Best of LinkedIn: Venture Capital CW 41/ 42

00:00:00: provided by Thomas Allgaier and Frennus, based on the most relevant LinkedIn posts about venture capital in CW-forty-one and forty-two.

00:00:08: Frennus specializes in BW market research for venture capital teams, providing landscape screenings and startup segmentations with a strong focus on the tech space.

00:00:18: Welcome to the deep dive.

00:00:20: Today, we're cutting through the noise of the last couple of weeks in venture capital that CW-forty-one and forty-two.

00:00:26: Our mission is really to pull out the essential insights you need.

00:00:29: Exactly.

00:00:30: If you're Prepping a fundraise, managing capital, or just tracking where things are headed, these shifts are crucial.

00:00:36: We're talking tectonic shifts, right?

00:00:38: Yeah.

00:00:38: Things you need to understand to navigate what's happening.

00:00:40: That's it.

00:00:41: Look, the consensus is pretty clear.

00:00:43: The easy money, definitely over.

00:00:45: We're in a phase defined by, well, discipline, extreme discipline.

00:00:48: And LPs with sharper expectations.

00:00:51: Razor sharp.

00:00:51: Plus, growth bets are becoming hyperselective.

00:00:54: We'll dig into the structural changes too, especially around liquidity, secondaries, and the huge impact of AI.

00:01:00: So this is basically the blueprint for capital and companies now heading into well the rest of this year and beyond.

00:01:06: you got it.

00:01:07: Okay, let's start unpacking this the market baseline.

00:01:10: We talk about macro discipline a lot, but it sounds like it's moved beyond a goal.

00:01:14: It's just the entry fee now.

00:01:16: That's a good way to put it.

00:01:17: It's the absolute baseline.

00:01:19: the focus is squarely on profitability efficient growth No way around it

00:01:25: and that forces founders to what flip their priorities

00:01:28: pretty much.

00:01:29: Trevor Ellman really hit this point.

00:01:31: He emphasized stop raising just to build an MVP.

00:01:35: fix your go to market first.

00:01:37: prove demand before you ask for scale-up capital.

00:01:40: Wow, okay.

00:01:40: It's that's a fundamental pivot.

00:01:42: So what does fixing GTM actually look like?

00:01:45: Practically speaking

00:01:46: it means clarity total clarity.

00:01:48: vcs demand proof.

00:01:50: You know your ideal customer profile inside out and

00:01:52: have a channel plan

00:01:53: the defined channel plan.

00:01:54: Yeah, that you're already acting on and you need real market signals things like LOI's paid trials Something tangible.

00:02:01: so it confirms the risk isn't the tech anymore.

00:02:03: It's actually acquiring the customer

00:02:05: precisely.

00:02:06: That's the big hurdle now.

00:02:07: and while startups face this the investor side is Consolidating aggressively.

00:02:12: it sounds like Yeah, Scott Stanford called it venture four point oh.

00:02:16: He's predicting a significant contraction.

00:02:19: Fewer VC firms survive

00:02:21: fewer firms, but capturing more capital.

00:02:24: That's the really stark part.

00:02:25: Scott's data showed the top thirty US firms.

00:02:28: They took nearly three quarters of all capital in the first half of twenty twenty five

00:02:32: three quarters.

00:02:33: I know.

00:02:33: So it's tough for founders, obviously, but it's also incredibly tight for fund managers.

00:02:38: It rewards what he calls structural advantage.

00:02:41: Yeah, deal flow.

00:02:42: brand and focus.

00:02:44: If you don't have those, raising your next fund becomes

00:02:47: difficult.

00:02:48: Very difficult.

00:02:49: And with capital concentrating like that, the exit path must be narrowing to IPOs, late stage M&A, just for the elite.

00:02:57: Preserved

00:02:57: for the absolute top tier, which leads to aging funds, portfolios sitting there.

00:03:02: And that's

00:03:02: where Alexandra Cavella's warning comes in about the machine breaking down.

00:03:06: Exactly.

00:03:06: He made a pretty stark point, especially for Europe.

00:03:08: He said the venture capital machine has broken down because exits are so limited.

00:03:12: So the ecosystem needs to reinvent itself.

00:03:15: Offer its own liquidity.

00:03:16: Basically, yes, create internal solutions.

00:03:19: Because relying on public markets, that's just not working consistently anymore.

00:03:23: Okay, so theme one.

00:03:24: If you're playing in venture four point oh, founder or fund manager, you need structural advantage.

00:03:30: Period.

00:03:31: All right, let's get tactical.

00:03:32: How does a founder actually navigate this, the fundraising playbook?

00:03:35: Right.

00:03:36: It really starts with meticulous prep, like super clean data rooms, crisp decks.

00:03:41: Sharp cap tables, these aren't optional anymore.

00:03:43: Or table stakes.

00:03:44: Absolutely.

00:03:45: You have to reduce friction in the diligence process, make it easy for them.

00:03:49: And the pitch deck itself, it's almost a test of your operational ability.

00:03:54: I saw Suit Nyang's five rules to avoid the trash pile.

00:03:58: This point was, a chaotic deck implies chaotic operations.

00:04:01: That's

00:04:01: spot on.

00:04:02: VCs make that leap.

00:04:03: If you can't organize a presentation, how are you running the company?

00:04:06: Those rules.

00:04:07: Essential.

00:04:08: Lead with traction first.

00:04:09: Don't bury the lead.

00:04:10: Make the good news obvious.

00:04:12: Use one sentence.

00:04:13: Explain the core business simply.

00:04:16: And this is crucial.

00:04:16: Sell the business, not the product.

00:04:18: Show the money-making engine.

00:04:20: VCs invest in future cash flows, remember.

00:04:22: Got it.

00:04:23: Sell the business.

00:04:24: Okay, that sets the stage.

00:04:26: But then there's managing momentum, right?

00:04:28: Urgency without seeming desperate.

00:04:31: Harry Stebbings had advice on timelines.

00:04:34: Yeah, that was great advice.

00:04:35: You need that balance.

00:04:36: Avoid extremes.

00:04:37: Saying closing on Friday when you're not.

00:04:40: Well, that just boxes you in.

00:04:41: Right.

00:04:42: And the opposite, saying before Christmas, back in October.

00:04:45: Yeah, that just signals a zero heat, no movement.

00:04:49: Makes you look like you have no other options.

00:04:50: What's the sweet spot?

00:04:51: What signal works?

00:04:52: He suggested a sort of humble confidence, something like, we're grateful for the significant interest and we're now moving quickly toward a conclusion.

00:05:01: Respectful, but signals velocity, shows you're managing a process.

00:05:05: Exactly.

00:05:05: Okay, let's shift to the math behind all this.

00:05:08: The part founders sometimes miss.

00:05:10: Mayer Esot talked about the fund returner concept.

00:05:12: Oh, this is critical.

00:05:13: Every founder needs to internalize this.

00:05:15: Mayer's example was a smallish fund, ten million dollars.

00:05:18: Okay.

00:05:19: If they write a two hundred and fifty-k, check.

00:05:21: Right.

00:05:21: After all the dilution, follow-ons, everything, that single investment needs to hit an exit value of one point one billion dollars.

00:05:28: Wow.

00:05:28: One point one billion dollars.

00:05:31: Just to return the fund from a quarter million check.

00:05:34: Yep.

00:05:34: That's a one fourteen X return needed on that specific deal just to get the funds capital back.

00:05:40: And if you assume, say, a three X revenue multiple at exit, then

00:05:44: that company needs to be doing what, three hundred and eighty one million dollars in annual revenue.

00:05:48: It's huge.

00:05:49: That's the kind of scale you're signing up for with VC money.

00:05:52: It is.

00:05:52: And if you don't honestly see that path, maybe VC isn't the right route, which is why Guillermo Floor quoted Mark Cuban, raising money is not an achievement is an obligation.

00:06:03: An obligation.

00:06:04: Yeah, it shifts your entire purpose.

00:06:05: You're now obligated to hit those massive investor economics, those exit timelines.

00:06:10: That massive math.

00:06:11: Yeah.

00:06:12: It really makes you wonder who is making money right now.

00:06:15: Which brings us neatly to LPs and the secondary wave, that Goldman Sachs deal.

00:06:20: buying industry ventures for a billion, Pavel Prada and Chris Harvey flagged that.

00:06:24: Yeah, that was seismic.

00:06:25: More than just an M&A deal, it's a huge statement.

00:06:27: Goldman's basically betting the farm on venture secondaries becoming the dominant exit path for the next decade.

00:06:32: And why?

00:06:33: because companies are staying private so much longer.

00:06:35: Exactly.

00:06:36: Average time to IPO is now, what, thirteen years?

00:06:39: That's way longer than a typical fun life.

00:06:41: Secondaries become the pressure relief valve.

00:06:44: So it always consistent deal flow for someone like Goldman.

00:06:47: Less dependence on market timing.

00:06:49: They can kind of create liquidity while private.

00:06:52: That's the idea.

00:06:52: A massive shift in financial infrastructure.

00:06:55: And how does that filter down to fun strategy for, say, emerging managers?

00:07:00: Well, Maria Mylendorf shared takeaways from a panel emphasizing anchoring to your fund size.

00:07:06: It's about meaningful ownership.

00:07:08: Meaningful ownership.

00:07:09: Yeah, her point was like owning ten percent of a five hundred million dollar exit might actually be way better for your specific fund returns than owning, say, point five percent of a ten billion dollar unicorn.

00:07:20: The math has to work for your fund.

00:07:22: Makes

00:07:22: sense.

00:07:23: And this whole shift impacts careers too, right?

00:07:25: Myrtle Alakos had a point about analysts.

00:07:28: A really compelling one.

00:07:29: She suggested AI is sort of pushing analysts out of the traditional research roles.

00:07:33: Because AI can do the data crunching.

00:07:35: Right.

00:07:36: If you can automate landscaping and analysis, the valuable human roles left are the ones that look more like a GP's job.

00:07:41: High touch deal sourcing, building your brand and influence, cultivating LP access.

00:07:47: If you can't start acting like a junior fund manager early on, the path narrows.

00:07:51: Okay, let's tackle the elephant in the room.

00:07:54: AI, it's everywhere.

00:07:56: But sixty-three percent of deals being AI related?

00:07:59: Is that a bubble?

00:08:00: Is capital chasing hype?

00:08:02: That's the billion dollar question, isn't it?

00:08:04: Kerry Lye acknowledged AI as a huge platform shift, like the internet, transformational.

00:08:09: But he also warned that extreme capital saturation inevitably leads to roadkill.

00:08:14: Too much money chasing too few genuinely great ideas.

00:08:18: You get the next pets.com, not the next Amazon.

00:08:20: And VCs feel pressure to deploy now even before the winners are clear.

00:08:24: Immense

00:08:24: pressure.

00:08:25: Itamar Novik had a counterpoint though, right?

00:08:27: That VCs are maybe exaggerating.

00:08:29: how much AI is productizing venture.

00:08:31: Yeah, he argued that seed investing fundamentally still runs on conviction.

00:08:35: on network.

00:08:36: It's just data processing.

00:08:37: Exactly.

00:08:38: You can try to systematize diligence with AI, sure, but the best early bets often come from believing in something before the data fully validates it.

00:08:45: That old-school network and gut feel still vital.

00:08:48: And beyond the software, the actual infrastructure cost for AI.

00:08:54: Johannes Gunther highlighted some pretty staggering numbers.

00:08:56: Jaw-dropping, really.

00:08:57: He mentioned companies like OpenAI needing hundreds of billions just for infrastructure, that brute force scaling approach.

00:09:04: Huge

00:09:04: data centers, massive energy needs.

00:09:07: It's just financially, and you could argue environmentally, unsustainable at that scale.

00:09:11: It puts huge pressure back on VCs, on debt markets.

00:09:14: Conventional capital can't write checks that big easily.

00:09:17: So while AI gets the headlines, are other sectors quietly gaining ground?

00:09:22: Energy.

00:09:23: industrial.

00:09:24: Definitely seeing momentum there.

00:09:25: Ayod Khalil Chamas pointed out a real surge in energy tech VC funding, even within oil and gas.

00:09:31: Really?

00:09:32: What's driving that?

00:09:33: Modernization.

00:09:34: Big focus on efficiency, digital operations, cutting emissions, think digital twins, methane tracking tech.

00:09:40: The industry is essentially funding its own digital transformation.

00:09:44: Interesting.

00:09:44: Okay, finally we have to talk about inclusion.

00:09:46: I feel like the most persistent inefficiency in this whole venture.

00:09:50: four point oh picture, the stats are still bad.

00:09:52: Horrifyingly persistent.

00:09:54: Yeah.

00:09:54: Kimberly Negrin and Toyo CS flagged female only teams getting only about two point three percent of global VC funding in twenty twenty four.

00:10:02: Two point three percent.

00:10:04: And Joe Wong highlighted black and Latino women founders.

00:10:08: Just point one percent in twenty twenty two.

00:10:10: It's abysmal.

00:10:10: And it's

00:10:11: not just stats.

00:10:12: Right.

00:10:12: There's a qualitative bias too.

00:10:14: Kimberly Negrin mentioned female founders getting asked more prevention questions.

00:10:18: Yeah.

00:10:18: Two point three times more.

00:10:20: Questions focused on risk, hurdles, what could go wrong, while men get asked promotion questions upside potential gain.

00:10:26: That difference shapes the whole conversation, the whole diligence process.

00:10:29: Absolutely.

00:10:30: It's a structural bias, which is why Aparna K made the argument that the next real tech breakthrough needs to be culture.

00:10:36: Culture.

00:10:37: Yeah, a reboot, making tech inclusive by design, ethically resilient, seeing inclusion not as a nice to have, but as core to strength.

00:10:45: And the call to action is getting concrete.

00:10:47: Jo-Wan's request was powerful move past just coffees and chants.

00:10:51: Right.

00:10:51: She asked for real action from allies, contracts with budgets, direct intros to VCs who actually write checks, not just pass you to another accelerator program.

00:10:59: They're ready.

00:11:00: The capital needs to follow.

00:11:01: Exactly.

00:11:03: Wow.

00:11:03: Okay, that was a really dense, essential deep dive.

00:11:06: We've hit the rise of secondaries, the tough math of fund returners, venture four point oh consolidation, and that urgent need for a cultural shift in how capital gets allocated.

00:11:15: If you enjoyed this episode, new episodes drop every two weeks.

00:11:18: Also check out our other editions on private equity, M&A, and strategy and consulting.

00:11:22: And

00:11:22: maybe one final thought, building on that Goldman industry ventures deal.

00:11:27: You see this convergence, right?

00:11:28: Private markets infrastructure getting absorbed by traditional Wall Street.

00:11:32: The lines between VC and conventional finance are blurring fast.

00:11:37: So the big question for everyone listening I think is, will this shift?

00:11:41: genuinely democratize liquidity for LPs and founders?

00:11:44: Or will it just institutionalize scarcity further, concentrating power with the biggest players?

00:11:50: Something profound to definitely mull over.

00:11:52: Thank you for diving deep with us today.

00:11:54: Make sure you subscribe so you don't miss our next deep dive.