Metha-venture in 2025
Some thoughts on VC velocity, my precious
The world is changing. The fun thing - the pace of change, d’’ or second derivative, is increasing. After making the VUCA → BANI transfer, it’s become even harder to make sense of the things happening.
The changes are everywhere: tech, healthcare, society, media… Not the least is investing world, e.g. venture capital and private equity.
Notes
Higher competition (!)
There are now 32,000+ venture funds out there:
Gone are the times when being a VC meant the world. It means - but it’s now a bigger ocean with bigger/smaller sharks (NFX gives 14 reasons to love the nuclear power on why VC market will continue to grow). And, IMO, the market’s Tinderized a lot - everyone wants that fresh-out-of-MIT ML PhD grad with a nerdy but genius team that are set to change the world.
For VCs themselves, Matthew effect and power law are in place, too - majority of capital is raised by the minority of firms
Brighter side of the moon
On the greener side, quoting the same NFX post:
LPs will continue to invest in LPs because
it’s just one of the strategies
it’s more than viable
brands are durable/defensible, i.e. a strong VC brand will be able to invest in a number of models efficiently
It’s still a pretty inefficient and dare I say
contrary to aforementioned claim- undersaturated market
It’s still small: appr. $300B in 2024 vs $4T for real estate and $4.9T for hedge funds.
It’s lucrative:
It’s becoming ubiqitous and faster:
Overall, as VC is much (!) more variable than most other asset classes (a virtually unlimited number of opportunities - all the things progress/innovation at the very least), hence inefficiencies/’alpha’ can be expected to exist for longer, possibly indefinitely:
So there are two main ways to surf here (later we’ll cover them more):
find the opportunities before anyone else
(preferably when the founder is still in the crib)be the C everyone wants 😏
build robust and defensible systems/flywheels by mixing cooperation and competition
establish the brand/voice
have the ultimate CxO/team enrichment/networking opportunities
Faster cycles and iterations
In line with d’’ rising, startup wax and wane cycles are shortening: it’s mostly a good thing (faster turnover + more startups):
Again, with the rise of AI MVPing/iterating speed is going (and does already) to add a few notches further, hence faster everything.
Oh, my boogers.
Hyperfocus vs generalists
It had become harder to hustle in the world of increasing product complexity. Sure, one could continue making micro-SaaS (low-maintenance fast-to-start projects), but to really change the world, you’d usually need something substantial. Or eat the startups for lunch like Rocketable does.
Focus on leaders
As it’s been reasonably mentioned in another NFX’s post - founder’ and the team’s attitude and ‘grit’ matter big time: it’s a subtle dichotomy as one should differentially diagnose the ‘we’re gritty but adaptable around our mission to _’ from ‘we’ll pursue the same idea no matter what, banging the walls’.
More CVC activity
Venture arms of big corps seem to be gaining ground: there are a lot of advantages to being invested by, say, Qualcomm’s own VC fund if you’re making chips. Risks of bankruptcy are cut in half (yet are still high), multipliers are higher etc.
From 2014 to 2024, CVC has made up more than 46% of total VC deal value and 21% of deal count. However, despite having invested a vast amount of capital, very little of this investment has translated to acquisitions.
To put it into perspective, their data shows that since 2000, below 4% of CVC-backed companies were acquired by an existing CVC investor.
Why are acquisitions so low?
You’d want to keep a good team nearby
It’s your child startup, not someone else’s
The last but not the least: it was never an option
Conclusions
So, let’s unwrap the burrito of each of the IMO ways to stay ahead of the curve. Yeah, I just love the’s.
Being a known voice in the industry
Got anything to analyze and show? Sure, why not.
Got access to non-NDA but valuable piece of information? Use it + share it.
Events? Be the speaker, organize or at least participate.
The truth is universal:
Nurturing from the start
Well-known formats: accelerators, venture studios, etc
(Universities take the cake here) Endowment and university grant/investment funds
In-person events to catch young talent - it could be a TEDx-style talk with students and researchers, or a hackathon 😏
Things like income share agreements seem tasty, but one is unlikely to catch a
Capturing the whole flywheel
Network effects are always underrated, as those are compounding like crazy.
Some of those are:
having your portfolio span over the whole value chain (a good way to map is Wardley map) and cooperate:
cooperate over geography, too!
create cliques: intra- and inter- (your other funds/arms, or friendly funds) cooperation can be incentivized with lower prices/fees and such
To reiterate: one of the important factors in building defensible systems/flywheels in international adaptability and cooperation: if a business can cooperate with portfolio/cooperating VCs’ port companies all over the world, it can create a strong ecosystem of products that will have more chances to compete with the biggies.
Basically, we all want to prevail over the Matthew effect, and decentralized cooperation can definitely be one of the tools.
Is there an end to win-’s?
One more factor that can, IMO, help in achieving the overall positive impact is accumulating incentives-provoking network effects. Sounds wordy, and it is - a better way is an example:
Sprinkling the portfolio companies with social projects, disaster response, at-risk group cooperation:
Helping scientists at risk with outreach or consulting gigs? Check
Assisting emergency services after an earthquake with transportation/energy supply/alt. food rations? Double check
Volunteering or opening days for children/at-risk social groups, so they'll get a taste of good-cause startups (if those are in your theses/portfolios)
All that can and will usually be coupled with the additional egotistical goal of press outreach. Combining companies / employees / causes multiplies the impact. Biggies like Tesla, Abbott and Mike Tyson (call him a kiddo or a smallboy at own risk) have already been doing this!
A strong portfolio of opportunities
When you’re a VC, your money isn’t the only/main thing good (informed) founders are looking for. Among other things:
aforementioned brand, as a good brand will attract follow-on investors + is a good way to get press releases/coverage for free 😏
networking opportunities to help with collaborations/regulations/legal peculiarities/go-to-market etc
CxO or team support, either with engineers or marketers or operations staff or whatever - helping run things smoothly so core team focuses on product and strategy
mentorship/strategic assistance → there’s no mentor as good as an early stage investor yearning for your success 😅
Data-driven decisions
Spotting the best-performers from the start can help one take the tastiest cake pieces.
For that, a lot of data points have to be combined in a data model, and evaluated. The hypiest piece that comes to mind is AI/data-driven startup scouting. Some examples:
Some awesome data/VC friends had published a paper outlining a great model + the product is underway 🫶
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