9point8 Collective

Why the studio model of venture building is well-suited for today's IPO landscape 🌟 🚫 The allure of IPOs is fading among tech entrepreneurs, with only 15% citing it as their long-term goal. Why? Because the founder-specific economics of an IPO are tough. 🎯 In a market where uncertainty looms and IPOs remain unpredictable, venture studios offer a compelling alternative. They optimize exits which balance both IRR (per-dollar efficiency) and duration (per-time efficiency). They're adept at aligning strategic acquisitions with growth phases, leveraging networks, and timing market conditions for optimal outcomes. 🎢 The IPO market is highly cyclical, and both founders and investors are better off hedging against that risk. Venture studios tend to provide stability and strategic guidance, empowering exits tailored to the long-term vision. #VentureStudios #StartupExits #IPOs #Entrepreneurship

💲 The landscape of venture capital is shifting. As distribution cycles lengthen, traditional LPs face prolonged negative cash-flow risks -- now going on a decade plus -- with liquidity challenges reshaping LP strategies and fund compositions. 🤷♂️ With distributions pushed further and further out, who really is the target LP? Sovereign wealth funds and U.S. public pensions, armed with substantial capital and longer investment horizons, are entering the fray. Their ability to weather extended capital commitments contrasts sharply with the constraints faced by traditional LPs. 🌐 This shift underscores a pivotal moment for VC: adapting to new LP dynamics in a tougher financial climate. #VentureCapital

Creating Economic Value in a Dynamic AI Landscape 🚀 🌕 There is a widening gap -- now $600B in annual revenue -- between infrastructure investment and revenue realization. 💵 OpenAI leads in revenue, while other startups struggle to scale, and as GPU computing commoditizes and competition intensifies, startups must differentiate with meaningful, consumer-centric innovations. So how? 🛂 Emphasis on delivering tangible consumer value is critical. Each AI startup must articulate its value proposition and expected use case clearly to bridge this gap effectively. 📈 Long-Term Vision: amidst speculative hype, focus on sustainable growth and economic impact. #AI #Startups #EconomicValue #Innovation #FutureOfWork

🌍 Navigating the Information Age: Insights for Venture Studios 🚀 The breadth and abundance of data grows exponentially each year. While having more information seems like a silver bullet, sometimes it just creates more opportunities to get misinformed, confused, distracted, or all of the above. The below article introduces a framework to help leaders sift through the noise and make informed decisions. Some things to watch out for: 1️⃣ Not Fact: Always verify statements with solid data. Don't take claims at face value, even if they're appealing. Understand what the data actually measures. 2️⃣ Not Data: Be cautious of anecdotes and cherry-picked examples. They might not represent the broader reality or might omit critical failures that tell a different story. 3️⃣ Not Evidence: Correlation isn't causation. Even large-scale data needs scrutiny to distinguish between causal relationships and coincidences. 4️⃣ Not Proof: Context matters. Evidence that holds true in one setting may not apply universally. What does this mean for venture capital? Most importantly, actually measure the things that matter and bring that data forward into investment decisions: Due diligence: before backing a startup or strategy, ensure claims are backed by robust data, not just compelling stories. Context: recognize that what works in one industry or region may not translate universally. Adapt insights accordingly. Balance: Acknowledge that success stories often hide failures. Seek diverse perspectives to avoid confirmation bias. By adopting these principles, venture builders can enhance their decision-making prowess, preserve capital, and boost returns. #venturebuilding

Admittedly the article title is provocative; the takeaway is more nuanced and important. 😀 We are often at our best when we operate from a position of abundance. When we feel like we have enough, we're more empathetic, opportunistic, and think more long-term. 🥴 When we are operating from a position of scarcity -- the feeling that we don't have enough time, choices, money, opportunity -- the opposite of true. We can be blunt, dismissive, and myopic. Since there are many more founders than VCs, the need to say "no" a lot can corrode a VC's mindset. It can lead to scarcity thinking ("I'm getting bombarded constantly and need to get it under control") instead of abundance thinking ("what's the best way to learn and unlock a new opportunity"). What are the fixes? For starters, more VCs with actual founder experience. It's hard to have empathy without shared experience, and having ex-entrepreneurs in the investor seat would provide some head start in bridging the divide. #venturebuilding #venturecapital

🌟 Default Alive: the key to startup anti-fragility 🚀 The startup landscape has undergone a profound shift in recent years, moving away from the "growth-at-all-costs" mentality towards a more financially sustainable approach. Why? Higher interest rates, less VC capital to deploy, and thus higher scrutiny when it comes to writing checks. In today's environment, startups do better if they prioritize solid unit economics over rapid but unsustainable growth. This means growing efficiently, without constantly relying on external capital infusions. 🦄 The allure of unicorn status is fading in favor of sustainable business models. Profitability, or a clear path to it, is now more appealing than ever. 🍝 Being default alive — where a business can sustain and grow without continual financing — is gaining traction. It's about resilience and long-term viability. ⛰️ Enduring through economic downturns requires adaptability and a focus on solving real problems. Honing value propositions during challenging macro environments is a short-term battle but ultimately creates better companies. 💬 At 9point8, we focus relentlessly on speed-to-traction and reaching default alive. Message to founders: own your destiny by having the flexibility to turn down outside capital. How is your startup working its way to default alive? Drop your thoughts below!

The quality of the data determines the quality of the AI. Garbage in, garbage out. 📈 While AI might appear like an overnight sensation, various forms of ML (the most common training mechanism for AI) have been utilized in digital applications for decades, and during that time, the universal truth was (and still is) garbage in, garbage out. 💽 AI algorithms are programs which process data to create outputs of interest. At its core, it's a bunch of if-this-then-that logic woven into complex calculations. 🎩 🔮 AI's ability to create valuable outputs all depends on the input data it starts with. If the training data is bad, so too will be the output. When analyzing how enterprises can create great AI applications, it's typically not about the algorithms, it's about the data. #AI

In the venture world, AI is a collection of tools and technologies which can be utilized to create new applications that deliver value to end users. 🔮 It is not a magic technology; it is an extension of the tech stack (computing, data, internet) which has powered digital innovation for decades. 😟 It's not surprising that among the growing concerns with generative AI are what can be thought of as core digital issues: data security, transparency, cost, and accuracy. 🔦 Why? Because these issues are paramount when it comes to create end user value. Regardless of a technology's power or capability, if security is too lax or cost is too high, it will never make its way into production. AI is not excused from addressing core production requirements just because it's the latest wave of tech innovation. This is in part the reason why truly scaled AI application is still lagging despite massive popularity. #venturebuilding #genai

Value-based decision-making under uncertainty 🤔 This is a bit of technical jargon, but the plain English translation is "how to make choices when the costs and benefits of those choices are unclear." 🔮 This is really what venture building is all about. In large mature businesses, executives make decisions with precise measurements on costs and benefits (customer growth, revenue, expenses, time). In ventures, several of these are unclear and founders have to make decisions with incomplete information. Deciding on the right course of action in this setting is extremely challenging. 🔬 One simple way to evaluate founders? Determining what is their comfort level with this type of decision making. Do they get anxious with unknowns, or forge ahead while they learn? Can they break down their strategy into its key risk points and build a plan to neutralize them, or do they put their head in the sand hoping for the best? Some of the best founders are comfortable in the unknown. They don't build castles in the sky, but use their runway to investigate markets, technology, business models, and systematically remove unknowns until a clear picture emerges. #venturebuilding

An interesting way to think about #venturestudios: venture capital exposure and upside, with private equity management and control. ⏱️ Private equity rose to prominence through LBOs, which created a management and control that drove economic improvement and returns. 🎯 Studios aka company creators have similar structure -- relatively large investment, controlling interest -- but focused on new companies not existing. 📈 Traditional VC does not seek control but rather leans into the opposite: spray and pray and riding the rollercoaster of wins and losses. Why? Some believe the volatility is necessary to create upside. Others believe in founders to be better managers. But in the last 10 years or so, the data is painting a clear picture that the PE model of investing applied to VC (aka studios) is starting to perform very well. #venturebuilding