Thread by @zacharykimball

1/ Finally finished @skupor book “Secrets of Sand Hill Road” about venture capital. The book is great detailed description (and fairly unbiased take) of the mechanics of venture capital in 2019. Makes me ponder next 10 years of venture. Quick thread.

2/ Scott’s background as both operator and GP @a16z obviously qualifies him immensely to speak to the technicalities. (Note: I may be biased because Scott’s somewhat “legal and governance” approach to analyzing VC appeals to me.)

3/ I found myself thinking often about how different the venture market is today from 10 years ago when Andreessen was founded, and how different still from 10 years prior when Opsware/Loudcloud founded by @pmarca and @bhorowitz.

4/ Many points on this throughout the book, but most prominent are (a) more seed capital is (b) available earlier meaning (c) more companies founded and (d) more growth capital is (e) available later so (f) companies stay private longer. Obviously many prominent examples.

5/ Over the next 10 years, I’m specifically interested in what this implies for (a) more competition in tech markets leading to (b) large but hastily built winners and (c) buyout funds entering late-stage venture deals to become operators.

6/ Ex: @marketo was public when purchased by Vista in 2016 after an IPO in 2013. Is the 2023 version of this a direct purchase out of late-stage private market? If PE can turn $2B into $5B and flip to @Adobe then I think the answer is yes.

7/ What are prominent examples of this already happening? Successful VC-backed tech co purchased in private market by PE firm to operate, optimize, and resell on private market to a strategic. Feels like this will be larger and larger part of late-stage venture exits.

8/ Seems like logical extension is *more* companies raising *more* capital and *more* often with *more* liquidity available. Returns for VCs continue to compress overall. Information asymmetry highest in early stage venture and power law most pronounced there.

9/ Meanwhile, PE finds new returns from private ventures that previously would have been public. Information asymmetry lowest in late stage private markets and power law less present. Best companies get optimal value from buyout funds, rather than going public.

10/ End result if they wait too long is the least strong tech companies are the only ones going public. Public markets react and there are more “big” losers in venture. Power law magnifies. How does this impact VC landscape through 2020s?