Stanford believes that the current challenges will lead to a new era of VC investing, where surviving investors will need to back companies that are genuinely innovative and come with a significant risk profile. He suggests that the era of startups gaining billion-dollar valuations simply by claiming to be a tech company is over, and that AI may not necessarily be the next big thing. Instead, investors without deep expertise, powerful networks, or large funds will struggle to raise money and build enduring franchises.
Key takeaways:
- A slowdown in VC deal activity has continued into the first quarter of this year, with inflation, interest rate uncertainty, and low M&A volume impacting the investing environment.
- Scott Stanford, a cofounder and partner at ACME Capital, predicts that half the VC firms that were actively investing in the last decade will be sidelined and eventually collapse in the next five to ten years.
- Stanford suggests that the venture capital industry has gotten ahead of itself, with the proliferation of firms and the money they're managing not supported by the financial value they're creating.
- Stanford believes that the current challenges will lead to a new era of VC investing, where investors will have to back companies that are actually inventing things and therefore come with a sizable risk profile.