Slowing Down To Speed Up

I saw this chart in Recode’s piece on Benchmark:

It’s an interesting chart because it breaks out new investments and follow-on investments, both of which have been falling at Benchmark for going on five years now.

The Recode article, written by Teddy Schliefer, also states that Benchmark has not raised a new core fund in over four years.

Our numbers at USV are not as stark, we never took up our investing pace that much. We have always done around 6-10 new deals a year and while there is a fair bit of variability in that number year to year, over time it has stayed pretty constant.

But we last raised a new core fund in early 2016 and we are maybe 2/3  of the way through investing that so it should take us at least three years to put that fund to work. That is down from the two year period where we went from the 2012 fund to the 2014 fund to the 2016 fund.

So Benchmark is not the only leading VC firm that has slowed things down over the last three to four years.

Teddy makes an interesting point in his piece:

That long a dry spell between funds — at a time when rival firms are competing with one another to raise bigger and bigger war chests at a faster and faster clip, led by SoftBank’s $100 billion Vision Fund — is decidedly unusual.

Longtime readers know that I have a huge amount of respect for Benchmark. I think they are a firm that beats to its own drum and does what it thinks is right and doesn’t worry too much about what others think. That approach leads to better returns over the long run in my view.

But if there are diverging perspectives among the top-tier VC firms right now, who is right? Or maybe both are right. Slow down the pace of early-stage investing and step on the gas in later-stage/growth?

And then, of course, there is crypto, where a lot of the smart people and smart money is going. Chris Dixon at Andreessen is raising a dedicated crypto fund. Matt Huang leaves Sequoia to do a crypto fund with Fred Ehrsam. And those are just two high profile examples, but there is most definitely a discernable pattern of smart money and smart people moving to the crytpo sector over the last few years.

So times they are a changing in VC land right now. Which mirrors the broader tech sector which is maturing and consolidating while a next wave starts brewing. How to play this whole thing is challenging. The future of the VC business and its top firms are in flux and those who play it right stand to gain a lot and those who don’t stand to lose a lot. It is most definitely not a time for the status quo.