Fireside Chat, Roundtable, Interview
Jason Lemkin & Rick Zullo: How "Mark to Market" Corrupted Venture Capital | E1052
- Mega funds are expected to resurge in late 2024 and 2025, accompanied by a flood of IPOs and returning liquidity that will reintegrate capital into the venture asset class.
- The venture business is forecast to evolve into an asset management model with splintered strategies and dedicated teams over the next couple of years, while AI spending is projected to double from 2023 to 2024 and consolidate among major players like OpenAI and Anthropic.
- Founders anticipate increased pressure to heed board advice due to bridge and down rounds, as 95% currently underestimate the regret associated with ignoring investors when funding gaps arise.
- Companies facing the "messy middle" may exit via write-offs or "bus" events rather than traditional down rounds, as salvage value is predicted to be lacking.
- Radical efficiency is required for the next five to 10 years if public markets cease funding massive losses, a condition they are predicted to maintain once comfortable with profitable entities; consequently, while a temporary pass for low growth may exist for efficient firms, founders must eventually return to triple-digit growth to avoid ending their venture journey.
- Companies valued at $2-3 billion with aggressive pricing from last year are expected to face significant difficulties in achieving exits.
- Venture firms that lacked honesty with LPs or failed to secure liquidity on their sole portfolio company are predicted to wash out, and many multi-stage fund investors will disappear in three to five years due to broken incentives.
- The industry faces a predicted return of markup-driven corruption and overfunding incentives, where LPs are often still compensated based on paper markups that previously fueled a unicorn explosion, potentially forcing struggling emerging managers to prove trustworthiness as fundraising doors close.
- Transitioning from seed to Series A will frequently fail due to "good but not great growth," requiring founders who can triple their valuation to raise subsequent rounds without VC pressure, while those excellent at building businesses are expected to eventually master pitching.