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I interviewed Sharon Wienbar, Managing Director Scale Venture Partners @NVCA Venturescape. Scale Venture Partners had just raised their 4th fund $300m very quickly & at their hard cap. Scale invests in companies that are in the scaling phase. After you’ve got product market fit & you’ve found that early sales channel thats working, you may be lucky to raise money from them to help scale the business. Their companies average about $4m in revenue in the year they invest & they average a growth rate of about 97% a year (some of them are much higher). She also spoke about the changes to the venture industry. The biggest most important thing is that innovation keeps happening regardless of economic cycle. For example, right now you’ve the twin trends of cloud & mobile changing the computing architecture completely in the same way that emergence of the web did in the mid 90s. That’s creating opportunity across the spectrum both consumer facing companies, enterprise applications & core computing infrastructure companies. There’s a massive upheaval of new companies & new technologies that customers are buying. That’s a ton of opportunity! On the other hand there is the whole financial sector, what’s happened in venture capital, how much capital is there & what’s happening in our little ecosystem. We’re about .2% GDP, a tiny piece of GDP even though the companies they invest in end up driving about 21% GDP. That current GDP that is being invested is down sharply from over 1% GDP at the peak of the bubble of the bubble of 1.0. So people think of that as the hey day of venture capital & in fact it was this crazy spike of returns that came from that new architecture. But then it pulled in so much capital, flooded the market that it ground venture capital returns for the ensuing 10 years. So really the industry has right sized itself now to about the same size it was as a % of US business in the 70s & 80s. Its about the right size now – there’s plenty of capital for companies but not so much that you fund 20 competitors for every good idea & then tank the market.
