Want to know what the future of Venture Capital looks like?
So do I.
Guess it’s time to bring out the all-powerful prognosticator of everything in business and beyond—the Magic 8-Ball.
Shake, shake, shake. The Magic 8-Ball says, “It is uncertain.”
Ugh.
I’ll give it a second rigorous shaking. It reveals, “Cannot predict now.”
One more hearty shake…”Reply hazy, try again.”
Oh, Magic 8-Ball, why have you failed me?
Turns out predicting is really hard.
Let’s see what Harvard Business School professor and best-selling author, the late and legendary Clayton Christensen, and his firm, Innosight, have to say.
According to a recent document they authored, 4 key shifts are happening in VC.
1. Democratization – VC is growing. Increased access to corporates and family offices is one reason, but there are also lower barriers to entry for startups due to technology that is more widely available.
2. Deal Growth – A significant influx of capital is coming from varying sources. Companies that would previously launch an IPO are now choosing to become part of a mega-round, while the formation of micro and nano VCs takes place.
3. Diversification – Whereas traditional VC may have left some areas of the globe undiscovered, a new VC presence has emerged in China, India, Latin America, and Southeast Asia.
4. Digitization – We’re moving from the Tech Age to the Age of Automation. AI, bots, and the use of big data will have an even larger presence in VC going forward.
What do these trends mean for investors and founders?
As always, those who can adapt to the changes and evolve with their industries will survive and thrive.
VC firms of the future will “adopt diverse strategies, become increasingly accessible to different investors, and become more data-driven.”
As those fundamental shifts take place and VC firms begin to futurize, Christensen says we can expect emerging new business models to replace traditional approaches:
1. Fundraising – Previous efforts focused almost exclusively on investor buy-in. New VC firms will raise capital through ETNs and by leveraging asset tokenization.
2. Sourcing – A sharper focus on partnerships with accelerators and developing proprietary platforms and venture studios will be the calling card of successful VC firms.
3. Selection – New firms are using diversification as a central strategy, while making heavy use of analytics to track their own performance as well as that of other VC firms.
4. Diligence – Modern VC firms are using automation to track KPIs and perform due diligence.
5. Support – Modern business models will leverage partners to support startups, apply an AI-based platform to recruit top-tier talent, and develop other software to assist in syndication and portfolio value add.
Wow! That is a much more useful response.
But let’s see what Magic 8-Ball has to say about the validity of this advice.
Shake, shake, shake…
“You may rely on it!”
Finally, the answer I was looking for :).
