Spark Capital’s Nabeel Hyatt explains.


“Unicorn” is the hot term, but they aren't the only companies out there

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Unicorns aren't the only companies out there

the headlines are that all the valuations are up and everything is heated and it's no longer venture is no longer a sleepy backwater and you know, everybody's coming at it that on the ground, a large portion of that is honestly just be to be SAS, which is that that hedge funds have thought that they figured out exactly what the formula is for B two B saAS companies so they can process it like clockwork and just come in and there are a lot of non B two B SAAS companies out in the world. There's a lot of weird companies out there in the world. There's a lot of creative risk being taken by founders thankfully in the world and it is, it is not all unicorns all the way through. And so just like forever. If you're a founder and you take a creative risk and you do something a little bit different then all the automaton investors don't know what to do with you and the same thing for a VC. If you, if you feel like you don't want to be an automaton investor, go do something a little bit more risky and go run a little bit way where the formulas don't, don't necessarily compile quickly and you actually have to do work with the founder because the truth is that like at the end of the journey, um, fast capital, higher evaluations, all the rest of that stuff. When I talked to a founder after an exit, after they've gone through an I. P. O. And we're having a conversation about that whole journey they don't talk about the board member and investor who was most valuable to them in terms like, oh they wrote a slightly higher term sheet at some point in time or um, oh they're technical recruiting services, staff was like pretty great series. Like these are not the conversations they have right. A conversation of founder has at that moment when the journey is over is this is the board member investor who was there when it really mattered. And that's still that business. At the end of the day. There are still really high risk, high volatile businesses that are really high stress and having the right partners along the way still still matters. So does it feel like the hedge funds or more specifically the hedge funds like Tiger that take on a more uh backseat approach, not necessarily taking a board seat that are investing the B two B. Saas companies that are tried and true and that you believe that the ones that are more traditional venture models, venture capital company models, I'm sorry. Uh they are the ones that are taking greater and greater risk. I don't want to overstate it. I think the whole middle of the venture market is going to completely evaporate just so completely. I think there's a whole bunch of old school folks who have no idea how to operate in this environment and are you going to go away? So I don't, no, there's of course there's a role for, for tiger and their ilk to come in and there are times where you just need capital and you just want to scale. Um What I'm just saying is I think what several people have said over the last six months which is at this bar belling of the industry and you're either gonna go really, really deep or really, really shallow and if you're really shallow, it's just cost of capital and can you raise $100 billion fund or not? And just keep pushing, pushing. And the other side is how deep the relationship are you willing to go with the founder? How how off piece are you willing to go? How much risk are you willing to take on? And there's always like always, there's always modernization and always more risk to take. And I think more than ever your fun size does become your strategy these days. It needs to be big enough for you to do your job in the particular area you're operating but small enough that you are scaling to meet the size of your firm and that's, that's a thing. Um I think probably we all obsess about If I look at my schedule. Um 1/3 time is doing a photo management. 1/3 time is looking at new investments. The one third, I didn't think that would be the case before is actually internal management, um Coronation uh mentorship um taking out structure and waits for its scale uh the 1st 10 years of G. V. It raised one billion, the second decade ends up being eight billion. Um And a lot of time we spend actually figuring out how to scale that business for exactly this environment, not going to be more companies than ever. Because, you know, we we we all have seen this during the last two years. The outside of uh in many emerging markets, especially in the US just acceleration of this organization, offline economy is unprecedented. Um So when that happens you're gonna be more opportunities than ever. And so you the market is bifurcating so you can go you were really deep and very focused or you'll be able to a bigger platform to accommodate that. So you've got to figure out which one makes sense for you. It's a personalization.