Interview, Fireside Chat, Podcast
What Does it Take to Be Good at Series A and B Today?
- The IPO window and M&A activity are expected to remain closed in the near term, with the venture asset class maintaining an "unloved" status; large endowments may exit the sector entirely if liquidity constraints are viewed as a permanent structural shift, though they will remain patient if the issue is temporary.
- Public listings are forecast to return only after capital inflows decrease to the point where companies can no longer access cheap private capital, potentially occurring when growth rates of 50-60% and market caps of $100-150 million become viable targets, while companies growing at 30% with $200 million in revenue may face mathematical hurdles for IPOs.
- The cost of capital for public companies is predicted to eventually fall below that of private companies, reversing the current anomaly, which may extend private holding periods to 15-20 years, forcing founders to face CEO turnover and a "second product crisis" before an exit.
- OpenAI is predicted to grow 1,000% by 2029, though the broader AI landscape carries risks of rapid regression from high revenue to near-zero levels and a high probability of "zeros" due to technical obsolescence by larger model providers like OpenAI extending their stacks.
- A "gold rush" phase of aggressive capital deployment is forecast for 2024, preceding a pullback, with the risk that investors paying Series B prices for Series A risk will result in significant value destruction if they fail to pick winners accurately in a low-margin error environment.
- Digital penetration in the B2B sector is expected to expand from sub-1% to multi-trillion dollar opportunities over the next 10 years, while horizontal LLM providers are predicted to win most categories, potentially disrupting vertical application startups and slow incumbents like eBay.
- Engineering productivity is projected to bifurcate, with "100X engineers" becoming significantly more powerful and "average" engineers seeing modest 2x improvements, creating an environment where only companies with aggressive, office-centric teams and "deranged" founders can survive the AI arms race.
- SMB-focused sales and customer success teams face a high risk of 50% elimination within two years due to AI automation, while the enterprise sector is expected to benefit more broadly from AI integration compared to smaller players with less data depth.
- Geopolitical risks are highlighted for investments in China and Russia, with predictions that authoritarian regimes will remain in power for the long term, potentially leading to congressional scrutiny of such investments by 2026 and forcing a shift toward defense technology manufacturing in Ukraine.
- Internal corporate dynamics in the U.S. may force a cultural shift where the European work-life balance model becomes a liability, as the pace of AI innovation requires an "American pace" of work to avoid extinction for B2B companies unable to pivot quickly.
- Specific public company outcomes include predictions that Box must re-accelerate to 20-30% growth to justify its value against Microsoft and Google competition, while companies like ServiceNow with 24% growth serve as positive indicators despite long-term uncertainties for "pre-AI behemoths."
- Historical patterns suggest that the best venture returns occur during periods of strong tech trends combined with low capital availability, similar to 1994 and 2010, whereas the current "doldrums" from 2022-2025 involving LP overexposure and lack of distributions may continue into 2025.
- ServiceNow's growth is viewed positively, but the long-term viability of large software companies depends on their ability to execute a "second act" re-acceleration, similar to Adobe's historical turnaround, to avoid stagnation in the AI era.
- The "20% growth at nine figures" mentality is predicted to be insufficient for survival, with investors needing to identify companies capable of exponential growth, while the market may repeat the 2021 overvaluation error if investors continue funding crowded categories without waiting for emergent winners.
- Investors are expected to deploy every available dollar during the current boom before a pullback, with the shock of the market downturn anticipated to last no longer than the interval between the next two VC funds (approx. 20 months).