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1/ I was at @ycombinator demo day today, and it made me start thinking about how the internet changed Venture Capital:
2/ Venture Capital used to be about proprietary deal flow. Where you would have asymmetric information that no one else held, and use it to your advantage. In the world of capital consolidation, this worked really well.
4/ The organization/ubiquity and low cost of communication and IT brought the cost of starting a company to virtually zero. Venture Capital kept doing things the old way... but a few people identified this change... any developer could start a company.
5/ I think there were tangential changes that no one could have predicted: any person could be a media empire, information on the internet continues to deliver compounding value, and the cost of starting a company was literally code. It also created the ability for standards.
6/ Standards of deals, standards for every startup, which lead to a much more efficient market.
7/ Enter @ycombinator, the most disruptive model in venture capital. I think most VCs don't even recognize their power. They identified the core change in venture capital. Venture Capital was no longer about asymmetrical information, it was about asymmetrical access.
8/ Asymmetrical access means own the relationship the earliest or control a brand that can win the deal. These are the only two defensible pieces in Venture Capital today. This has lead every venture fund to attempt a model that replicates what YC does.
9/ But big funds can't do what @ycombinator does. Their business model doesn't fit the mold, and there are features that YC did from the beginning in their DNA that can't be replicated retroactively. (deal standards, volume of deals, programmatic investing, scale)
10/ and the network just keeps compounding.
11/ To give a prompt, @BoostVC forked the @ycombinator model 7 years ago and identified that there was an underserved network building in #SciFiTech... It's working... building in blindspots is fun. We have become something else.
12/ This leads to the question of what is next? What does a VC look like in the next 10 years?
13/ At the core, Venture Capital is a service business. We are translators between maniacs and conservatives. We connect ideas to capital, and the past to the future. We are a network, that serves the company... the VCs who forget the service part of the business will lose.
14/ The gap between money and the idea is narrowing, and that will continue to shrink. The value of capital will become minimal to a startup. The value of networks will continue to compound, so digital identity will become exceptionally valuable.
15/ I think we will continue to see a democratization of global access. Remote Work is going to be a trend that we will continue to see.
16/ I think we are about to see the rise of quantification of venture capital. High frequency capital is about to start happening. Data collection, quantifiable networks, and verticalization of strengths.
17/ But who knows... it's all just luck right.
