The end of Venture Capital? (VC Roundtable) | E2285
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The top 5 U.S. venture firms captured 73% of all LP commits in Q1, and three veteran VCs say the math may have officially broken. Aleph's Michael Eisenberg argues we may be witnessing the end of a 60-year run for venture capital as a craft business. Maniv's Mike Granoff and Oxcart's Larry Covert push back, arguing it's merely splitting into two asset classes: "Consensus VC" and traditional VC. Either way, the implications for founders, LPs, and the next decade of innovation are enormous.
TWiST is back on the beat with a venture round table discussing investment concentration, the IPO drought, "bullshit ARR" in the AI era, AI gross margins, the U.S.-China chip war, the Iran conflict's impact on defense tech, the death of NATO and the rise of allied supply chains, why Tel Aviv's stock exchange could become the next NASDAQ, and a lightning round on each VC's favorite portfolio company. Let’s go!
Timestamps:
0:00 Intro + sponsor reads (Grasshopper Bank, PaperOS, LinkedIn Jobs)
0:58 Plaud: If your work depends on conversations — interviews, meetings, calls — you need a Plaud NotePin. You can check it out at https://Plaud.ai/twist and use code TWIST for 10% off!
2:13 Introductions: Eisenberg (Aleph), Granoff (Maniv), Covert (Oxcart)
3:57 The impact of rising venture capital concentration
6:43 "We may be witnessing the end of venture capital"
9:17 Consensus VC vs. Traditional VC
10:01 LinkedIn Jobs - Hire right, the first time. Post your first job and get $100 off towards your job post at https://LinkedIn.com/twist
11:48 Why mid-size firms beat the behemoths on founder access
19:35 Coining "Consensus Colossal Collaborative Capital" (CCCC)
20:03 AngelList's USVC retail VC fund — does it help mid-size funds?
20:18 PaperOS - Whether you're raising a round, launching a fund, or managing a venture portfolio, PaperOS can unlock simplicity and scale across your empire of capital, contracts, and companies. Claim your $10,000 credit at https://paperos.com/twist
23:27 Are there more breakout startups today than 5 years ago?
28:36 The "bullshit ARR" problem and AI gross margins
30:03 Grasshopper Bank - Time is money. Don't waste either. Go to https://grasshopper.bank/twist and get an exclusive $500 cash bonus just for opening an account.
32:08 Cursor's negative gross margins and the hyperscaler funding flywheel
33:06 Are we all electron constrained?
35:35 Are we headed for surge pricing on compute?
40:22 Will anything replace NVIDIA? NextSilicon, Hailo & Israel's chip stack
43:33 Distillation, small models, and Apple's edge advantage
46:38 Public trust in AI: should government mandate Waymo & FSD?
1:02:58 Defense tech: Saronic, Anduril & the coming defense M&A wave
1:06:35 The Iran war timeline & supply chain impact
1:18:52 Lightning round: Jiga, Divergent, Volaback, Firehawk, Harbinger
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20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg
Michael Eisenberg is a Co-Founder and General Partner @ Aleph, one of Israel's leading venture firms with a portfolio including the likes of Wix, Lemonade, Empathy, Honeybook and more. Before leading Aleph, Michael was a General Partner @ Benchmark.
In Today's Show with Michael Eisenberg We Discuss:
1. The State of AI Investing:
Why does Michael believe that "foundation models are the fastest depreciating asset in history"?
Are we in an AI bubble today? As an investor, what is the right way to approach this market?
Who will be the biggest losers in this AI investing phase?
Where will the biggest value accrual be? What lessons does Michael have from the dot com for this?
2. Where Is the Liquidity Coming From?
Why does Michael believe that it is BS that private equity will come in and buy a load of software companies and be the primary exit destination?
Why does Michael believe that IPO windows are always open? Should founders go out now? What is good enough revenue numbers to go out into the public markets?
Why does Michael believe that Lina Kahn is a threat to capitalism? How does Michael predict the next 12-24 months for the M&A market?
3. AI as a Weapon: Who Wins: China or the US:
Does Michael agree with the notion that China is 2 years behind the US in AI development?
Does Michael agree that AI could be a more dangerous weapon in wars than nuclear weapons?
Why does Michael suggest that for all founders in Europe, they should leave?
US, China, Israel, Europe, how do they rank for innovating around data regulation for AI?
4. Venture 101: Reserves, Selling Positions and Fund Dying:
Why does Michael only want to do reserves into his middle-performing companies?
What framework does Michael use to determine whether he should sell a position?
Which funds will be the first to die in this next wave of venture?
Why does Michael not do sourcing anymore? Where is he weakest in venture?
Why does Michael believe that no board meeting needs to be over 45 mins?
AI investments, VC ecosystem geography, and VC hypocrisy | E1956
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Todays show:
David Weisburd hosts Jaime Matus, Michael Eisenberg, and Jason Calacanis to discuss AI investments and the potential washout of overfunded startups (4:11). They also touch on VC hypocrisy (38:47), and the role of geography in the VC ecosystem (54:53).
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Timestamps:
(0:00) David Weisburd intros Jaime Matus, Michael Eisenberg, and Jason Calacanis
(4:11) Pitchbook data summarizing the total amount of capital invested in AI
(12:12) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at http://www.Squarespace.com/TWIST
(16:33) Predicting a washout of overfunded AI startups and sky high valuations
(25:30) OpenPhone - Get 20% off your first six months at https://www.openphone.com/twist
(26:57) Discussing Michael Eisenberg's career and investment experiences
(37:22) Lemon.io - Get 15% off your first 4 weeks of developer time at https://Lemon.io/twist
(38:47) Discussion on Greg Isenberg's tweet about VC hypocrisy
(54:53) Fundraising rankings by ecosystem
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Thank you to our partners:
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20VC: Israeli Resilience From Tech and Beyond with Michael Eisenberg and Adi Levanon
Michael Eisenberg spent 15 years as a General Partner @ Benchmark working alongside Bill and the Benchmark partnership. Following Benchmark, Michael co-founded Aleph, one of the leading Israeli venture funds of the last decade with a portfolio including Lemonade, Melio and HoneyBook, just to name a couple of Aleph's unicorns.
Adi Levanon is the Founder & Managing Partner @ Selah Ventures, a solo-GP-founded venture fund investing $500k checks into AI-based solutions that enhance financial services, healthcare organizations, fintechs, and SMBs, with a focus on founders in the US and Israelis globally.
In Today's Episode on Israeli Resilience We Discuss:
Where are we at today? What is it like on the ground, today?
Have the international community reacted as expected? What more can be done?
What does it mean to be called up for "reserve"?
How are companies dealing with 25% of their teams being called into the armed forces?
Are VCs investing still? Does work carry on?
Whose reactions are exemplary and we should look to follow?
Whose have been woeful and should be called out?
What are the single biggest misconceptions of the situation?
What can people do to help? What can be done?
20VC: 13 of the Great Investing Minds on When to Pay Up vs When To Remain Disciplined and Walk Because the Price is too High: The Ultimate Guide to Price Sensitivity
Marcelo Claure is an entrepreneur and investor who has founded and led some of the world's most iconic businesses. He is currently the Chairman & CEO of Claure Capital, a newly founded multi-billion-dollar global investment firm. Before this, Marcelo was COO @ Softbank Group, the world's largest technology investment company.
Bill Gurley is a General Partner @ Benchmark, one of the most successful funds of the last decade with a portfolio including Uber, Twitter, Dropbox, Modern Treasury, Snapchat, StitchFix, and many more.
Michael Eisenberg spent 15 years as a General Partner @ Benchmark working alongside Bill and the Benchmark partnership. Following Benchmark, Michael co-founded Aleph, one of the leading Israeli venture funds of the last decade.
David Tisch is the Founder and Managing Partner @ Box Group, one of the leading seed focused firms of the last decade with a portfolio including Airtable, Glossier, PillPack, Plaid and many more.
Cyan Banister is one of the most successful and renowned early-stage investors in the last decade. Her portfolio includes the likes of SpaceX, Uber, Affirm, Opendoor Postmates, Niantic and Thumbtack to name a few.
Zach Weinberg is a Co-Founder of Operator Partners, operators funding operators, with no outside LPs, just their own capital.
Luciana Lixandru is a Partner @ Sequoia, one of the world's most renowned and successful venture firms with Sequoia-backed companies accounting for more than 20% of NASDAQ's total value.
Jeff Lieberman is the Managing Director @ Insight Partners, one of the leading investing franchises of the last 25 years with their most recent flagship fund announced earlier this year being a staggering $20BN.
Nick Shalek is a General Partner @ Ribbit Capital, specializing in fintech they are one of the most successful venture firms of the last decade with a portfolio including Robinhood, Coinbase, Revolut, Nubank and more.
Frank Rotman is a founding partner of QED Investors, one of the leading fintech-focused venture firms investing today with a portfolio including the likes of Klarna, Kavak, Quinto Andar, Credit Karma and more.
Geoff Lewis is the Founder and Managing Partner @ Bedrock, now with over $1BN in AUM, Bedrock invests in breakout technology companies that are incongruent with popular narratives.
Justin Fishner-Wolfson is founder and the managing partner of 137 Ventures. Their portfolio includes SpaceX, Wish, Anduril, Flexport, and WorkRise (formerly Rigup) to name a few.
David Sze is a General Partner @ Greylock where he has led some of the firms most notable investments including Facebook, LinkedIn and Pandora.
In Today's Episode We Discuss Price Sensitivity:
1.) How do you assess your relationship to price and price sensitivity?
2.) When is the time to pay up and have less price discipline?
3.) When should we remain disciplined and not pay up for a deal and walk away because of price?
4.) Of the deals you have paid up for, did their growth rate justify the high entry price?
5.) Knowing all you know now on price, how do you advise younger investors today?
20VC: Bill Gurley and Michael Eisenberg on The First Signs of an Impending Bust, What Happens with a Market Crash, How Do Public Markets Impact Private Valuations & The Biggest Lessons from 20 Years Investing in Venture
Bill Gurley is a General Partner @ Benchmark, one of the most successful funds of the last decade with a portfolio including Uber, Twitter, Dropbox, Modern Treasury, Snapchat, StitchFix, and many more. As for Bill, widely recognized as one of the greats in venture having worked with GrubHub, NextDoor, Uber, OpenTable, Stitch Fix, and Zillow. Prior to Benchmark, Bill was a partner with Hummer Winblad Venture Partners.
Michael Eisenberg spent 15 years as a General Partner @ Benchmark working alongside Bill and the Benchmark partnership. Following Benchmark, Michael co-founded Aleph, one of the leading Israeli venture funds of the last decade with a portfolio including Lemonade, Melio, and HoneyBook, just to name a couple of Aleph's unicorns.
In Today's Episode with Bill Gurley and Michael Eisenberg You Will Learn:
1.) How does the current market activity in venture today compare to the dot com bubble? What elements are different? What elements are the same? What were the ramifications of the dot com bubble? Would Bill and Michael expect to see the same again? Is there anything good that comes from bubbles? How did the prior bubble impact Michael and Bill's investing mindset?
2.) Does Bill Gurley agree that Benchmark are the only firm to have retained price discipline in this crazy market? How do Bill and Michael think about their own relationship to price today? How does Bill try and answer the question, "what could go right?" when he meets entrepreneurs today? On reflection, what have been Michael and Bill's biggest miss? How did it change their approach?
3.) How does one compete in a world of Tiger and crossover funds? When it comes to capital deployment and pacing, do Michael and Bill agree with the suggestion of "playing the game on the field"? What are the nuances to this statement? What companies does Bill believe capital can be a moat for? What companies is capital not a moat and they should be conservative with raising and pre-emptive rounds?
4.) Do Bill and Michael believe that ownership still matters today with outcomes being larger than ever? How do Bill and Michael feel about the importance of temporal diversification today in a world of compressed deployment cycles? What investing lesson learned over 25 years in the business do Bill and Michael wish they had known when they started?
Item's Mentioned In Today's Episode with Bill Gurley and Michael Eisenberg
Bill's Favourite Book: The Storytelling Animal: How Stories Make Us Human
20VC: Aleph's Michael Eisenberg on Why Generalists Over Specialists, Why Boutique Smaller Firms Over Multi-Stage Firms, Portfolio Construction Theory, Capital Concentration Limits and How To Think Through Reserve Allocations with Market Cycles in Mind?
Michael Eisenberg is a Co-Founder and Equal Partner @ Aleph, with over $550M under management and a portfolio including the likes of Lemonade, Melio and HoneyBook, they are one of the leading early-stage firms of the last decade. Prior to founding Aleph, Michael spent 15 years as a General Partner @ Benchmark and before that, made his way into venture with Israel Seed Partners where he built an incredible portfolio over an 8 year period. If all of this was not enough, Michael is also an author having published 4 books.
In Today's Episode You Will Learn:
1.) How Michael made his way into venture over 25 years ago and how his 15 years at Benchmark led to his founding Aleph?
2.) How has seeing multiple booms and busts impacted Michael's investing mindset? What do many misunderstand when it comes to reserve allocations in market cycles? Why does Michael believe busts are more psychologically impactful than financially impactful?
3.) How does Michael approach portfolio construction with Aleph today? How does Michael think about the right level of portfolio diversification? How does Michael think about the right level of capital concentrated into one company? How does Michael assess the difference between risk and uncertainty? What do many misunderstand between the two?
4.) Why does Michael believe in generalist VCs over specialist VCs? Why do they win? Why does Michael believe in small boutique firms vs large multi-stage firms? How does Michael think about the notion of ownership on first check? Is it possible to really build ownership across rounds today?
5.) How does Michael reflect on his own style of board membership today? How has it changed? What have been some of Michael's biggest lessons on board membership from Bruce Dunlevie @ Benchmark? What advice does Michael have to newer investors joining boards for the first time?
Item's Mentioned In Today's Episode
Michael's Most Recent Investment: Melio
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