SAN FRANCISCO, CA – OCTOBER 06: Andreessen Horowitz Co-founder Marc Andreessen speaks onstage … [+] during “North Meets South—Bridging Silicon Valley and Hollywood” at the Vanity Fair New Establishment Summit at Yerba Buena Center for the Arts on October 6, 2015 in San Francisco, California. (Photo by Michael Kovac/Getty Images for Vanity Fair)
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In the world of venture capital, the secret sauce for success isn’t just about throwing money at promising startups. Instead, it’s also about having an investment thesis that guides decision-making and shapes your portfolio.
Whether or not investment thesis make a difference is an ongoing question – but after Marc Andreesen published the A16Z “Techno-optimism” manifesto and the recent Open AI drama, the conversation around world views and ideologies among VCs has emerged once again across social media and online publications.
Venture Capital’s North Star: Effective Altruism, Accelerationism, and Techno-Optimism as Guiding Stars
In the todays market the VC funds are like the architects of the future. But these funds aren’t just about making money—they also have deep-rooted beliefs that guide how they invest. Think of it like different schools of thought. Some funds believe in doing good with their money (Effective Altruism), some think speeding up technological progress is the key (Effective Accelerationism), and others are optimistic about the power of technology to make the world better (Techno-Optimism). These philosophies aren’t just abstract ideas—they are shaping the investment theses of these funds and subsequently shaping the future of business and society. It’s like a peek behind the curtain at the core ideas steering the ship of venture capital in this fast-changing landscape.
The Techno-Optimist Manifesto: Embracing the Potential of Technology for a Better Future
In “The Techno-Optimist Manifesto”, a compelling case is presented for embracing technology as a catalyst for positive change in our world. The manifesto, Internet and VC icon Marc Andreessen, outlines the opportunities and responsibilities that come with being techno-optimists in an age of rapid technological advancements.
The central message of the manifesto is that technology, when harnessed thoughtfully and responsibly, has the power to address humanity’s most pressing challenges and lead us towards a brighter future. Andreessen explains that throughout history, advancements such as the printing press, electricity, and the internet have revolutionised society and improved lives.
He argues that we should embrace technological progress and the innovations it brings, rather than succumbing to fear and resistance – although these emotions are expected and should be acknowledged. The author embraces legitimate concerns surrounding technology, stressing the need for proper regulation, ethical guidelines, and accountability. It emphasises the importance of addressing social inequalities exacerbated by technology and calls for actively working towards inclusive solutions that benefit all members of society.
Andreessen urges policymakers, educators, entrepreneurs, and citizens alike to become educated about technology and its implications, advocating for a cultural shift towards embracing and understanding the tools shaping our world. He highlights the significance of investing in technological research and development, as well as encouraging a more dynamic approach to education that prepares individuals for a technology-driven future.
By highlighting tangible examples of technological progress and its positive impact, such as advances in healthcare, energy, transportation, and communication, the manifesto serves to counterbalance the prevailing narrative of fear and scepticism.
The manifesto received polarising criticism; from techno libertarians rejoicing to traditional media saying it’s just one of the many tone-deff comments technology leaders are making.
But the bigger question seems to be: why do funds keep taking a stance and articulating their worldviews, and does it even matter for their bottom line?
VC Worldviews: From Software Eating The World To Investing In “Brain Rotting” Technologies
Since all funds are chasing returns for their LPs, looking for an edge and moat, how different can their thesis and world views be?
Well, if we look at A16Z, Sequoia Capital, GGV Capital, Lux Capital, Prosus Ventures, Greylock Partners, SoftBank Vision Fund, Accel Partners – it seems that each of these firms has a unique perspective on how they view the market and where they place their bets.
Andreessen Horowitz (a16z):
Thesis summary: “Software is Eating the World” and “Techno-Optimism”
What is it about: A16z firmly believes in the transformative power of software. They’ve shown a commitment to backing companies that leverage technology to disrupt traditional industries. This techno-optimistic stance fuels their investments in areas like AI, blockchain, and digital health. They are advocating to acknowledge the innate human impulse of being afraid – but also to find the power and vision to rise above that and master the technology, as we always did in the past.
Sequoia Capital:
Thesis summary: “Founder-Centric Approach” and “Global Network”
What is it about: Sequoia Capital puts founders at the forefront of their investments, recognizing that visionary entrepreneurs are the key drivers of innovation. Their focus is the underdog founder, the “man in the arena” so their biggest emphasis is to find these outcasts and give them the capital and support to build the company against “all odds”.
GGV Capital:
Thesis summary: “Global Reach”, “Multi-Stage” and “Sector Focused”
What is it about: GGV Capital boasts a global reach, with investments in both the U.S. and China. Their multi-stage approach allows them to support entrepreneurs from early-stage startups to established companies and they focus on specific sectors. Their China and US connection is especially challenging and important in times of global tensions.
Lux Capital:
Thesis summary: “Deep Tech and Science-Driven Innovation”, “Category Creation” and “Brain Rotting technologies”
What is it about: Lux Capital seeks to identify pioneers in the world of deep tech and science-driven innovation. They’re not just looking to invest; they’re looking to back companies that have the potential to create entirely new markets. Their founder Josh Wolfe is often saying: “ Whenever parents say ‘It will rot your brain’ It always presages the next +$10 billion industry” – a very polarising sentence that seems to be resonating well among founders and builders.
Prosus Ventures (formerly Naspers):
Thesis summary: “Global E-Commerce and Internet Businesses” and “Long-Term Growth”
What is it about: Naspers Ventures zeroes in on e-commerce and internet companies on a global scale. Their long-term perspective allows startups to grow and expand over time – this is best demonstrated through their portfolio companies like Tencent, Flipkart (now sold) and Delivery Hero.
Greylock Partners:
Thesis summary: “Product-Led Growth” and “Long-Term Partnership”
What is it about: Greylock emphasises product-led growth as a driver of success. Their long-term partnerships with founders provide startups with the support they need to scale effectively. This is best embodied in their investment in Linkedin, Facebook and Redfin
RDFN
.
SoftBank Vision Fund:
Thesis summary: “Big Bets on Disruptive Technologies” and “Extremely Long-Term Perspective”
What is it about: SoftBank Vision Fund makes massive investments in companies developing disruptive technologies. Their long-term approach gives startups room to innovate without immediate profitability pressure – which has led them to take incredibly brave and successful companies such as Alibaba and Arm but also completely failed and overfunded ventures like WeWork.
Accel Partners:
Thesis summary: “Network Effects” and “Global Expansion”
What is it about: Accel Partners hones in on network effects, which amplify the value of products as more users join. They actively help portfolio companies expand globally – which is most evident in their portfolio companies like Slack, Qualtrics
XM
and Dropbox.
First round capital:
Thesis summary: “Early-Stage Investing” and “Founder-Centric Approach”
What is it about: First Round Capital specialises in early-stage investments, focusing on supporting and nurturing startups in their initial stages. First Round Capital concentrates on providing capital and support to startups at the earliest stages of their development -they believe that these formative years are when startups can make significant strides and establish a strong foundation for growth.They’ve backed numerous early-stage companies across various sectors, including Uber
UBER
, Notion, Square, and Mint.com
Founders Fund: Backing Unconventional Ideas and Maverick Founders
MIAMI, FLORIDA – APRIL 7: Peter Thiel, co-founder of PayPal, Palantir Technologies, and Founders … [+] Fund, gestures as he speaks during the Bitcoin 2022 Conference at Miami Beach Convention Center on April 7, 2022 in Miami, Florida. The worlds largest bitcoin conference runs from April 6-9, expecting over 30,000 people in attendance and over 7 million live stream viewers worldwide.(Photo by Marco Bello/Getty Images)
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Founders Fund, founded by former PayPal
PYPL
executives and other tech entrepreneurs, has a reputation for embracing unconventional and contrarian ideas. They are known for investing in startups that may be considered highly unconventional or even audacious by traditional standards. Some key elements of their investment thesis include:
Maverick Founders: Founders Fund seeks out founders who possess a unique vision and the determination to challenge the status quo. They are drawn to founders who are unafraid to take bold risks and pursue ambitious goals – often those that seem crazy to the expert community such as Elon Musk for Space X.
Deep Tech and Radical Innovation: The fund is particularly interested in startups that explore deep tech, cutting-edge scientific advancements, and disruptive technologies that have the potential to reshape entire industries. Their famous saying “We wanted flying cars, instead we got 140 characters” by Peter Thiel is the embodiment of their contrarian worldview: they firmly believe we are lacking radical innovation and should strive to go further then what the mainstream media is presenting as technological advancement and innovation.
Long-Term Thinking: Founders Fund takes a long-term perspective, allowing startups to work on visionary projects that may take years to come to fruition. They are willing to support companies that aim to address significant global challenges over the long haul.
One of the most notable examples of their unconventional approach is their early investment in SpaceX, Elon Musk’s private aerospace manufacturer and space transportation company. At the time, space exploration was considered a highly risky and unconventional industry for venture capital. However, this investment has since paid off handsomely as SpaceX has become a leading force in the aerospace sector.
Founders Fund’s willingness to back audacious ideas and founders who think beyond traditional boundaries has led to successful investments in companies that push the envelope of what’s possible. While their approach may be unusual, it has demonstrated that taking big risks can yield significant rewards in the world of venture capital.
VCs Are Building Everything Around Us, Often Times With Public Capital Or Using Public Goods
VC firms are more than just sources of funding. They are actively building the world around us: our transport, education, healthcare system, the way we socialise, find love and build families have all been significantly impacted by companies that VCs have selected and funded in the last few decades.
They are now entering the realm of public interest, utilising public funds or public goods. For instance, the European Investment Fund (EIF) is a major investor across European VC funds, and in the US, we are witnessing an increasing trend of scale-up companies securing government contracts in sectors like healthcare and defence. It can be seen as a positive development that VCs are more willing to express their perspectives and engage in public discourse about their investment strategies.
This opens up opportunities for the public to participate in discussions and benefits all stakeholders, including the limited partners (LPs) involved.
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