Top 3 Takeaways from the Wall Street Journal Future of VC Panel

Venture capital is in the middle of a metamorphosis. Stalwart firms like Andreessen Horowitz are shedding the VC model to become a registered investment advisor (RIA), while other firms are shying away from unprofitable B2C companies.

The changing VC landscape was the subject of a panel discussion at the Wall Street Journal Future of Venture Capital event — sponsored by Forge — in San Francisco.

WSJ reporter Rolfe Winkler was the moderator for the panel and was joined on stage by Sarah Tavel, general partner for Benchmark Capital, and Charles Hudson, managing partner at Precursor Ventures.

Seated left to right Rolfe Winkler, Sarah Tavel and Charles Hudson
Forge CEO Kelly Rodriques kicked off the event

During the event, the panelists discussed several inflection points happening in the venture capital space, including the recent IPOs, how they evaluate the next investment opportunity, the impact of capital on founders and more.

Out of all of the salient insights from the Future of Venture Capital event, here are the most important takeaways.  

B2B Businesses are Catching Everyone’s Eye

The B2B space is heating up and that was made evident by the Zoom IPO. Both Zoom and Pinterest debuted their respective IPOs on the day of the Wall Street Journal Future of the event — April 18 — and the contrast between the two couldn’t be starker.

According to a report from Rolfe Winkler, “Zoom shares soared 72 percent to close at $62 each from its initial-public-offering price of $36 a share.”

Conversely, Pinterest shares jumped 28 percent from $19 a share to a little over $24. Published reports cited that $19 was above its target range, but it didn’t meet the $21 a share price when it raised capital in June 2017.

From an investor point of view, Tavel and Hudson agreed that the Zoom IPO makes other B2B companies look more attractive.

“B2B firms are easier to understand because they’re profitable,” said Tavel.

“If you think about the consumer companies coming out right now, versus the enterprise companies coming out, enterprise comes to the market with a business model that is already profitable,” she concluded.

Charles Hudson echoed that sentiment by adding “when you look at consumer companies they’re pretty upfront and tell you that ‘we’re losing money now and will probably continue to lose money for the foreseeable future’ — that’s a harder thing [for VCs] to wrap their heads around compared to a company that’s already profitable in a category.”

‘Academy Companies’ are Still the Favorite

When the conversation turned to address the future of VC directly, one theme became clear — there appears to be “floods” of capital going into startups with a lot of traction.

Charles Hudson from Precursor Ventures reinforced that thought and told the audience that there is “a flood of capital but not for people who don’t come from top companies.”

“There has never been more money in the market for post traction companies that have solid unit economics, lots of demand… [but] there has never been less capital for people who are just getting started who don’t come from an academy company — such as Uber, Lyft, Pinterest, Twitter, or Facebook.”

Hudson added that the impact of the infusion of capital is driven by VCs “deciding” that the IPO strategy will be to wait for traction and “pay a higher price for [companies] that can be a model for others.”

“[VC] has never been more concentrated in a short list of names that seem to be capital vacuums,” he concluded.

The Impact of Capital on Founders

When startups secure VC capital, some founders may expect that they’ll be left to their own devices to run their company and that VCs are there to “be a cheerleader” rather than provide governance.  

The dynamic presents a challenge to VCs — they don’t want to chase away a potentially great company if they have to give founders tough advice.

However, Sarah Tavel put a stake in the ground and stated that “if a founder is looking for a cheerleader, that’s probably not a founder that we want to work with.”

“You [VCs] may not actually have control, but try — using your influence —  to work collaboratively with the founders to make a difference.”

Alternatively, Hudson felt that there are founders out there that are looking for governance and guidance.

“I think that if you [the founder] get a lot of praise from people who are telling you that you’re amazing and awesome — the good ones know that is BS. I’m seeing a hunger from founders who really do want honesty.”

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