WTF VC - Fall 2023: What is going on, where the opportunities are, and what to avoid hot takes from @lessin
Key takeaway
- For entrepreneurs: Focus on building sustainable, profitable businesses rather than chasing the next funding round or unicorn status.
- For investors: The era of easy, factory-line venture capital is over; success now requires more thoughtful, contrarian investments in unique opportunities.
Summary
Sam Lessin argues that the "factory system" era of venture capital, characterized by predictable funding rounds and valuations, is coming to an end. He suggests that the future of VC will involve more artisanal, thoughtful investments in businesses that may not fit the traditional high-growth, VC-backed model. Lessin emphasizes the importance of profitability, niche markets, and non-consensus thinking in both entrepreneurship and investing.
Insights
- The public market appetite for high-growth, unprofitable tech companies has diminished.
- Big tech incumbents are increasingly capturing the majority of gains from new technological advancements.
- There's a shift towards valuing "real" businesses that generate cash flow over speculative, growth-at-all-costs models.
- Crypto remains a potentially disruptive force in finance, despite market volatility.
- Small businesses and franchises represent an underexplored opportunity for both entrepreneurs and investors.
- The COVID-19 pandemic has shifted cultural attitudes towards work and entrepreneurship.
Implications
- Entrepreneurs may need to focus more on building sustainable businesses rather than chasing rapid growth and funding rounds.
- Investors will need to develop more specialized knowledge and contrarian viewpoints to succeed in the new VC landscape.
- There may be fewer "unicorn" companies emerging, but more opportunities for smaller, profitable ventures.
- The VC industry may contract, with fewer firms and individual investors able to generate strong returns.