Evolve or Die

A few months ago, our Partnership gathered for the final of six strategy sessions spanning the previous 14 months.

We started our journey in early 2024 with the words “Evolve or Die” written prominently on the whiteboard; a sobering recognition that if the VC industry doesn’t adapt to the realities of Venture 4.0, including us, we face an uncertain fate.

So yes, to those who expressed surprise with my stark words in my previous post, I am throwing stones, and I do live in a glass house.

My post last week introduced Venture 4.0 - a fundamental shift in the VC ecosystem highlighted by the breakdown in our industry's entry/exit balance, but with much deeper causality than the finicky mood of capital and M&A markets.

(As a side, a sincere thanks to all who liked, commented, and reached out. Posting anything anywhere has historically been out of my comfort zone, so the interest was very appreciated. This social media thing might actually catch on. :))

So what now? For venture firms, the existential question is: What is our right to exist in Venture 4.0? And for the GPs: Am I aligned with, and additive to, that purpose?

There are no definitive answers, as only time will tell. But in an effort to continue an open dialogue, I’m sharing some of the ACME Capital team’s conclusions.
For the sub $500m VC funds (“Alpha VCs”), we identified several time-tested strategies that have the best shot at creating a Venture 4.0 right to exist / right to win. However, as my Partner Hany Nada loves to say, history doesn’t repeat itself, it rhymes. (Mark Twain)

The first chart attempts to separate the “words on a page” from defensible structural differences. In testing each of these oft-mentioned VC firm qualities, we asked ourselves: can others easily say/replicate this? Or does it take real structural differentiation to make the claim? (Of course, the list is by no means exhaustive.)

The second slide was our attempt to double-click on each of the qualities and subject them to the test of a strategy void of substance vs. substance to enable a strategy. The right side of the spectrum truly moves the needle, be it in sourcing, picking, winning, impacting, and/or exiting.

VCs are standouts in trend spotting, storytelling, capital raising, and promoting, but this simply won’t cut it as we exit the overcrowded Venture 3.0 phase.
See slides here