By Jong Eun Jung
Scott Kupor is the managing partner at Andreessen Horowitz, a venture capital firm with more than $10 billion in assets under management. From 2017-2018, he served as Chairman of the National Venture Capital Association. He is also the author of the national bestselling book Secrets of Sand Hill Road: Venture Capital and How to Get It. Last month, he spoke at a Vanderbilt Business talk hosted by Dean Eric Johnson and the Owen Venture and Entrepreneurship Club.
In giving advice to members of the audience, Kupor noted that it is critical for entrepreneurs to articulate their vision and communicate how their team is uniquely positioned for success in comparison to other teams of entrepreneurs. “How do I tell the story in a way that allows the venture capitalists to walk away saying, ‘This is an incredibly exciting market with an incredibly exciting team?’” Kupor said. Afterwards, he discussed the latest trends in venture capital, which can be found below.
1. Venture capital firms are investing heavily in software.
Kupor described how software impacts many industries, including the entertainment and music industries; one of his examples was the rise of Spotify. He said that he doesn’t see this changing and that his firm will continue to invest in software in the years to come. “Look at what happened with Netflix and streaming, and how that’s impacting traditional channels. We’re now starting to see it in financial services. We’re seeing it in, I hope, health care delivery, we may see it education over time. So we will continue to invest there,” Kupor said.
2. Companies are staying private for a longer period of time.
Historically, companies would go public about five to six years after they were founded. However, Kupor said this pattern has changed in recent decades. “The trend we see today, which I think is a long-term structural change, is companies staying private for 10 or 12 years,” he said. Kupor explained that from an investment perspective, venture capital firms will follow companies for longer amounts of time after early-stage investing to capture more appreciation, an approach that will benefit both investors and the firms.
3. There will be a more active and potentially liquid secondary market for private company shares.
Kupor also thinks there may be more opportunities for investors to buy and exchange equity before a company goes public. For example, the stock exchange NASDAQ recently bought the Private Exchange Group, which allows someone who owns shares of a private company to sell the equity to someone else before an IPO. “I don’t know what form it will look like, but we’re going to have some kind of hybrid public-private market,” he said. “I think over a five to 10-year period, more people (will be able to) transact in pre-public companies in a way that I think actually is beneficial to this primary goal of improving compensation.”
4. There will be better overall access to venture capital.
Kupor noted that the funding environment for venture capital is not very geographically diverse: Most venture capital firms are grouped along the coasts. He said that markets need to continue to build more diverse pipelines to reach more talent and broaden financial opportunities. “In general, the spoils of venture capital have not been well distributed geographically,” he said. “I actually think if we’re sitting here 10 or 20 years from now — I would be shocked if we don’t see better democratization of access to capital.”