Best of LinkedIn: Venture Capital CW 07/ 08

00:00:00: provided by Thomas Allgaier and Frennis, based on the most relevant LinkedIn posts about venture capital from CW seven-and-eight.

00:00:07: Frenis specializes in BDB market research for venture capital teams providing landscape screenings and startup segmentations with a strong focus on the tech space.

00:00:16: Yeah um it is great to be back.

00:00:18: we've got a lot to cover today.

00:00:20: We

00:00:20: really do.

00:00:21: Welcome to this deep dive.

00:00:22: Today we are looking at The Landscape From Mid To Late February twenty-twenty six and if I had to put a single label on it, i'd probably call the great bifurcation.

00:00:33: Right!

00:00:33: The Great Bifurcation.

00:00:34: that feels incredibly appropriate

00:00:36: because If you just scroll through your feed or go into an networking event...the vibe is still very recessionary.

00:00:42: You hear about down rounds bridge rounds founders struggling but then look at hard data coming out And numbers are absolutely massive.

00:00:50: Capital's definitely flowing again.

00:00:52: It is, but it's flowing into vastly fewer hands.

00:00:54: The spray and pray era of twenty-twenty one Is completely dead?

00:00:58: Its a market of extremes right now.

00:01:00: Yeah And I think Peter Dimov data on the UK Market Perfectly encapsulates this weird disconnect between sentiment and reality.

00:01:08: Oh!

00:01:09: This...the thirty five percent jump.

00:01:10: Exactly

00:01:10: Everyone feels like the U.K ecosystem is stalling out But DIMOF showed that startup funding there actually jumped thirty five per cent year over year in twenty-twenty five.

00:01:20: They hit twenty three point six billion dollars,

00:01:23: which is a massive number but you really have to peel back the onion on that data.

00:01:27: Demov highlights that out of that twenty three points six billion AI alone pulled in seven point nine billion

00:01:34: literally a third of the country's venture output.

00:01:36: right.

00:01:36: so the feeling of a drought isn't because there's no money it's an efficiency problem.

00:01:40: demov noted that founders are just pitching their wrong funds.

00:01:44: The Generalist Capital Pool is gone, so if you're not in London or Oxford building an AI company You are statistically invisible right now.

00:01:51: And what's crazy Is this concentration isn't just happening at the startup level.

00:01:54: It is arguably worse than on top of a food chain with LPs.

00:01:58: Yeah, Nicole Detemaso shared that frankly should alarm anyone looking At long-term health of the ecosystem.

00:02:06: Yes, LPs wrote fifty billion dollars In checks to six

00:02:12: firms

00:02:12: Andres and Horowitz, Thrive, Lightspeed, General Catalyst, Founders Fund & Dragoneer.

00:02:19: I mean that effectively turns the rest of the venture market into penny stocks!

00:02:23: DiTomaso also mentioned new fund closings dropped by nearly fifty percent.

00:02:27: We went from twenty one hundred funds down to around eleven hundred.

00:02:30: It's a massive flight-to-safety.

00:02:32: LPs are treating these top tier VC firms like blue chip stocks.

00:02:36: They were just cutting off the rest in the market to minimize risk.

00:02:39: But that changes how those big firms operate too.

00:02:42: Yeah, Pavel Prada actually broke down Thrive Capital's new fund X which I think proves your point.

00:02:48: they raised ten billion dollars but the allocation is what's fascinating

00:02:51: One billion for early stage and nine billion for growth.

00:02:54: Right That it a total shift in philosophy.

00:02:57: Prada nailed the analysis on this.

00:02:59: Thrive isn't trying to find a hundred needles in a haystack anymore, they have highly concentrated portfolio with companies like OpenAI and SpaceX

00:03:14: just buys the whole haystack.

00:03:15: Exactly, which brings up a huge structural issue.

00:03:19: The Tommaso argued that emerging managers aren't dead but generalist and merging managers absolutely are.

00:03:25: You need highly specific niche and proprietary deal flow now.

00:03:29: James Heath made great point about this symbiosis.

00:03:31: there though The mega funds actually need these small specialized funds to survive

00:03:37: because a ten billion dollar fund Cannot efficiently scout the seed stage.

00:03:41: It's too granular.

00:03:43: So, the small funds are essentially acting as outsourced R&D for the mega funds But

00:03:47: those small funds or getting squeezed by the LPs which creates a massive bottleneck For anything that isn't obviously AI

00:03:54: Which leads us right into the second major theme.

00:03:56: we saw across the feeds.

00:03:57: AI is just absorbing all the oxygen in the room and the geography along with

00:04:02: it.

00:04:02: Yeah, Jonas Anker had a great post about this.

00:04:04: he pointed out that twenty-twenty six is officially year of infrastructure and physical implementation.

00:04:09: The era of thin AI wrapper is over

00:04:12: Completely Over!

00:04:13: Anker noted that AI captured roughly sixty five percent of total US VC deal value entering Twenty-Twenty Six Two thirds all money.

00:04:21: Because it's so capital intensive now, we're talking data centers massive compute and what anchor called sovereign grade foundation models.

00:04:29: I love that term sovereign grade.

00:04:31: It highlights that this isn't just enterprise software anymore.

00:04:34: These are assets that nations consider vital to their economic survival.

00:04:38: And because it requires So much physical infrastructure in raw talent?

00:04:45: Asher Tiedman shared some mind-blowing data on San Francisco.

00:04:48: The death

00:04:48: of San Francisco narrative was highly exaggerated,

00:04:51: to say the least.

00:04:52: Tiedmen showed that in twenty twenty five, the San Francisco Bay Area alone captured fifty two percent of total US VC deal value more than half the country's venture capital in one bay.

00:05:02: He calls it the Waymo radius right?

00:05:04: Yeah!

00:05:04: The Waymo Radius Open AI Anthropic Databricks They're all within a five to ten minute driverless ride with each other.

00:05:13: Tiedman argues this basically kills the remote work thesis for frontier tech.

00:05:17: You need researchers, engineers and capital in the exact same room.

00:05:21: iterating

00:05:23: Because the spillover effects of knowledge are just too valuable, you can't replicate that density on a zoom call and see valuations reflecting this concentration.

00:05:31: Greg Batte be reported on Anthropic closing the historic thirty billion dollar series G

00:05:37: at three hundred eighty billion dollar valuation... Just

00:05:40: astronomical numbers!

00:05:42: But it's interesting because extreme US concentration is finally sparking global reaction.

00:05:47: Rinka Zanneveld highlighted a deal in the Netherlands that shows Europe trying to fight back on the hardware layer.

00:05:52: Accelera AI.

00:05:53: Yeah, Accelara AI secured two hundred and ten million euros for energy efficient AI chips.

00:05:58: So Europe is trying to carve out a niche so they aren't entirely dependent on US or Asian supply chains.

00:06:03: And Sam Marchant flagged this similar geopolitical move.

00:06:06: He highlighted applied AI raising a pre-series beatback by Mubadalu

00:06:10: Signaling The Rise of Private Sector AI National Champions.

00:06:14: Exactly Sovereign wealth funds aren't just acting as LPs for American venture firms anymore, they want to back their own local champions and own the IP.

00:06:22: It

00:06:23: really turns venture capital into an arm of geopolitical strategy.

00:06:26: but you know while everyone is focused on these massive infrastructure raises there's a quieter shift happening regarding liquidity that I think is just as important.

00:06:35: The secondary market explosion Yeah

00:06:37: Emily M Zeng reported US Ventures secondaries surpassed one hundred billion dollars in twenty-twenty five.

00:06:44: That is double the volume of twenty-twenty

00:06:47: four.

00:06:47: It's a complete paradigm shift, secondaries used to be seen as a distress signal like oh The founder selling shares early.

00:06:53: something must be wrong

00:06:55: but Zhang argues it's becoming core infrastructure.

00:06:57: now though She did note that if we see mega IPOs from SpaceX or open AI?

00:07:03: That might temporarily dent this secondary trading volume.

00:07:06: But

00:07:06: the underlying trend is undeniable.

00:07:08: Peter Walker calls it the forever private dynamic.

00:07:11: The top-demand private companies are now averaging eleven years old before they exit.

00:07:15: Eleven Years is a lifetime adventure, Anton Ards actually shared real world example of this.

00:07:21: he mentioned that set fund to finally liquidated after fourteen years...

00:07:24: Fourteen years to return the capital!

00:07:26: The traditional seven to ten year fun cycle completely stretched to breaking point

00:07:31: which is why secondaries are essential.

00:07:33: You can't ask employees or early investors to wait over a decade for a liquidity event,

00:07:38: but the dark side of this liquidity shift Is what Greg Head calls The Zombie Cohort because not everyone Can easily sell on the secondary market?

00:07:47: No absolutely no head provided A really grim reality check For the twenty-twenty two twenty-two vintage Of startups.

00:07:55: he estimates there Are ten thousand software companies out There that raised at those peak Zero interest rate valuations and

00:08:02: they are completely stuck.

00:08:04: Stuck, They can't reason you around because the VC world moved all their chips to AI And I cancel the company because there valuations or completely detached from reality.

00:08:12: So they just exist as zombies burning cash

00:08:15: head says we're looking at potential fire sales for a huge chunk of these assets.

00:08:19: It's brutal for those founders but even for the founders who were still executing well The bar has been raised significantly.

00:08:27: I thought Alana Gold's post about the Series B trap was incredibly insightful.

00:08:32: Series b is where startups go to die,

00:08:34: that was her exact quote.

00:08:36: she pointed out that seventy percent of venture-backed companies that exit never raise beyond series a

00:08:42: because The mechanics fundamentally change.

00:08:45: series A Is Where you sell?

00:08:46: The dream.

00:08:46: You sell the vision and the team.

00:08:48: but series be requires a repeatable engine.

00:08:51: you have To prove That your unit economics actually work at scale.

00:08:55: And because traditional VCs are demanding that level of rigor, we're seeing a lot of founders look toward corporate VC as an alternative.

00:09:01: Right but Heath Nacon had massive warning about it!

00:09:04: He argues that Corporate VC is not friendly money.

00:09:07: he called it a control layer

00:09:08: Meaning pipeline surveillance and roadmap influence.

00:09:11: Exactly

00:09:12: Founders think they get strategic partner But the corporate backer might just want to steer your product To serve their own internal needs.

00:09:20: MAD's Hebelstrap added to this, warning that CVC timelines and their definition of strategic fit vary wildly from traditional VC.

00:09:27: If the corporate strategy changes next quarter your funding might just vanish.

00:09:32: it is a huge risk.

00:09:33: Speaking of strategic mistakes Sheryl C highlighted very specific pitch killer for founders talking to European investors.

00:09:41: Oh,

00:09:41: the Europe is on a roadmap line?

00:09:43: Yes!

00:09:43: She says.

00:09:44: saying that to a European VC is an instant pass

00:09:47: because they view it as an afterthought.

00:09:48: right

00:09:49: you can't treat.

00:09:49: Europe has a backup plan.

00:09:51: Cheryl explained that Founders need to frame The expansion strategically yet say something specific like Sweden Is our entry point due to regulatory alignment?

00:10:00: give them A real thesis.

00:10:02: attention To detail matters more than ever even On the regulatory side.

00:10:06: We saw a brief but important mention from Eric Sivertson and Chris Harvey regarding California's FIPVCC law.

00:10:13: The Diversity Data Reporting Law.

00:10:14: Yeah,

00:10:15: it requires VCs to report demographic data on the founders they back.

00:10:20: Sivertson & Harvey discussed Angelist new tool that handles this compliance without violating the founder personal privacy

00:10:27: Which is great example of ecosystem building tools handle increasing regulatory burden But you know we can talk about compliance tools in AI infrastructure all day But Sharon Maroon brought up a concept that grounds all of this back in reality.

00:10:43: It's brilliant.

00:10:44: Dataland is where you use algorithms and landscape screenings to filter the market,

00:10:48: You

00:10:48: absolutely need dataland To survive the noise.

00:10:51: But

00:10:51: you can't close a deal in dataland

00:10:53: Exactly!

00:10:54: You closed deals In dinnerland.

00:10:56: it Is still fundamentally A relationship business based on trust.

00:11:00: Rick Bappy had The numbers back that up too.

00:11:02: He noted That right now Cold outreach gets But warm intros get forty percent.

00:11:09: That is an insane delta!

00:11:10: Zhu Jian added to this by pointing out why so many aspiring VCs fail.

00:11:15: They treat the industry like a pure meritocracy, they think whoever has the best spreadsheet wins.

00:11:19: but it's ultimately about The Human Network.

00:11:21: Always you use the data To know who did take to dinner be still have to buy them dinner.

00:11:26: So synthesizing everything we've looked at today from these CW seven and eight posts The market is entirely bifurcated.

00:11:33: It is!

00:11:34: If you are building a sovereign-grade AI infrastructure, or if your a top tier mega fund... You're experiencing an absolute

00:11:40: boommarket.

00:11:41: But if you were a generalist fund Or a twenty-twenty one sauce company stuck at high valuation it's just an absolute grind.

00:11:48: right now My

00:11:49: rules have changed.

00:11:50: the liquidity timelines are stretching past decade Corporate money acting as gatekeeper and geographic concentration is tighter than in twenty years

00:11:59: which leaves us with a fascinating provocative thought to mull over.

00:12:03: If secondaries are replacing IPOs and sovereign wealth funds, or acting as the new king makers in a highly concentrated geographic radius you have to ask yourself if we're witnessing the complete privatization of global innovation?

00:12:17: What does that mean for the outsider founder tomorrow?

00:12:20: definitely something for you to explore on your own.

00:12:22: it's very different game.

00:12:23: now

00:12:24: It really is!

00:12:28: Also check out our other editions on Private Equity, M&A and Strategy & Consulting.

00:12:33: Thanks

00:12:33: for joining us today!

00:12:35: Don't forget to subscribe...and we'll see you in the next Deep Dive.