Fireside Chat, Panel
Roundtable #6 with Rebecca Kaden, Nicole Quinn, Eurie Kim, Harry Stebbings | E1083
- OpenAI's evolution into an "app store of AI" is projected to trigger a new search distribution wave, potentially driving valuations "slightly higher" and enabling new business models that deliver expensive services at "fractions of the cost" or provide a "lottery of time" by freeing up hours in the day.
- Seed valuations are expected to remain "bluntly immune" to macro cycles, holding stable at a "$35 million average" over the last decade, though Series A and B metrics will eventually force convergence, creating pressure on later-stage rounds that have seen valuations drop from $740 million to $340 million.
- Investors are described as "very hesitant" to reprice assets or execute down rounds due to the complexity of anti-dilution mechanisms, leading to a market where founders must increasingly accept "clean terms" and "significant down round" valuations to avoid structural baggage.
- Future venture returns are predicted to stem from "outsized and better ideas" rather than consensus, shifting the industry away from the "myth of a hot deal" and momentum-chasing toward a focus on "development of ideas and perspectives and the edges" paired with strong efficiency stories.
- High mortality rates are anticipated as startups face pressure to meet "Series A metric level" standards earlier, with companies that raised too much capital without product-market fit expected to "die from indigestion rather than starvation."
- Employee turnover is forecast to rise as shares go "underwater," prompting workers to quit rather than accept complex down-round structures, while the IPO market remains "not exactly wide open," constraining liquidity and increasing pressure on fund performance.
- M&A activity is unlikely to serve as a primary exit strategy because large companies are prioritizing "burn" and "essentials," resulting in "paltry 1x at best" multiples for acqui-hires and limiting large-scale sales to giants.
- Emerging managers who raised funds during the 2019-2020 vintages and "overspent" are expected to face "disproportionate challenges" or stop growing if they lack the buffer of prior vintages, while large multi-stage funds may reassess the viability of writing "$2 million checks" without the ability to follow companies to exit.
- The industry is predicted to see a shift toward collaborative models where multistage funds co-invest with seed funds rather than dominating cap tables, alongside the emergence of new liquidity solutions such as secondary sales of older positions to specific funds.
- Consumer applications integrated with "crypto rails" are expected to revive a "crypto winter," while AI is projected to become a "critical building block" for existing portfolio companies rather than just a standalone sector, with "season teams" and deep markets commanding "massive multiples."
- The venture capital industry is anticipated to continue for "another couple of decades" driven by enduring innovation, though specific fund vintages with "god-awful performances" may face a strategic rethink, forcing firms to potentially retreat from writing as many seed checks.
- Complicated markets and stories with lower revenue are expected to be "very hard" to raise money for in Series A, shrinking the opportunity for fringe concepts to those with "momentum," "deep markets," and "fundamental economics."