Panel
How New Investors Are Influencing Venture Capital
Milken InstituteCourt Coursey, Chance Barnett, Troy Carter, Dave McClure, Kara Nortman, D.A. Wallach, Cort Corsi
- Market conditions are expected to shift toward rationality and capital efficiency, characterized by a slowdown and return to normalcy rather than a systemic retraction or major bubble, though some observers note overconfidence in China and a recent "air being let out" over the last year in the U.S.
- Investment activity has seen reduced Series A volume and a more conservative approach as investors seek better value and time to conduct due diligence without the pressure of two-week decision windows.
- The pool of entrepreneurs is expanding significantly due to lowered technology costs, with individuals migrating from Wall Street to Silicon Valley and taking the leap in academic science commercialization, though some argue this includes founders who may lack the necessary "hustle" or grit.
- Venture Capital success metrics remain highly skewed, with expectations that only approximately 2% of portfolios reach billion-dollar outcomes and 5% reach the $100 million mark, driven by the high probability of near-death experiences and low-probability events in hiring and product pivots.
- Fundraising and deployment strategies are evolving, with some funds targeting 500 to 5,000 deals annually and others shifting focus to copying top-performing VC deals rather than identifying seed-stage winners.
- Equity crowdfunding is projected to double year-over-year, growing from a $34 billion industry in 2016 to a size comparable to the current venture capital market, leveraging a decentralized global online economy.
- Future value creation is anticipated to be fueled by technological advances in cloud supercomputing, mobile devices, and bio-engineering, potentially generating trillions in value over the next decade alongside demographic shifts in the US, China, and the broader 5 billion-person global market adopting online payments.
- Regional markets are maturing rapidly, with Southeast Asia seeing rapid consolidation such as Grab Taxi reaching a billion-dollar valuation in under three years, while general competition among VCs is increasing as more firms identify and back the same promising companies.
- Risks include the potential for over-correction in current valuations, the difficulty of distinguishing true entrepreneurial resilience from temporary success, and the challenge of 21-year-olds defaulting to founding rather than traditional finance roles despite a lack of prior experience.
- The current cycle is viewed as distinct from the 2008-2009 and 2009 periods due to the presence of sustainable cash-flow businesses and high growth, though there is a wish for a market correction of 2009's severity to uncover more unicorns.