It has been a good thing for a long time, but in the past ten years, it has lost some of its identity and direction.
What will happen to people at a turning point in their lives?
You start to question who you are, whether you should do something different, and whether it is possible for you to keep up with the ever-changing world.
Maybe you quit your job, cut unnecessary obligations, and chase every shiny object that caught your eye.
I believe that venture capital is also at a similar moment. The system no longer functions as it used to, and many people are asking, “Where are we going from here?”
This is not an excavation of VC. I see many of them as friends and people I respect very much. I have been discussing these issues with them, and they nodded eagerly to agree!
My goal is not to criticize, but to raise awareness so that we can work together to make the system run smoothly again.
What happened to venture capital?
We need to acknowledge and address several unfortunate trends in the start-up world because they are causing all of us to lose checks and balances, overvalued and over-risk investments.
The old VC check and balance mechanism is gone forever
In the past, new companies had to prove their progress by increasing funding rounds. Series B investors are counting on their Series A partners to hand over transactions to them through appropriate barriers.
After Facebook went public at a valuation of more than 100 billion U.S. dollars, the situation changed and the trend of high valuation IPOs began. Wall Street lost the “pop” of previous IPOs, so it went to Silicon Valley and began to inject capital into early-stage companies, counting on the power of big data to return.
Today, only the founder of PowerPoint has earned millions of dollars!
Since 2010, the median pre-investment valuation of Series A financing has increased by 6 times to US$37 million. Too much money invested in start-ups too early is destroying the company, which puts venture capital companies in a difficult position.
Valuation is higher than value (obsessed with unicorns)
With so much money pouring into the startup world, Valuations across the board are crazy.
I feel sorry for many young entrepreneurs because they are misled into thinking that fundraising is the goal. They told me excitedly: “I want to be the next ten-horned beast!”
There are many factors in valuation, and they may be more related to adjusting investment terms than any real indication of value.
You can have the best valuation in the world, but you are still in the cemetery of entrepreneurship two years later.
The founder did not realize the negative impact of accepting so much money so early. It will force you to focus on the wrong things, and you will always lose some control. You can easily end up in a stressful job instead of becoming the master of your own destiny as you imagined it.
High-value, high-risk investments
In this overvalued environment, venture capital firms that need to deploy capital have to make big bets on unproven companies to win deals.
However, the funding terms have not yet adapted to changing realities.
Although venture capital is usually passive capital, they are accustomed to locking the founders on a fixed path, with little flexibility to learn, iterate, or adjust.
This has never been an ideal approach, but it works well for proven startups. However, if the thing you invest in is just an idea, then this rigidity is likely to kill it before it becomes anything.
Sadly, we have agreed to invest money in 10 companies because they know that 9 of them will not function as long as the last company breaks out. This is part of the “unicorn or bankruptcy” mentality that leads the founder in the wrong direction and leaves a huge opportunity on the table.
result?
Waste of resources, damaged relationships, the failure of potentially great companies, pressure is everywhere, and too little value is created.
There must be a better way. Have.
How does venture capital get its magic back
The following are the top strategies I have adopted in this corner of the startup world to restore balance to the ecosystem.
Recovery check and balance
Before making major venture investments, we need to re-examine companies in the early stages. Most ideas can and should be tested as a small part of what people inject today.
Doing this early allows us to remain objective when testing and iterating ideas.We can avoid “this already work. “What works in the end is rarely what we thought at the beginning. Let us look forward to this, quickly and cheaply find out if there is a viable path, and then decide whether it is worthy of further funding.
This will help all of us get back on track so that A, B, and C series investors can get the right level of funding when the company really deserves it.
Extended access
From the beginning, venture capital was an exclusive club that most people could not enter.
New technologies and financing systems are fundamentally changing the rules of the game.
Crowdfunding allows anyone to make small investments in many early-stage companies. Blockchain technology enables creators and founders to go one step further-using NFT to crowdfund their ideas, even without the need for a “middleman” platform.
With the rise of low-code/no-code platforms, the cost of starting a business and creating products is falling rapidly.
These developments are driving the explosive growth of great companies from non-traditional regions and populations. Venture capital companies need to pay attention to and accept this democratization of entrepreneurship and access to capital.
Focus on value
Let us return to the essence of business, which is to create value and improve people’s lives.
The great resignation should be a wake-up call.
People not only need flexibility and freedom, but also the meaning and purpose of their work. They are no longer willing to settle for the status quo.
Talent will become the commercial battlefield in the coming decades. Companies that meet this need have major advantages.
Entrepreneurs should be problem solvers and visionaries. There are too many problems in this world, too many great ideas to support, let us continue to walk the way we have been. Now is the time to reassess our priorities and refocus on meaningful work.
From crisis to opportunity
Psychologists are beginning to realize that a midlife crisis is not necessarily a completely negative experience. This is a turning point, it can be a natural transition period-uncomfortable, but useful-paving the way for new understanding and growth.
Despite these imbalances in the venture capital community recently, I have never been so excited about the prospects for the future.
The emerging possibilities of meaning, realization, and reward are beyond any imagination ten years ago. When we enter this new era, we all have a choice: we can be obstacles or stewards. I choose the latter.
Mark S. McNally is the founder and chief unknown person of Nobody Studios. Nobody Studios is a global high-speed venture capital studio that brings together investors, founders and creatives to create goals, real-world values and interpersonal Relationship company.For more information, please visit www.nobodystudios.com.
