Trends Watch: Outlook for Venture Capital
- Dec 7, 2023
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks with Charles McCormick, Partner, Beni Venture Capital.
What is your outlook for VC investing?
The VC market is cyclical. We came out of a cycle where, in early 2022, it was very much a seller’s (i.e., company/issuer) market. 2023 marked a cooling off, and in fairness, we are seeing some down – or even cramdown – rounds for companies with good future business prospects but no more cash in the bank. This has been the case across industries, unless you were doing anything touching artificial intelligence (AI). Despite the ups and downs, our outlook remains extremely positive. VC investing is about the future, where the market and the world are going. As long as people keep trying to improve and make progress, there will always be a place for VC.
Where do you see the greatest opportunities and why?
The greatest opportunities are those that strike the right balance between what’s next and what’s now. The types of businesses that fall into the “what’s now” category have a hard time attracting VC. Think a restaurant or an industrial components manufacturer. These are great businesses, but in 10, 30 or 100 years, the economics of those businesses will probably look a lot like they do today. VC goes after business in the “what’s next” bucket. Think fusion technology, lab grown meats, making jet fuel out of carbon dioxide. A typical VC investment might have zero actual market today but might be indispensable in a decade. Or it might flame out. At Beni VC, we look for opportunities that strike the right balance between being market-changing and market-ready.
What are the greatest challenges you face and why?
Our biggest challenge is not being able to predict the future. Every company that Beni VC invests in could be banished into obscurity by a smarter, better funded, luckier competitor. Every company could be rendered irrelevant overnight by technological change. Or, we could have picked the winners, the ones who will out-disrupt and out-compete everyone else. Part of the VC industry is being comfortable with uncertainty and understanding that your best portfolio company today could be your biggest loser tomorrow – and vice versa.
What keeps you up at night?
I think a lot about what I call false negatives. This comes out of my experiences as a young lawyer working through the dot com bust in the early 2000s. It seemed to me that some of the absolute best technology created in that era ended up on the scrap heap. Maybe they were too far ahead of the market (think streaming apps in a dial-up world). Maybe the founders came to hate each other. Or maybe people just gave up when things got harder than they expected. It’s the same rationale for going to a flea market – finding that painting or that vase that someone didn’t want to bother taking with them to their next home that turns out to be a masterpiece. I don’t go to flea markets, but if you ever want to really get my attention, show me a company that Beni VC passed on that went on to be a massive success. Those are the headlines that I actively look for – not because I’m into self-loathing, but because I want to try to understand what I might have missed so that I don’t miss the next one.
The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.
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Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.
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