Railway crossroads serve as a reminder that trains are not the premier form of transportation they once were. The same could happen to venture capital.

Heading into the COVID crisis, Silicon Valley had reached a consensus that venture capital was going to get hit hard. In March, as the market crashed with alarming speed, new investments came to a grinding halt, and the IPO market froze completely, it seemed the most dire predictions were coming true. Today, after navigating months of uncharted waters, it is clear these doomsday expectations could not have been more wrong. However, if the industry doesn’t tread carefully, its short-term gains could pave the way to long-term self-destruction.

Venture capital in 2020 has not slowed down, it has accelerated. Whether you look at median valuation, deal count, early stage rounds, late stage mega-rounds, or IPOs, third quarter metrics across the board have raced back to historic highs. The rebound has been fueled by continued favorable macro conditions, such as tech’s outperformance in the public markets, low interest rates, regulatory tailwinds, and the fact that entrepreneurship historically outperforms in economic recessions.

The real momentum, however, stems from the much-needed structural innovation that thrives in disruption. For an industry that claims to invest in the future, it has been a long time since VC funds have been forced to innovate. Whether it is AngelList’s rolling funds, the rise of YC-style accelerators for new fund managers, or the booming popularity of direct listings and SPACs, COVID has proven to be a platform shift not only for technology, but for venture capital itself.

Continue reading… “Venture capital at a crossroads : Change or be forgotten”