Why not put capital to work if it is really worth something?
An easy complaint When it comes to venture capital, it usually isn’t. Venture-esque, that is. It is certainly capital.
For example, over the past decade, a large portion of venture capital investment has gone to software-as-a-service companies, some of the least risky private technology companies out there. Sure, some fail, but the SaaS model is usually sustainable and the performance trackable so anyone can pencil in modeling future growth and arrive at a valuation conclusion.
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Where are the daring slots on space factories, superfoods and the like? Sorry – you have DocuSign instead.
But not all funds are timid, even if we find the current lack of material commitments to mega-projects disappointing. No, some funds are resisting the downturn by setting up new, massive venture capital firms to invest in markets that don’t seem healthy from an outsider’s perspective. In a sense, this is actual venture capital activity as the investors take their money on an adventure into unknown parts – and market conditions.
That makes recent funds from Sequoia Capital China and a16z all the more interesting to talk about. And why their returns could be all the sweeter.
Saw while others zigzag
In short, the news: Sequoia Capital China is raising a huge new fund. That means the Sequoia crew is gearing up to spend the money of a bank in the country. Welcome news, to be sure, for the beleaguered Chinese tech ecosystem that has seen slower growth and increasing layoffs. But why now? One reason could be that the Chinese technology market is just that: under siege.
The next step: the huge new crypto fund from a16z. Valued at some $4.5 billion, it’s the company’s largest to date, and like the Sequoia fund, it could be a substantial part of the upcoming venture capital financing for its chosen market, namely web3.
As the Chinese venture capital market and technology industry suffers and the crypto industry undergoes rapid climate change from NFT Summer to Meltdown Winter, theses investors are raising new, massive funds.
Why do the opposite of the market? Because that’s – potentially at least – where the money is.