ocampo Capital consists of four parts:
- Early-stage company identification. Ocampo Capital follows a strict process to identify and assess businesses that would be a good fit for our model and portfolio, based on inputs developed during my career in merchandising and finance.
- Development of operational strategies. Ocampo Capital develops an operational game plan in concert with the founders, which governs the hands-on guidance provided to the portfolio company.
- Revenue amplification initiative identification. Ocampo Capital leverages its retail network to help portfolio companies expand distribution channels, once their operational foundation is solidified.
- Support for exit events. Ocampo Capital coordinates and attends meetings with potential acquirors and bankers to support exit events for portfolio companies, if and when the timing is right.
Why Launch Ocampo Capital Now?
As I mentioned above, venture capital is very cyclical. In recent quarters, early stage venture capital has slowed dramatically- with the number of priced rounds and amount of cash raised falling for both Seed and Series A companies:
The combined deal value of pre-seed and seed dropped from $24.2 billion to $14.6 billion in 2023, according to Pitchbook- and the industry averaged negative IRRs for both 2022 and 2023. Of the deals that were completed last year, one in five was in support of down-round valuations. Broadly speaking, companies that didn't need to raise funds in 2023 avoided doing so given that backdrop.
Consumer businesses in particular have seen a precipitous decline in venture funding in 2023. Many consumer-focused venture funds- particularly the larger ones- have shared with me over the past year that they are focused on triaging their current portfolios and are not focused on putting new money to work. As such, the data shows that there currently is a significant imbalance between the supply of venture funds available, and the demand for funds by new businesses.
And despite that, total venture fund new contributions exceeded distributions to limited partners in both 2022 and 2023- with venture capital distributions falling to the lowest levels since the global financial crisis 14 years ago. Unsurprisingly, limited partners' appetite to put more net new funds to work in funds in 2024 is low. Many (including my former team at J.P. Morgan) are prognosticating another tough year for legacy venture funds in 2024 because of these dynamics:
"Looking forward, we anticipate most venture-backed startups will need to raise capital in 2024. Unless there is a material shift in sentiment or IPO market activity—which we do not expect— many will face taking a significant down round to raise new equity, end up in M&A discussions, or worst of all, closing their doors. This trend is already picking up, with the number of startups winding down due to bankruptcy or liquidation doubling in 2023 from 2022." - Ginger Chambless, Pamela Aldsworth and Andy Kelly, J.P. Morgan Venture Capital Coverage group.
Valuations are falling. Fewer funds are deploying capital to startups. Consumer funds are reining in investment and are triaging their current portfolio. According to many, unicorns are turning into “unicorpses”:
And yet, overall consumer business applications are up 50% versus prior to the pandemic and there continues to be great consumer companies emerging with differentiated product, strong founders, and lots of potential.
The legendary hedge fund manager Howard Marks of Oaktree Capital has said, "when you go to a bond auction and you sit down, and you see there are no other bidders, that's usually a good thing." I am currently seeing very interesting companies at much more reasonable valuations than in years past. All of these industry dynamics, combined with proof of meaningful outperformance for our strategy due to a combination of strong portfolio company selection and the ability to help them operationally to drive stronger outcomes, leads me to believe strongly that Ocampo Capital is poised to win.
Ocampo Capital is a trajectory amplifier:Ā It advises, supports, and invests in consumer companies,Ā aiming to help themĀ achieve their aspirations.
We hate SPAM. We will never sell your information, for any reason.
