This week at TechCrunch’s StrictlyVC event in Athens—part of the Panathenaic festival taking place in the city—I sat down with Niko Bonatsos of Verdict Capital, Andreas Stavropoulos of Threshold Ventures, and Ben Blume of Atomico to ask about the current state of venture capital, the wave of mega-IPOs that SpaceX is seeing, and where they can still look. Our subsequent conversation has been edited for length and clarity. You can see the entire discussion at the bottom of the page.
With SpaceX reportedly eyeing a $1.75 trillion IPO valuation, and OpenAI and Anthropic potentially not far behind, what will the effects be on the broader market?
Andreas Stavropoulos: I remember how exciting the Google IPO was and how it heralded a reopening of a market that had been very pessimistic about technology in the early 2000s—how it was an enabling event that brought in a whole new generation of entrepreneurs. The same is happening now. With each successive wave of paradigm shift, the scale changes by orders of magnitude, and that is to be expected. What company today in the information age is not a technology company?
Ben Blume: These are phenomenal companies, and with each of these major liquidity events, they generate wealth and returns that trickle down to the next generation of companies.
Niko Bonatsos: My co-founder at Verdict was the first ever investor in what is now known as Cursor. So if Elon feels he is [having] a good moment, maybe Cursor [which Musk revealed recently that he has the option to acquire for $60 billion] also want some good news. But more generally, for the next next generation of companies, as Andreas mentioned, they could go after much bigger markets, and immigrant founders, as we know, are the ones who dream really big, they have nothing to lose, and they can go far, and Elon Musk is an immigrant founder himself. So for those of us coming from Greece or other smaller markets, wow, you know, that’s a great example.
Some have suggested that at that valuation, SpaceX could soak up so much public market capital that it hurts companies going out in its wake. Is that a real concern?
Stavropoulos: You can choose to see most things as optimistic or pessimistic and present very good arguments for both. Something like a SpaceX, macro-wise, will end up bringing more people into the market than the short-term effect of soaking up some liquidity. Consumer involvement in markets in the last 30 years has gone from not really being a thing to something people trade on their phones every day. Those numbers add up.
Flower: SpaceX is such a one-of-a-kind company. Space has long been a government and public sector domain. Giving investors real financial access to it – I think that will capture a widespread imagination. It may mentally detract from longer-tail allocations that might otherwise have gone into the next 20 or 30 software companies, but I think the interest it generates more than compensates.
Is the current flow of capital into AI justified by future earnings, or is this extreme FOMO?
bonito sauce: If you’re an AI-native founder or company in the US dynamic space right now, you may be living life in the fast lane. If you are not in one of the two buckets, it is really difficult. In 17 years in Silicon Valley, I have never seen more groupthink. Three-quarters of all venture capital raised over the past year went to five companies. Today, if you’re a 40-year-old tenured professor at Stanford and you’re not building anything in AI, nobody wants to meet you.
That said, something real is changing. Two founders with today’s AI tools can make more progress in two months with one funding round than they could a year ago with ten people, two rounds and a full year of work. This is changing how companies get started and how they will capitalize themselves – potentially going straight from pre-seed to Series B.
Stavropoulos: There will be a correction that squeezes some capital back from the market. The promise and optimism are still significantly ahead of the ability to show results in the short to medium term. But on a long-term, macro scale, I don’t think we’re being overly optimistic. The problem is, don’t be confused with thinking that every 19-year-old with an idea is the next big thing.
How do you actually price deals when things move so fast?
Flower: The best founders have no shortage of capital opportunities. You need to think about what is a meaningful holding for your fund and walk away when you can’t get there. The interesting dynamic is that we are a $500 million fund looking at the same opportunities as people investing from a $10 or $15 billion fund. The incremental value of a dollar for us versus them is very different. It distorts round sizes and makes it difficult for offers to stack like-for-like.
bonito sauce: We invest first – instead of friends and family, instead of angels. We invest in what I would call “freaks” – individuals where a few people break all the records, just like in professional sports. A day goes by and they learn and mature and make the progress that takes the average smart founder a full week. Most of the founders we’ve backed so far work in markets that don’t yet have a name – which is exactly why the valuations are low. Larger asset managers can’t ask their teams to find companies in a market that doesn’t exist yet.
There is a lot of talk about very young founders being given term sheets almost on arrival. Is age really a proxy for anything meaningful right now?
Stavropoulos: In periods of disruption, when the world seems to be changing in some fundamental way, it especially favors lack of experience. Experience can actually steer you the wrong way. This does not mean that it has changed forever – we are going through a phase where things have not fallen into place yet, and this creates fertile ground for new ideas and typically younger entrepreneurs. But I don’t want to overgeneralize.
bonito sauce: The same thing happened when I arrived as a graduate student at Stanford in 2009. The iPhone was two years old, the App Store was a year old, and there were days when there were more VCs on campus than students. Today is one of those unique moments again. If you’re 22 years old in San Francisco and building something in artificial intelligence, there might be a seed word sheet in your inbox — but if you’re 19, oh my God, that means you’re really good [laughs]; you may already have a series A [offer]. And look, age is all relative at this point – I spoke to a founder here in Athens this week who is 24, and when I said he wasn’t that young, I meant it: I met the Mercor kids when they were 19, and look where they are now.
Flower: If you try to generalize just from age, I think you’re missing what you’re actually looking for: an extremely high level of intensity, the ability to move ahead of the pace at which the market moves, and the mental dexterity to adapt in a constantly changing landscape. If you have those things, it is more important than the age on the passport.
What do you think about shady behavior happening around metrics – especially how companies report ARR [annualized recurring revenue]?
Flower: People are relatively liberal with how they define A and R and R. New pricing models—token-based billing, free tokens counted as revenue—create many ways to express these numbers. Our job as investors is to cut through it and make decisions based on the actual truths. Is it okay from a marketing perspective? Probably. Is it fine to decide which companies get capital? No. But sophisticated investors can generally cut through it.
Bonito sauce: Sometimes I get an email with a very high ARR figure from a portfolio company I didn’t remember doing so well, so I contact the founder. The answer? It was 365 times what they did the day before because a campaign hit. I said to him, can you at least use a quarterly basis? When a lot of money chases specific themes, some people develop a grief mentality for short-term gain.
In venture, you can only lose your money once on a bad investment, but the right one can return 100x – so you write off the bad actors and move on.
For the aspiring founders in the audience, where do you actually see white space right now?
bonito sauce: Each VC firm used to have at least half of its partners investing in consumer internet. Today they have maybe half a person – they have left the field entirely. But one of the best AI companies in the last few years, OpenAI, became massive because of ChatGPT. The consumer is coming back, which is almost a crazy statement. These founders today have maybe five investors they can pitch to their first or second round. I think there is also a new movement coming that will help restore the American dream through new fintech ideas for consumers.
Flower: The possibility of AI interacting with the physical world is orders of magnitude greater than what we have seen so far in workflow automation and digital process. The physical world still shapes a large part of the economy. The move to robotics in all its forms—not just the humanoid that does a backflip—remains one of the biggest open spaces over the next 10 years.
If you’re interested in learning more about what the three think — including whether Stanford University has gotten too cozy with the venture capital industry — you can check out the entire conversation below:
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