I talk to thousands of LPs every year. Here's what I'm seeing right now when it comes to how they're approaching VC. 1) Late-stage co-investments have never been hotter. The top 5-7 names have effectively *unlimited* demand. And that supply/demand imbalance has created three real issues: First, the question of *true* access. Many of the SPVs floating around for these companies are not sanctioned by these companies. Buyer beware. These companies are tight on their cap tables, and access can be gated beyond just capacity. The fee creep is getting egregious. Someone shared with me recently that for a top AI lab, a group was charging 15% upfront, 20% carry, and 30% over a 2X. At those economics, you can take what would be a generational company but a bad investment. Fees are the silent killer of returns in late-stage co-invest, and this risk is now being focused on the logo, but ignoring the fee effects. Additionally, for those who aren't getting access to the top companies must go a tier (or two) below. Very dangerous in a high-intensity / valuation market for AI. As I've mentioned, there will be a lot of expensive mistakes made as we figure out what winners will look like in the future. 2) Capital is flowing to large, established brands. This is the clearest trend right now. LPs are concentrating on the top multi-stage and Series A firms. The logic is straightforward: these are easier to underwrite, and given how extreme the power law has become, investors want exposure to the trophy assets soon after investing. If you're a top 10-20 brand, you're oversubscribed, sometimes in multiples. If you're not, the fundraising environment is a different world. 3) Emerging and emerged managers are in the toughest spot, with a notable exception. Spinouts from top firms and operators with strong brands are moving fast and generally very oversubscribed. For everyone else, the bar has never been higher. I think this is actually where the opportunity is for LPs If they have the time/expertise to do so. The issue isn't that LPs don't know this. Most do. The problem is twofold: the time and difficulty of sourcing and diligencing emerging managers is real, and the hangover from 2019-2021 is still very present. A lot of people tried VC during that era who probably shouldn't have, and the failure rate on those Fund 1s has made the entire segment harder to navigate. Matching supply and demand here has become nearly impossible. Supply (Managers) far exceeds demand due to the issues noted.

@orenzeev is one of most unique VCs. After a brief meeting with Peter Thiel, he decided to launch his own solo GP fund with Peter's help. Today, he manages nearly $3B but remains a one-man shop. No associates, no assistants. In a world of consensus, he's anything but as he's lowered fund sizes, generally stayed away from the frothiest parts of AI, and continues to operate with a simple philosophy around founder selection. One area we dug into is how many companies that are growing (2-3x per year) are largely ignored in the AI area (i.e. if you're not growing 5-10x, you are not "venture" fundable). In essence we are trading, in some cases durability of revenues for rapidity of growth. This seems like a great opportunity to buy strong, durable companies with good metrics at a relative discount to the rest of the market. For many in VC, the incentives point toward momentum and consensus, which is why I really enjoyed Oren's straightforward and principled approach. Check out our conversation in the comments below.

I really don't get these tranched rounds. Think we'll look back in a couple of years, and see how this is a top of the market feature when investors just want to get into AI consensus, regardless of structure / price. This is still under discussed. Tier-1s are cleaning up on first tranche vals.

Taking money off the table in high valued growth rounds is something that should part and parcel of prudent portfolio management. A company may be "generational" but depending on price point, the risk/reward economic trade may still point to partial sell. At the very least, all GPs should have a thoughtful policy. Also, I do not think the vast majority VCs should be holding public positions past lock-ups periods. Distribute cash or in-kind (preferred for taxable investors if material)

It seems like this was bound to happen eventually. The standard practice in Silicon Valley has become that so many people have so many pro rata rights that it’s hard to bring in new money without early investors agreeing to waive pro rata they negotiated a legal right to. Some do, some don’t. Exercising pro rata in winners is where the highest risk investments really pay off, and sometimes it can make or break an entire fund. Pretty fundamental misalignment of incentives. I don’t know what the answer is.

The other issue from a company standpoint (this is where interests can misalign over time) is that the company wants to limit dilution while having shareholders that are most likely to help at that phase. A seed stage/very early stage GP at the C/D+ round is less likely to be augmentative (exceptions do exist of course). And at these valuations, I actually think more investors who went in really early should consider selling, not buying more - and most of this is through a SPV anyway.

2 quick observations from last 3 weeks of vc twitter 1) Amazing how things that used to be private are now being blasted out (Valar and factory/cognition). Rarely does anyone come out looking better coming out of it. Truth usually in the middle. Why is this happening now? 2) we used to never see vcs dunk on companies or competitors. Now we see both. 3) interesting to see that most dont understand that pro rata in vc has always been somewhat soft and situational Reward system today and reward system on this app probably accounts for a bit of 1 and 2. Not aligned with my principles but it does create some good entertainment!

For larger funds, @venkyganesan is right from a practical standpoint, however I also think some of the pushback from other firms has because of the interpretation that option check = no conviction or help provided. That's not always true as I find it depends on partner/team/firm. But yes practically, let's say a $1B funds puts $4M into a seed round. It is really a option that the company/founder will perform and it provides a pathway into 8 or 9 figure check in the future. There is a business model distinction between larger A/B focused firms and seed/A firms.

Silicon Valley was a documentary not a parody. It needs a reboot

$100M of ARR is becoming easier to create at the same time that $100M of ARR is becoming less of a signal about the future prospects of the company than anytime in history

This was an incredible interview @patrick_oshag Fun fact, my wife uses the same driver as Mike and she says he's one of nicest and most unassuming guys.

Have to disagree with this. Most lps i talk want in kind distributions for top companies like spacex etx

Completely farcical.

This is an um, interesting read on it....

A 1.18 DPI in 9 years in an early stage VC fund (let's say 3 year deployment) is good. LPs focused on return of capital are better equipped to do credit or PE. VC is where, if you have access to top managers, you are seeking compounding, high multiple right tail returns (10-20% of managers). If you don't have access or ability to discover hidden gems before they are access constrained, it's not a asset category to invest in.

Well, better than the multi layer spvs that combine for that or higher. But anything about 1-2pct upfront and 10-15pct carry (or 0/20) is rarely a good path. The 10/1/15 structures ive seen are ridic (10pct upfront) But, times like this, grifters grift, and sometimes make generational wealth.

While we are in consensus driven world today across all stages, I expect to see some of the best outcomes in 2028+being non-consensus. Non consensus founding team Non consensus thesis Non consensus market Finding hidden gems is getting lost today; but think it's largely transient for non-large platforms. Large platforms can play consensus forever, and likely do just fine.

2021: LPs flock to growth 2022-2024: LP flock to Seed 2025-2026: LPs flock to growth 2027-2028: ?

AI M&A is in full effect, and don't think we are close to be done. Cursor: $60B OpenRouter: ~$8B Hugging Face - $12.9B Decart: $6B-$7B Along with Spx, Anduril, Anthro, Ramp, OAI, Databricks, and others on the IPO path, and the next few years will bring historic amounts of liquidity. Also likely prolongs the level of front we are seeing today. But after a long stretch of nothing, this is seriously incredible.