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Mega Funds vs. Focused Funds. Deep Tech & AI vs. ……..
The landscape of the Venture Capital industry is changing. You have your mega funds, your funds that are good at capital raising, that essentially index venture. They get into every big name, partners are paid to put capital to work, and the returns are OK, but you aren’t waking up to a 3x-5x DPI fund. But you also won’t get fired for allocating to these funds. It’s like investing in $IBM ( ▼ 3.61% ) …… it's safe.
The other side of the coin is your focused funds, your deep domain experts. Capacity constrained. You can’t manage a billion dollars of capital in seed investing for example. That being said, these funds shoot for 3x DPI and ultimately want to return you much larger numbers. When they have winners, they double down, they try to maintain pro rata and keep investing and the best fund managers own 10-20% through Series B.
The other way to think about this is you now have Silicon Valley that is focused on Deep Tech and AI. You have people that deeply understand the technology and are investing hundrends of millions if not billions into the next Deep Tech and AI companies. From LLMs to Humanoids to Defense Tech like autonomous dept. of defense ships.
The other side of the coin is those who are investing in everything else. Social Leverage, for example, is positioned today as good as we have ever been. On the financial services and fintech side, we are seeing unbelievable founders building real businesses. We still sit on the board and have Howard as the leader at Stocktwits, which gives us an unfair advantage into what retail is looking at, what investment trends are happening, who's building innovative fintech startups, and has us at the center of the conversation with every public and private company. We are seeing trends across fintech and crypto and everything in between. We are heavily invested in the wealth management and wealthtech space, and we have dozens upon dozens of LPs and people in our network that are RIAs or work in and around the wealth space. Our network is stronger than ever, and in financial services, we are seeing a whole new world where investing/predictions/tokenization/private markets/wealth/banking are now blending together. The world of data is now as important as it’s ever been. Data feeds AI. I spent my whole career in the data industry within financial services, and how these new Data as a Service companies are being built, how they are creating rich, valuable data, is all changing. Our network in the data industry is deep and growing exponentially, with the InitialDataOffering.com platform giving us deep insights into trends.
Our other area of interest has always been vertical SaaS. I think of this now as Vertical AI. Every company is building with AI, and we are seeing incredible companies being created that are very deep into the workflows, nuances, and solving real problems with AI for niche verticals. From insurance litigation to healthcare, to wealth management, to expert networks. OpenAI is going to compete with lots of applications, but there will be vertical AI winners that go a step further than OpenAI is capable of because they can’t win every vertical.
As Social Leverage deploys out of our Fund V, we are now invested in 5 phenomenal companies with a handful of other companies in diligence. Our Fund IV and Fund III companies are continuing to break out, and the collaboration of our founders across funds is exciting to see. Everyone is descending to Coronado to the Hotel Del in less than 2 weeks to celebrate Stocktoberfest and attend the Social Leverage annual event we call Palooza.
I look forward to seeing our network and the 400+ people who have RSVP’d for the event. More discussions around these topics I have written about, fantastic lineups of speakers, fireside chats, demos from our Fund V founders, and rich networking.
See you on the deck at the Hotel Del!
