This Invest Like the Best podcast features Bill Gurley discussing the current state of venture capital, focusing on several key market realities. The conversation analyzes the impact of mega-VC funds, "zombie unicorns," stalled IPO and M&A markets, LP liquidity issues, and the rise of AI, exploring both the opportunities and challenges these trends present for founders and investors.
Rise of Mega-VC Funds: The increasing size and market reach of mega-VC funds are significantly altering the venture capital landscape, leading to more capital under management and increased late-stage (or "big check") investment.
Zombie Unicorns: A large number of privately held companies valued at over $1 billion ("zombie unicorns") present valuation challenges. The lack of incentive for accurate valuation adjustments creates uncertainty in the market.
Stalled IPO and M&A Markets: The IPO and M&A markets have slowed, despite a rising NASDAQ. This is attributed to factors such as IPO pricing discounts, high costs of going public, and regulatory hurdles affecting M&A.
LP Liquidity Issues: Many Limited Partners (LPs) face liquidity problems due to the lack of IPOs and M&A activity, leading to increased debt issuance and secondary market activity for private equity.
AI's Impact: The advent of AI has created a surge in investment and high valuations, potentially masking underlying market corrections and altering traditional company-building strategies due to increased competition and capital availability. Concerns exist about the sustainability of current AI revenue models.
The Future of Private Markets: The possibility of large companies remaining private indefinitely ("by appointment public market") is becoming a significant factor, altering traditional exit strategies and impacting both LPs and founders. Incentives exist for large investors to encourage this trend.
