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There is no doubt of the phenomenal impact that the risk capital has had in the economy of the United States and global in recent decades. A small number of risk capital investors has helped create some of the most dynamic companies in history and generated amazing returns. But past performance is not a guide to future results, as they say, and the world is changing quickly. Is the VC industry, like the latest rocket releases of Elon Musk, about to be called in a “rapid unchanging disassembly”?
Ilya Strebulaev, Finance Professor at the Stanford Graduate Business School and co -author of the Unicorn report, discards any talk, suggesting that the current slowdown in the VC industry is more cyclical than structural. “The reason why the United States produced as many large companies as Apple, Facebook, Google and Nvidia is not because the United States is more innovative, but because it has a risk capital industry. It is causal,” he tells me.
Your unicorn report of 350 pages recently updated firmly supports your thesis. Of all the public companies founded in the USA. In the last 50 years, companies backed by VC represent half of their number, three quarters of their market value and 92 percent of the costs of R&D D.
Of the 10 most valuable public companies in the US, the average foundation year was 1946. In the rest of the G7 was 1892. The VC industry of the United States remains a formidable innovation machine. The support of hungry entrepreneurs with initial stage funds to take advantage of the latest technologies to meet the daily needs of consumers and business remains a promising commitment.
That said, it is difficult to see that the risk capital industry soon returns to the days of Glory of 2021, when 478 unicorns were coined in the United States, approximately 31 percent of all unicorns backed by VC never created. The combination of low interest rates, abundant capital, high sugar assessments and hurry towards digital platforms during Covid blockade was the happy time of the industry.
Today’s perspective is more sober. Investors now face higher interest rates, malfunction of capital markets, geopolitical agitation, increased protectionism and mass adoption of artificial intelligence. “I don’t think the VC model will die, but it will change,” says investor David Galbraith. “And the general panorama is that the American model could be under threat.”
In his opinion, AI is rewriting the rules of technological and investment game. The traditional capital software distribution model (Think Social Networks) that has worked so well for VCS is quickly evolving to one of the production of heavy capital hardware (AI chips and data infrastructure), much harder investment land. The companies that lead this transition are the dominant technological giants that collectively invest hundreds of billions of dollars. They have also emerged as the main sponsors of the new largest companies, including Operai and Anthrope, usurping the historical role of the VC.
The majority of the other new companies of the VC backed that apply technology in different sectors will fail, Galbraith predicts, because the AI that changes will quickly erode to its competitive ghosts.
The other great secular change is that technology has now become the focus of the intense geopolitical rivalry, and every important power speaks of the need to affirm technological sovereignty. The last one is Saudi Arabia, which has just launched a VC fund of $ 10 billion, with the aim of becoming a center of the leader.
This geopolitical imperative demands a much deeper collaboration between governments, national corporate champions and new dynamic companies, as has become common in the northeast of Asia. In his book Initial capitalismRobyn Klingler-Vidra and Ramon Pacheco Pardo argue that China, Japan, South Korea and Taiwan have learned the lessons of Silicon Valley and updated them for the new era, helping to create companies such as TSMC of Taiwan, the world leader chips manufacturer. Many of these practices are now filtering the United States in a form of “return of return”, as they call it.
Europe, that this week launched a renewed effort To vigorize its initial industry, it seems stuck in the old Silicon Valley play book. Although such liberalizing initiatives are welcome, they must be quickly implemented and part of a more muscular geopolitical strategy. “The adaptation to the northeast model of Asia is much more viable,” Klingler-Vidra tells me.
Sometimes it is forgotten that Silicon Valley was in itself the offspring of the National Security State of the United States during the Cold War. Geopolitics has now returned with revenge and, like everyone else, the world of VC must quickly adapt to that new reality.