Venture Capital In Technology

Founders are turning down millions in venture capital. Their reason? "I don't need the money. We're already profitable." 10 years ago, unthinkable. Today, common. The Information wrote an insightful piece on "Seed-strapping"—raise once, focus on profitability: → $3.7M revenue per employee (10X industry standard) → 80% lower development costs → 90% less capital to reach profitability The uncomfortable truth for VCs: → Companies need just one funding round → SAFEs never convert → Founders keep 70-80% ownership → The traditional model breaks For investors, survival requires reinvention. New Fund Economics: → Smaller funds with more concentrated bets → Lower management fees, higher carry → Faster distribution timelines → Many smaller wins vs. few unicorn exits New Deal Structures: → Revenue-based financing with capped returns → Dividend rights if companies don't raise again → Profit-sharing without requiring additional rounds New Value Proposition: → Capital efficiency expertise over growth-at-all-costs → Customer connections & distribution support → Operational support over financial engineering → Alternative liquidity paths beyond traditional exits The era of "We'll figure out profitability later" is over. What comes next? Imagine a VC landscape dominated by smaller, specialized firms helping founders build profitable businesses from day one. In this new world, the winners won't have the biggest funds—they'll understand AI has fundamentally changed capital efficiency. For founders: Why dilute when you can profit after one round? For investors: How do you add value when capital isn't the constraint? The answer determines who thrives—and who vanishes in 24 months.

We used to have an American Industrial Base… We ate it at the Last Supper. Two weeks ago, I shared with HASC why I believe the US is in a state of undeclared emergency. Xi commands an Axis of Authoritarians waging war in Europe and the Middle East. And unlike WW2, America is no longer the best at mass production. Our adversary is. This always was a secret war of the factories. Public reporting indicates we have 1-3 weeks of weapons on hand for a fight against China. We need YEARS worth of weapons. Given the vast sums we have spent and the decades of Pax Americana, it would be reasonable to wonder what went wrong? In 1993, after the end of the Cold War, America wanted a Peace Dividend. Defense Spending was slashed 67%. The Secretary of Defense held a dinner at the Pentagon to tell the 51 Prime Contractors that not all of them would survive and they had permission to consolidate. From 51 Primes to today 5. This was the so called ‘Last Supper.’ This event and its consequences is often blamed for the lack of competition in the Defense Industrial Base. This is WRONG. The actual consequence is that we decoupled the US Commercial innovation from US Defense - The Great Schism of the American Economy. This marked the beginning of the financialization of Defense. This massive consolidation bred conformity. It pushed out the crazy Founders and innovative engineers. It allowed the worst instincts of the Monopsony to flourish. We should not forget that in WW2, it was not Northrop Grumman, it was Jack Northrop. It was not Lockheed Martin, it was Glenn Martin. Andrew Higgins, Henry Kaiser - and countless American founders and innovators - inside and outside government. In America we know founders are special — there is a reason we call them the Founding Fathers. They have been completely missing. The last Defense company, excluding Mergers and Spinouts, to be added to the S&P 500 was 46 years ago—until Palantir’s addition this month. You’d be forgiven for thinking we were talking about Europe’s sclerotic capital markets, not ours. In the last 50 years, Europe has created 0 companies with a marketcap greater than $100Bn; America created all her $1Tr marketcap companies in that time. Palantir might be the first DefenseTech company to make into the S&P, but we won’t be the last. Because today the Founders are back in the 100s— and they are backed by 100s of billions of dollars from the American Capital Class to build in the national interest. Before the the fall of the Berlin wall, 86% of DoD spending went to companies that had Defense AND Commercial businesses. Chrysler made cars AND missiles. Ford made Satellites until 1990. General Mills, the cereal company, made artillery and inertial guidance systems. Today that figure is 6%. Once upon a time the car, camera, cereal box, and tire you bought enabled research & development to defend the nation. The Reformation is here. Three decades in wait, the American Industrial Base will be Resurrected.

Corporate Venture Capital and Unicorn Investing GV (Google Ventures) leads with an impressive 90 unicorn investments, followed by Salesforce Ventures (42) and Intel Capital (40). CVCs, if they are well designed and well run, can offer startups value-add in addition to traditional VCs, such as built-in infrastructure for scaling and access to their supply chain and partners. CVCs can also help with distribution channels & market access. For example, Salesforce Ventures doesn't just invest – they provide access to Salesforce's massive customer base through their AppExchange marketplace. The high unicorn count from these CVCs isn't just about capital – it's about being able to provide infrastructure that accelerates scaling. But having a lot of unicorn investments does not guarantee longevity of the CVC unit. Some CVCs on our list have been disbanded or their investment activity has been curtailed. In some cases, CVCs may not provide high enough strategic value. In other cases, parent companies need to acquire the venture mindset and design the CVC unit more effectively.

BlackRock, along with Microsoft and MGX, is launching the world's largest AI infrastructure fund. The fund will focus on developing data centres and energy projects to meet the growing demands of continuously evolving AI products. Initially, the fund aims to secure $30 billion, which will increase to $100 billion with leverage, making it one of the largest investment vehicles ever raised globally. BlackRock is launching the new fund under its infrastructure investment unit, Global Infrastructure Partners, which it recently acquired for $12.5 billion. Nvidia is also part of the partnership and will advise on factory design and integration. MGX, launched by Abu Dhabi’s Mubadala earlier this year, supports the development of AI and other advanced technologies. The staggering size of the fund demonstrates the immense investment needed in energy and infrastructure to keep up with AI demand, as well as the commitment from the world's leading institutions. #innovation #technology #investing #fundraising #artificialintelligence

US tech is now at the same multiple as ex-tech (chart), despite still expected to drive >60% of S&P 500 earnings this year. Growth dominance is no longer commanding an obvious premium. We continue to favour the AI theme and tech within that, but it warrants a more active approach: ➡️ Early-year repricing reflected a shift in focus from cash flows to terminal value. The broad brush created opportunities, but also highlighted the need to avoid names with less durable business models - this is no rising tide lifting all boats. ➡️ Tech is becoming more capital intensive at this stage of the buildout. That likely means higher leverage and, at least initially, lower returns on investment. Parts of tech may start to be treated more like capital-intensive sectors, with greater dispersion and more sensitivity to payout time. Winner-takes-most dynamics will matter. ➡️ Competition for capital is rising - from national infrastructure and defence projects and the IPO pipeline - at a time when global capital is not obviously expanding.

Everyone wants AI. But what are they actually funding? According to Deloitte’s latest survey of 600 manufacturing executives, the answer is clear: They’re funding data 𝐟𝐨𝐮𝐧𝐝𝐚𝐭𝐢𝐨𝐧𝐬. They’re funding 𝐜𝐨𝐧𝐧𝐞𝐜𝐭𝐢𝐯𝐢𝐭𝐲. They’re funding automation 𝐢𝐧𝐟𝐫𝐚𝐬𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞. They’re not buying the hype—they’re building the 𝐛𝐚𝐜𝐤𝐛𝐨𝐧𝐞. • 𝟕𝟖% of manufacturers are spending more than 20% of their improvement budgets on smart manufacturing. • 𝟒𝟎% say data analytics is a top investment priority. • 𝟐𝟗% are putting cloud and AI next. • 𝟑𝟒% are focused on active sensors—the eyes of their factories. Why? Because without clean, connected, contextualized data, none of the shiny stuff works. This isn’t a pilot phase. This is the build phase—and it’s quietly transforming how factories think, sense, and act. Despite all the tech, the lowest maturity score? 𝐇𝐮𝐦𝐚𝐧 𝐜𝐚𝐩𝐢𝐭𝐚𝐥. Manufacturers know the systems are coming online. Now they’re scrambling to bring the people along. So if you're a manufacturer still working off spreadsheets and tribal knowledge—know this: Your competitors aren’t just automating. They’re upgrading their operational IQ. And if you’re not investing in your digital foundation today… You’re budgeting for irrelevance tomorrow. 𝐑𝐞𝐚𝐝 𝐟𝐮𝐥𝐥 𝐫𝐞𝐩𝐨𝐫𝐭:  https://lnkd.in/e6_QsJcw ******************************************* • Visit www.jeffwinterinsights.com for access to all my content and to stay current on Industry 4.0 and other cool tech trends • Ring the 🔔 for notifications!

Is it time to build in atoms, not bits? For the first time from us at Carta - benchmarks on US deep tech startup fundraising. Valuations, cash raised, and dilution from pre-seed through Series C. Deep tech covers many sectors including: renewable energy, hardware, medical devices, pharma, biotech, space, telecom, semiconductors. Two things stand out to me. 1) Deep tech rounds are more dilutive to founders than rounds raised by software companies. Median seed dilution is 23% for deep tech and 19% for software, for instance. 2) Deep tech companies do NOT always need vastly more capital than their software peers. If you add up the median cash raised between Seed and Series C for each group, you get: Software: $75.3 million raised Deep tech: $81.9 million raised So the extra dilution is due to lower valuations. Is that down to technical risk (deep tech companies generally don't produce revenue that quickly)? Is it down to a smaller investor pool? Lots to dig into. Data Explanations Rounds completed on SAFEs in the orange color tiers are split by total amount raised, since everyone has a slightly different definition of “pre-seed” and “seed on SAFEs”. Rounds on priced equity in the blue color tiers split by round names. Just primary rounds, no bridges or extensions or “Series A Jr” stuff going on. While the total number of rounds for deep tech is considerably lower than for software companies, deep tech has held up well in recent quarters. Seems like investors are slightly more open to deep tech hypotheses than they were previously. Share with a fundraising (deep tech) founder 🙏 #startups #founders #deeptech #fundraising

I stalked my co-founder for months before we started a VC firm together. Not in a creepy way. I just knew Janneke Niessen was brilliant at building tech companies from scratch. She'd done it twice already. Most VCs look at the obvious things: market size, product-market fit, financials. But here's what 15 years of research taught me: 60% of startups die because their teams implode. Not competition. Not market conditions. Not running out of money. Teams fall apart. After studying thousands of founders at Berkeley and Amsterdam, I discovered something counterintuitive: The traits that make someone an amazing early founder often become toxic during scale-up. That raw drive? It can turn into control-freakery. That passionate vision? It might blind you to market changes. That fierce independence? It could prevent crucial delegation. This is why Janneke and I built CapitalT differently. We don't just evaluate pitch decks. We measure team dynamics using hard science. We spot scaling problems before they emerge. Because unicorns aren't born from pitch decks. They're built by teams that evolve. P.S. Know a founder who needs to hear this? Tag them below.

Harvey and Legora just raised $300M combined at unicorn valuations equaling roughly 80 times revenue. EIGHTY times revenue. The average emerging public SaaS company trades for about 9x revenue according to Bessemer. When VCs make investments, they always ask themselves "What has to be true for us to get a 10x return on this investment?" 𝗛𝗮𝗿𝘃𝗲𝘆'𝘀 $𝟴𝗕 𝘃𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 𝗺𝗲𝗮𝗻𝘀 𝗩𝗖𝘀 𝗻𝗲𝗲𝗱 𝗮𝗻 $𝟴𝟬𝗕+ 𝗜𝗣𝗢. That's approximately the market cap of Starbucks, Ford, and Thomson Reuters. Legora's $1.8B valuation requires an $18B+ exit ramp. So just those two companies need to create about $100B in enterprise value combined. For context, the entire global legal tech market is about $30B today. 𝗦𝗼 𝘄𝗵𝗮𝘁 𝗵𝗮𝘀 𝘁𝗼 𝗯𝗲 𝘁𝗿𝘂𝗲 𝗳𝗼𝗿 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀 𝘁𝗼 𝗴𝗲𝘁 𝘁𝗵𝗲𝗶𝗿 𝗲𝘅𝗽𝗲𝗰𝘁𝗲𝗱 𝗿𝗲𝘁𝘂𝗿𝗻? ➡️ Legal tech TAM doubles or triples in 5-7 years ➡️ AI replaces 20-30% of associate billable hours ➡️ Harvey scales revenue 80x to $8B (CAGR > 100%) ➡️ They IPO at 10x revenue (median is 6x) and stays there past lock up period ➡️ Recession doesn't crimp legal budgets (we're very overdue for one) ➡️ AI ethics, hallucination risks, and data privacy (GDPR, bar rules) evolve favorably ➡️ The frontier models don't steamroll vertical solutions This is a list off the top of my head and far from being complete. 𝗪𝗵𝗮𝘁 𝗮𝗿𝗲 𝘁𝗵𝗲 𝗼𝗱𝗱𝘀 𝗼𝗳 𝗮𝗹𝗹 𝘁𝗵𝗲𝘀𝗲 𝘁𝗵𝗶𝗻𝗴𝘀 𝗯𝗲𝗰𝗼𝗺𝗶𝗻𝗴 𝘁𝗿𝘂𝗲? The market has never seen a legal tech company go public above about $7B. That was LegalZoom in 2021 shortly after the Treasury dumped trillions into the economy. LegalZoom is worth 25% of that value today ($1.8B) Harvey has raised $750M this year alone across three rounds. These aren't investments in legal tech companies. They're bets that legal tech stops being a category and becomes a significant portion of the practice of law. The math only works if AI doesn't augment legal work but fundamentally replaces large portions of it. Bold bets require extraordinary outcomes. Sometimes I feel like the show Silicon Valley is playing out in real life. Raymond Blyd what say you?

When frontier companies start funding other frontiers, the real story is not the deal. It is the architecture. SpaceX channeling capital into xAI signals a deeper shift. Capital is now being recycled across infrastructure layers, not just portfolios. Launch, compute, AI, energy, materials. Pipes funding pipes. We have seen echoes of this before: > Amazon built Amazon Web Services (AWS) to serve its own needs before reshaping global compute. > Google internalized data centers, chips, and energy to sustain search and AI. What is different now is scale and coupling. These are private, capital-intensive ecosystems being vertically integrated before public markets ever appear. For entrepreneurs, the question is no longer just product excellence, but how your technology plugs into a broader system. For investors, governance, resilience, and risk concentration must be evaluated far earlier in the lifecycle. This is also a timely moment to revisit Clayton Christensen’s work on strategy and disruption. As industries converge into tightly coupled systems, the boundary between strategy, integration, and long-term advantage becomes impossible to ignore. If AI, space, and energy are becoming foundational infrastructure rather than speculative frontiers…what does “early” actually mean anymore? 🤔