The Twenty Minute VCWhy VC Today is Worse than 2021
At a glance
WHAT IT’S REALLY ABOUT
VC returns look tougher as AI hype reshapes markets rapidly
- Venture has become a slower, harder liquidity game as companies stay private longer, carry takes longer to distribute, and billion-dollar outcomes no longer feel like “real exits.”
- The panel argues that investors are increasingly misreading market size because “everyone is in market” for AI right now, creating Covid-like extrapolation risks where near-term adoption spikes may not persist.
- Vertical AI and vertical SaaS are portrayed as especially vulnerable to TAM exhaustion and overfunding, where many companies can reach meaningful revenue but too few can justify venture-scale valuations.
- The AI race is pushing unprecedented capital intensity, with examples like OpenAI shifting spend to Oracle and Poolside building its own data center, suggesting compute access is becoming a competitive moat.
- Strategically, they suggest leaning into clear winners and massive horizontal platforms while being disciplined on entry price, ownership, and realistic long-term growth assumptions.
IDEAS WORTH REMEMBERING
5 ideasVenture is increasingly a “get rich slow” asset class again.
Carry can arrive early but meaningful distributions can stall for a decade-plus as IPOs delay and winners are held longer, making paper gains feel less valuable than liquid comp elsewhere.
Private markets are capturing upside that public markets used to get.
Revolut’s $75B private round illustrates how scaled, IPO-ready businesses can keep compounding privately, shifting returns and power toward late-stage private capital.
TAM exhaustion is showing up earlier and more broadly than many VCs expected.
When $1B revenue becomes the implied threshold for a great outcome, narrow markets that once supported strong venture returns (e.g., $100–300M revenue) may no longer clear the bar at today’s entry prices.
AI is warping demand signals because buyers are temporarily “all in market.”
CIOs feel pressured to buy *something* now, so growth rates in 2024–2025 may reflect a compressed decision window rather than durable multi-year expansion, risking over-extrapolation.
In compressed markets, speed-to-ownership matters more than ever.
If most enterprise customers choose a vendor within 12–24 months and then standardize for years, late entrants—even good ones—may be structurally locked out.
WORDS WORTH SAVING
5 quotesVenture, as someone said to me years ago, it's the get rich slow program, and yeah, there can be 10-year periods of non-payment
— Rory O’Driscoll
I see TAM exhaustion everywhere, and you gotta run so fast as a founder to keep ahead of it, faster than maybe we used to think. We used to have more time. We used to have more time, Rory.
— Jason Lemkin
The fact that everyone's in market instead of 5% of the market, which is like our traditional metric in B2B, is warping how we think about market size. It's like 2020 all over again.
— Jason Lemkin
The easiest way to make money in 2025 is to take the very biggest companies and double down one more time.
— Rory O’Driscoll
Again, reminder, in a bull market, the most aggressive person will look the smartest just before the crash, because the more risk you've taken, the more money you've made.
— Rory O’Driscoll
High quality AI-generated summary created from speaker-labeled transcript.
