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Thread. Thoughts & hypotheses on this tweet by @bgurley that was inspired by @1heathermack’s WSJ piece exploring the spur towards profitability in VC / startups.
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Before that a brief look at VC investing history.

Venture investing hit its own Product Market Fit in 1950s as it discovered the venture power law: 1- 2 investments of a fund more than covering up for the all the monies invested / lost on others.
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ARD (Doriot)’s investment in DEC the 1st such multibagger.

On the back of this, VC industry took off, & the model broadly held for tech (software / hardware) & later biotech.

But over time there has been a 'mission creep' or 'strategic drift' in VC.
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Over the years, especially in the last decade, the VC model has got stretched to cover tech services / consumer products / brands etc. The venture model works here kinda, but not always & increasingly it is becoming hard to pull off outsized winners in nontech. Why?
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One reason perhaps is that winner-take-all doesnt work / hold outside most industries other than deeptech / biotech / media. The model that worked for Intel, MSFT, Google, FB doesnt seem to hold for Uber-Lyft or Zomato-Swiggy. They seem fated to continue competing. For ever.
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If winner-take-all doesnt hold & the world is awash in cheap capital, then you get today’s scenario, where companies pile up huge losses and the true beneficiaries are consumers who get huge subsidies.
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Another reason is that code / IP scales well (and hence worked well with the old capital efficient VC model). But brand power / using tech as convenience layer (like ordering) doesnt scale as easily.
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Take brands. It has become harder for brands to truly command pricing power when they have toll bridges like Amazon, Google, FB who intermediate on behalf of your consumers.
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Tech as convenience layer: you are subject to same laws of gravity / competitive dynamics as the industry you compete in. @benedictevans said "Netflix is a media co, not a tech co". Uber is a taxi co using "tech as a crowbar". Tech, it seems, gives you no lasting advantage.
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This is the piece by @benedictevans (using tech as a crowbar)
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ben-evans.com/benedictevans/…
To summarise thus far: without winner-take-all effects, and given challenges of pricing, monetisation, competition, the VC model holds weakly (outside deeptech / biotech) for most consumer tech products / services.
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Hence IMHO the recent interest in VCs for profitability. It has nothing to do with lack of liquidity. The world is still awash in capital, and Softbank has got its 1st close of Fund2.
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Instead VCs are sensing that the VC model doesnt really hold outside of a narrow set of industries, and they have to put limits on how much and how long they can fund Pre Product Market Fit (PMF) companies, given it can take forever to achieve PMF.
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It is worth noting that when @pmarca defined product/market fit (PMF) in ‘07, he meant it in the context of B2B primarily &/or where customers were paying for the product. PMF happened when the monetisation experiment was deemed to work, unlike now.
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pmarchive.com/guide_to_start…
If you make a chart tracking quantum of VC capital in prePMF companies across the years, it would show an increasing share of capital going to PrePMF cos, thanks to growth / later stage capital pushing their way in at this stage, spurring startups to push out monetisation.
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Will this change in the coming years?

Am not entirely sure, but it does look like the recent questioning + push for profitability could force earlier monetisation experiment & perhaps faster failures / forcing earlier PMF. In my view, that is only a good thing.
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VC is a specific asset allocation model towards a limited set of industries who exhibit certain features (tech is the product not an enabler, winner-takes-all, less need for capital etc). It is not a universal asset allocation model as we have made it out to be.
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The above is my personal view, and is not the view of my employer.

These are but hyoptheses, and I would love your take on it.
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