The Current State of Venture Capital | Jason Lemkin w/ Harry Stebbings

Investment Activity & Market Context

• The investor has deployed almost no capital in the last 12 months, contrasting with a period between 2013–2014 where they executed deals for Pipedrive, TalkDesk, Algolia, Greenhouse, and SalesLoft within 12 months.
• Despite high social media activity claiming 11+ deals in early 2023, the investor reports not seeing 10 times the qualified deal flow observed 12 to 24 months ago.
• Market conditions have forced a "reset" where the bar for investment quality has risen significantly due to the previous two years of excessive risk-taking and market strength.
• The "Postmates Effect" (the ability for multiple non-dominant players to achieve billion-dollar valuations) is no longer true, driven by a shift from an artificially inflated macro environment to a stricter capital efficiency standard.

Investment Criteria & Metrics

• The core target for SaaS and B2B investments remains achieving $100 million+ in revenue within 7 to 10 years, though this threshold has likely shifted to closer to $200 million to facilitate a viable IPO.
• Investors now require a "trifecta" of top-tier growth rates, top-quartile capital efficiency, and a clear path to profitability, a standard difficult to find even at $1 million ARR.
• The total capital available for a company to reach an IPO has reset from a peak of $300–400 million back to approximately $100 million, mandating capital efficiency that was lost during the 2021 boom.
• Growth milestones have become more precise; historically, companies needed to grow 5x in five quarters or less, while current models may require "triple, triple, double, double" growth trajectories as simplified by Neeraj from Battery.

Founder Expectations & Strategy

• Founders must demonstrate definitive conviction on how they will win, specifically articulating why competitors have stumbled rather than relying on vague category growth assumptions.
• While categories are broader than in the past, the "competition slide" has regained importance as VCs demand specific answers regarding competitive differentiation and market ownership.
• Founders can succeed by dominating specific segments (e.g., SMB, mid-market, or vertical-specific niches) rather than necessarily being the overall number one in a broad category.
• The term "unicorn" has lost its bragging power; founders no longer prioritize unicorn status, and the market now views such valuations with skepticism unless supported by rigorous capital efficiency.