The Man Who Watches $170B Says the IPO Is Dying | Scott Voss, HarbourVest

If I'm a big investor in the Mag 7, but I want to diversify away from those companies, I can either go downmarket within the public markets, or maybe I look to private markets. I want to gain access to an OpenAI or a SpaceX or even an Anthropic, which just closed around today. Although the venture industry is thriving right now, it's the AI story and the larger mega venture story. Venture industry is kind of a winners take most. Kind of industry, right? The, the Ben Horowitz, you got to be in the companies that matter in every cycle.

All right. Welcome to the Venture Capital Podcast, part of the VC FM network. Today we're joined by Scott Voss, managing director at HarborVest Partners, one of the world's leading private equity investment firms with over $170 billion in assets under management. Scott spent two decades investing across the US and Asia, served two terms as chair of HarborVest's global primary investment committee, and now helps make sense of what's happening across the market as HarborVest's senior market strategist with a big focus on venture capital. Scott, welcome to the show.

Thanks, thanks, John. Great to be here.

All right, before we begin, do you want to talk about your background from a high level? Anything else you'd like to add?

No, other than, you know, 26 years at HarborVest, I've only had two jobs in my life. My pre-HarborVest career was working for a sporting goods manufacturing company called Cannondale, a manufacturer of high-end bicycles. So I used to manage international sales and distribution, and that always gets a little bit of attention from folks that see me having a little bit different profile than, than most of the people in our industry.

It's quite the jump. How did that jump happen?

So I was given the opportunity to move to Asia on behalf of Cannondale and run their Cannondale Asia operation. I was 28 years old and for various reasons I decided that was not going to be the next 5 years of my life. So in turning that down, I realized I had to probably go do something else. I went to Babson College to get my MBA, studied venture capital and entrepreneurship, and that was my path to HarborVest. Great decision, great school. I don't regret any of it.

So awesome.

Well, welcome to the podcast.

Thanks.

So before we dive into some of these questions, and maybe this will be a good jump-off point, what does a senior market strategist do? Like, what does your day-to-day look like?

Yeah, so it was probably a year and a half ago our CEO approached me to see if I'd be willing to take on this new this new role that was being created, you know, given where HarborVest sits within private markets, we're a multi-manager fund. For 45 years we've catered to institutional investors, but more recently the wealth channel has opened up and there's a lot of access that's being given to individual investors. And part of the responsibility for private markets as that new investor comes into the asset class is to educate them on what private markets are and what they're not. And so, you know, what we wanted was a face and voice of the firm to complement our CEO, who's also in the market, to really talk about private markets and talk about the things that people are talking about. And that's what I've been doing.

And to educate these, you know, not that they're dumb, but, you know, less sophisticated investors.

Yeah, I, I think most investors, when they think about equity in particular, they think about public equity. It's liquid, it could be traded daily, and that's not the case with private markets. There's this illiquidity, this illiquidity that exists. It's about duration. And these are fundamental principles that I think a new investor allocating to the asset class needs to understand and appreciate. Yeah.

How do you help get those investors over that that hurdle of like, hey, your money's going to get locked up for a long time?

Well, one of the ways the industry has innovated is they've created a structure called the open-ended evergreen fund that has contracted redemption rights. That doesn't mean that that vehicle's liquid, but it does have the ability to generate liquidity on a quarterly basis for the investor. And I think that it's technology that's existed for a long period of time, but institutions haven't necessarily asked for it. I think for the individual, it just gets them more comfortable that the private market allocation starts to look a little bit more like their public equity allocation.

Yeah. Yeah. Yeah. It's interesting how those have really kind of blown up over the last few years. I think largely, I'd be curious to see your perspective on this, but it seems like that's largely driven by the fact that So many of these private companies, these privately held assets are fairly liquid at the end of the day through secondary markets. They're not as liquid clearly as like a public market, but if you want to get in and out of Stripe, you know, within a quarter or two, you can fairly easily, which I think, you know, going back 5, 6 years ago, I don't know that that was the case. And so like these funds probably wouldn't have been able to offer that same sort of opportunity to investors. You think that's right or are you seeing something different on your side?

No, absolutely. So there's a couple things. One, yes, the secondary market has grown dramatically and just is a liquidity option if an investor needs liquidity and it's not coming through traditional ways. So we're just seeing more frequent trading within the secondary market. There's new technology platforms that are emerging I know you referenced Stripe. Schwab recently acquired a company called Forge that's actually a marketplace that allows for trading of these private equity or private assets. And then in venture capital in particular, we'll talk more about this, I think, throughout the pod. You know, companies have just chosen to stay private longer. So if I'm a big investor in the Mag 7, but I want to diversify away from those companies, I can either go downmarket within the public markets, or maybe I look to private markets. I want to gain access to an OpenAI or a SpaceX or even an Anthropic, which just closed around today. And so there's a lot of growing interest, I think, for investors to gain access to that type of opportunity.

Yeah, absolutely. Why do you think companies are staying private longer? I know there's a lot of speculation. I'd be curious, you know, how you and your firm kind of approaches that question.

Yeah, so this started happening well over a decade ago and, you know, it's interesting if you go back to 2010, I think there was a view within the venture market that, you know, the venture model was broken, that venture wasn't even an asset class. And I think there was good reason for that. I think if you looked at, you know, the Cambridge Associates 10-year return in 2010, it was negative. So it was hard to argue that you, you should allocate to venture capital. Interestingly, since that time, I think venture capital has become one of the strongest, if not the strongest performing asset classes within private markets. And at the same time, it's become greater in scale. So where companies used to IPO at a value of $500 million or a billion dollars, we started to see them hold out, stay in the private markets longer, become more stable companies, frankly, and more durable companies before they tapped the public markets. So if I just map, let's pick the Meta IPO, which happened back in 2012. It still is the largest or greatest of all time as far as venture-backed IPOs. It was valued at about $104 billion. Meta probably could have gone public at $20 billion, but it chose to stay private. Til it was north of $100 billion. And then since then we've seen, you know, other milestone transactions. A couple notable events, it was probably in 2021 where we saw Stripe and SpaceX raise at just shy of $100 billion. And then obviously today we're seeing private companies raise SpaceX at $800 billion, OpenAI at $5 billion, and then Anthropic recently at $380 billion. And the reality is the capital is available. It's out there available to invest where maybe previously it wasn't available at that scale. The last point I'll make, you know, when OpenAI raised $40 billion back in April of 2025 at a $300 billion valuation, those are kind of huge numbers. The largest IPO ever to date, which this will be broken probably this year by one of these companies I mentioned, it was Saudi Aramco raising about $26 billion back in 2019. So a private company raised $40 billion where the largest public equity raise, at least right now, has been $26 million.

Yeah, I was talking to an investment banker recently who does a lot of— he's built his career on doing kind of small-cap stocks, which, you know, secondaries have kind of wiped that whole industry out. But he was kind of bemoaning how, you know, last year publicly traded public companies raised about $140 billion in total and privately held companies raised about $200 billion. Yeah. And how, you know, you, you're seeing this big shift. That being said, right, if you take out 5 names, that, that number drops by a lot. So it's, it's not quite apples to apples, but it is interesting.

Well, and there's also this interesting contrast. What went public last year and at what price. The sweet spot, even though the IPO made a comeback, the sweet spot seemed to be at values between $5 billion and $20 billion. And, you know, we're talking about private market financings that are, you know, 5 or 10 times those valuations or greater. And when some of these companies ultimately go public, it'll be, you know, 10 times greater than the greatest of all time, perhaps, right? So, yeah, some— this year will be interesting to see if Assuming markets stay stable and public markets are open, it could be a really interesting year for the venture industry.

Yeah. Do you worry at all about dislocation of valuations between private and public markets that, you know, some of these companies aren't going to get valued as highly when they go public?

I think you have to, right? And when we look at the IPOs that happened in 2025, it's really a mixed performance signal. I think 50% have traded up, 50% have traded down, and we need the supermajority or all of them to trade up. And we've even seen some pricing discrepancies within private markets where companies ultimately go public. So I think Instacart was an example. More recently, Klarna. McLaren raised at a $50 billion valuation in the private markets, but today has a market cap between $10 and $15 billion.

Yep.

Pennies. Chump change.

Yeah, I mean, I think it's interesting. How do you guys think about kind of controlling for that risk, particularly in kind of later stage secondary rounds where the valuations are very high and how do you underwrite that so you don't end up in that bottom 50%?

So, you know, I want to avoid talking too much about our program, but generally I think investors investing in venture capital that can lead into the earlier stages are going to mitigate some of the valuation risk that's happening in the mid to late stage, especially in the environment that we're in now. And then if you have an active management function, you can also sell into some of this liquidity that you mentioned earlier that's available at some of these high price valuations. And there you have to kind of make an investment decision. Is there value or is there not value? So I think the earlier an investor can go in venture capital, which becomes harder to do, the more you mitigate the risk that you face with some of the valuations we're talking about right now.

Yeah, for sure. So I want to talk a little bit about that and it's this bifurcation that a lot of people are talking about around how the big firms just keep getting bigger and bigger and bigger. And, you know, like I was talking to a friend of mine and he made the point, he's like, you're either big or you're first in today's market as a venture fund. And so like part of, I wonder, do these valuations ultimately, like, How much of the valuations in the private markets are driven by the fact that Andreessen has just raised a ton of money, or pick your fund, right? Sequoia, Insight, you know, all these big huge funds. They've raised billions of dollars and they need to deploy hundreds of millions, you know, per deal. And in order to do that without, you know, basically buying the company, they have to boost up valuations. And create maybe what become artificially high valuations. Do you think that's happening or do you think that's a false framework?

Well, first of all, I'd say a couple things. When we talk about venture today, we talk about what we call traditional venture, which is investing in an entrepreneur, in an idea at the company formation stage. And that's kind of the venture we all grew up kind of knowing. But there is this new asset class that we spent some time talking about right now, which is private companies being valued in the hundreds of billions of dollars. And are those valuations justified, right? So if a company's generating $3 to $5 billion in revenue and growing at 300% per year, I don't think we've ever seen that before, right? So how do you value that? And I think it will be a good test this year on justifying valuations when some of these record-breaking deals ultimately could happen and will the valuations be supported by a different market, the public market, right?

Yeah. Yeah. Yeah. It'll be interesting to see, right?

Let me, let's get back. Yeah. I mean, we were having this conversation the other day with some of these funds that are being raised to target this part of the market to put put this in perspective, there's 10 companies or less that are valued at $50 billion or greater right now that are private venture-backed companies. There's probably 100 that are valued at $10 billion or more, right? And then there's over 1,000 that are valued between $1 billion and $10 billion. So your universe gets smaller, right? Like above $1 billion, it's a over $1,000. Above $10 billion, it's $100, and above $50 billion, it's $10. So your universe gets small fast. And I have to believe that some of these scale venture investors are all targeting that $100 billion or that 100-company universe that's $10 billion or greater, right?

Well, they almost have to, right? I mean, their fund sizes are so big that if they're not in one of the top 100, they've kind of failed as a firm.

Right. Yeah. Yeah. And, and you have to have a higher hit rate at that valuation. And, and I think companies that are valued at $10 billion or greater have, have proven their market position. It's when you go down to that billion dollars or greater where I think there's still binary risk that, that exists in some of those companies.

Yeah. Yeah. I, I was reflecting the other day on I'm wondering how much is AI and these, these very large businesses kind of sucking all the air, or in other words, capital and attention out of the room for like these next tier down companies, right? If you're not one of the top, frankly, like 10, do you even get the attention, right? And you could have a really great business., but all the money is flowing to AI and nobody cares. Do you know what I mean? Are you seeing that or?

Yeah, I totally agree. It feels like although the venture industry is thriving right now, it's the AI story and the larger mega venture story. And if you're investing in, you know, one of these other categories that could be benefiting from business model innovation using technology, which has been a theme for the last decade. You're just not getting the same attention that you got, you know, 3 or 4 years ago. So, and I do think there, there is this question that made, might exist around some companies that were invested in 2020 and 2021 before the ChatGPT moment. I, I heard one well-known venture capitalist refer to it, are, are you on the right side of history or the wrong side of history?, and it's really driven by what side of November 2022 have you invested on, right?

Yeah. And I wonder what happens to all those companies that are on the other side. I mean, because there were probably of that 1,000 companies that are worth a billion to $10 billion, I would imagine most of them raised on the before November 2022, and I don't know that all of them have a clear exit path today. Right. And so many venture funds I know are still holding a lot of those assets at those valuations. Maybe they've brought them down, but have they brought them down enough? And ultimately, regardless of where you've marked them, what does that liquidity path look like for an enterprise? SaaS business doing $200 to $300 million in ARR, solid business, but where does it go?

You know? Yeah. So, for me, I think the question is, first of all, the venture industry is kind of a winner-takes-most kind of industry, right? The Ben Horowitz, you gotta be in the companies that matter in every cycle, I think is real and it's true. I think a big question with some of these investments that were made pre, call it ChatGPT, is are their business models even relevant anymore? And that, that, I think that's question number one. If they are relevant and they're just not at the scale that some of these other logos we've been talking about are at, and they have, but they have a reason to exist, I think there's a path forward. And I think private equity can play a role. Where private equity could be a buyer of some of these companies. There, there could be new funds that are raised that are meant to roll up some of these companies and create almost a conglomerate of companies that provide a more holistic solution to whatever market they're selling into. But the fundamental question is, is the business model still relevant today or not based on all of this? The changes in innovation we've seen, especially around AI.

Yeah, when depending on the day, the public markets do or don't agree with whether or not SaaS will still be around in, you know, 5 years.

So, you know, you know, it's fad that that's obviously got a ton of news over the last couple of weeks, but within the venture world and the private equity world, you know, this question has been on the table and it's driven investment kind of activity and underwriting of deals. It's not like it just showed up and caught everybody by surprise. Maybe it's moving faster than some thought. We are seeing a number of public to privates happen that are SaaS companies that don't have their AI enablement story fully baked. And if you're a public company and you gotta report quarterly and you don't have that story nailed, you're gonna get punished. So, maybe the best path is to step out of the public markets, become private, have a value-added partner that helps you kind of navigate that AI enablement transformation.

Isn't the better answer that SaaS isn't dead, just that perhaps the multiples that SaaS has had just won't be there?

That's right. So think about what SaaS is. It was enterprise software that was a licensing revenue model. That was a long-cycle sell. It, it took a lot of work. And then private equity actually benefited from this migration to cloud and SaaS 20 years ago, where there was an arbitrage where you could basically buy one of these enterprise companies that were using licensing models, transition them to SaaS, and your multiple went from 10 times to 20 times overnight. You know, the durability of that revenue And those margins, 85% gross margins is now being challenged. You know, we're going to walk back that valuation arbitrage that happened 20 years ago and we'll see what that business model looks like. The fact that an industry could maintain itself for a couple of decades with 85% gross margins is just really astounding to me, frankly. It's amazing somebody didn't come in and either undercut or disrupt or do whatever.

So yeah, I think it'll be interesting to see how markets ultimately end up valuing SaaS businesses. And what's hard for me is trying to figure out if this is like an overreaction, if it's a repricing, if it's kind of all the capital being sucked out of the room to go fund other businesses, if it's some combination of all of them, and where things ultimately settle. In large part because I think it has real implications into the valuations of the assets that are still privately held and what will ultimately happen to them.

But, but, so I agree, and this drawdown that's recently happened really didn't discriminate. And I think as companies come back, it'll become more clear and obvious to investors, you know, what business models deserve to exist or which business models are more vulnerable. But we've seen some of these leading SaaS companies' stocks decline by as much as, you know, 30 or 40% over the last 12 months. And then, you know, maybe there was a more significant decline in the last couple of weeks, but the market's been pricing in that kind of new normal for, you know, what type of multiple should we be putting on these companies?

Yeah, I've been thinking a lot lately, is, are we moving to an environment where there's only a handful of companies? Uh, right, because I think that is kind of the bull case of backing some of these large AI players is that, you know, Anthropic might just replace, you know, 60, 70% of software. 10, 15 years down the road from now. I don't know, what do you think? Do you think that's a likely outcome, or do you think there's too many structural things and too many things that enterprises need that would keep that from occurring?

You know, I think we could continue forward in a world that's dominated by almost like an oligopolistic type of, of environment like we've been in, you know, with the Mag Seven and some of the large tech stocks. And, and maybe that becomes narrower in how it's, it's structured. And then, then I think the question is, do regulators come in and kind of put an end to, you know, this, this move towards oligopoly, right? Which, which they've done, done in the past. And I, I can also tell you as investors, you know, we, we're talking about AI in the context of venture capital, but when we look, look across our entire portfolio. There's the new company creation, which, you know, more than the majority of venture capital is investing into AI-related deals. The public to privates, which have dominated the largest deals, which are take privates of kind of mid-cap SaaS companies. Then you move into infrastructure and private credit, and I don't care what fund you meet with, they're going to talk about data centers, power, and compute and how that's kind of core to their portfolio. So AI is everywhere. And one of the conversations that we have is how do we diversify away from this concentrated risk that we have around this massive innovation cycle.

Yeah. And I think to your point, I think it's really hard to diversify away because unlike so many of the prior technological shifts, AI really does touch almost every area of our lives. And then, I mean, and if you add in robotics, I mean, it definitely does.

That's right. So, you know, I published a predictions piece probably 3 or 4 weeks ago, and one of the predictions is, well, it was an answer to a question of Scott, what keeps you up at night? And I talked about the consensus risk trap, but I didn't say what my 3 top risks were. The number 1 risk that was not published was an AI valuation reckoning, but I didn't think it was going to be it, you know, the SaaS model that was having the AI valuation reckoning. I thought it would be something more around, you know, the valuations that we were talking about earlier. And who knows, maybe AI turns on itself and we see it kind of attack itself at some point.

Yeah, the problem is, is there's just a lot of uncertainty. I think things are moving so incredibly fast that it makes it hard to know where things will ultimately end up.

Yeah. But look, on the non-AI trade, if you sat in our investment committee, you would hear us talk a lot about looking at markets like the mid-market in Europe, basic industry, where maybe AI creates more efficiency in these businesses, but their business models are not kind of in the center of the bullseye for AI. And this kind of plays into my consensus risk trap again. Like the way I define consensus risk trap is if you look at the headlines that dominated 2025, where everybody was evangelizing things and not really looking around corners. Those are the areas of the greatest risk in 2026. Nobody's really talking about, you know, basic industry mid-market buyout in, in Europe. So, um, these are, these are— I, I think this is the contrarian value play that you need to complement this high-growth innovation strategy with.

Right.

Yeah.

Well, and that's, you know, it's interesting you say that because that aligns with some of the investments we've made recently. So we've invested in some of the large AI businesses and kind of derivatives of those, but we've also invested in some healthcare services businesses that we think are fairly well insulated from AI, right? It's going to be a while before a robot is going into someone's home and taking care of them. Right? But AI can do certain things to help make those businesses more efficient and operate better and provide higher and better standards of care. So it's kind of an interesting way to diversify a little bit away from some of that risk. But it is challenging because AI really is touching so many different areas. I'm curious where Sorry, go ahead.

I was gonna come at it from the other side. Like I, I've joked with colleagues when I, when I build my, you know, private portfolio, I'm gonna do a roll-up of car washes. And the reality is those have been robot enabled for forever. Right. And yeah. So anyway, we'll see where we go from here.

Yeah, for sure. I'm curious, where do you see the opportunities in venture? That exist today? Like where, where do you think we're headed and, and where, you know, what areas get you excited?

So I think where venture has really evolved is over the last decade it's gone global and a lot of what's driven the global opportunity has been this investment thesis around business model innovation where you're taking software that's proven, that's not You know, it's not binary and you're applying it to basic industry, whether it's fintech, edtech, prop tech, go down the list. And so we've seen great companies looking backwards emerge from this thesis. You know, AI is more intellectual property. It's invention. And I think the other cycle, the other innovation cycles that we're starting to see emerge are also in that category. So I do think we're in a world where The investment opportunity begins to concentrate more around innovation hubs where invention and IP is being created. So, you know, you referenced robotics. It could be small nuclear, it could be fusion and other sources of energy. And I think we're just going to continue to see more of this deeper tech innovation cycle play out, which is a great opportunity for new company creation, right? If, I think these innovation cycles are just going to compound on top of each other.

How do you think about kind of firm size and how that's evolved? Are there opportunities there or risks? You know, sometimes I wonder, like, is the traditional venture capital fund kind of dead in that, you know, we're talking like the, yeah, call it 3 to 10 person firm does Series A deals. Usually kind of regional focus, fairly opportunistic in approach, although lately it's probably been enterprise software focused. Feels like that strategy is, is under a lot of stress right now and you kind of have to move earlier to pre-seed, seed. And, you know, like I mentioned earlier, you got to be first or you got to move upmarket because otherwise you don't have anything compelling to convince a founder to take your money versus, you know, one of those bigger players?

Yeah, I don't think it's dead. I think it deserves to exist, but part of the challenge it's having, even these large funds are investing in, they're building diversified seed portfolios, right? So they have options kind of on the table to see some of these things emerge. So, you know, when we look at a venture manager, especially if it's a new manager that we're evaluating, the first thing we focus on is the people and what is their network and what gives them the ability to access the best entrepreneurs that are out there. Doesn't necessarily have to be its fund size. It probably definitely needs to be the quality of the individual that's investing and how credible they might be in the eyes of the entrepreneur and the way they would win a deal. Frankly, if they have a fund that's $500 million or less and they don't have to put hundreds of millions of dollars into a company, you know, they could be the first check in the first round knowing that some of the larger guys are going to be there in the next round to lead a, probably a round that's marked up with a lot more capital. If you're not that profile of individual that has a great network and credibility within the entrepreneur's eyes, it is very difficult, I think, to win in the early stage.

Yeah, yeah. Well, and I think, yeah, I think there's this band of kind of Series A to Series C probably that's challenging right now to kind of carve out something that's differentiated.

We're already seeing this, and I think we're going to see more of it. Running a big fund has clear economic advantages to those that work for the fund, but it takes you away from the purity of investing in the entrepreneur and the idea. And I think increasingly you're going to see partners that probably, you know, have been very successful. They've kind of made their money and for the rest of their career, they just want to go back to traditional venture, right? And really helping to help that company go from zero to one or whatever the right definition is.

Yeah, I wonder how much founders care about having somebody that's in their corner and they have a deep relationship with them, and versus like they just want the brand name and, and the capital and move on, right? Like, is capital really commoditized, or can it, can it be differentiated? Um, and we had a conversation Yeah, actually earlier today with another investor and, you know, he was making the argument and I think he's right that at the earliest stages, capital is not commoditized and it really does make a huge difference. But then as you get bigger and more scale, you know, maybe it does become a little more commoditized.

And that's where brand frankly matters, right? But when an entrepreneur needs help, when they need somebody to help them kind of go to market, product market fit, that type of thing, you're really relying on the individual that's investing in your company and the help either that individual or their firm is, is going to be able to deliver to you. Yeah. And different entrepreneurs think different ways. Some, some entrepreneurs will say, my venture capitalists, I don't need anything from them. I'm a great entrepreneur and I just want their, their money and I want them to leave me alone. And then there's others that really want the help. Yeah.

Yeah. Are you seeing, you know, when you're, when you're talking to VCs and so forth, are you seeing, and, and, you know, especially like new funds that are popping up, is there a movement towards smaller funds largely driven by the use of AI?

Do you have a perspective on that? So I don't think anybody's thinking about smaller, like just going smaller. I think, you know, in this asset class, whether it's venture or private equity, it's always about scale and raising more capital, sometimes too much capital. But I do think AI can bring efficiencies to the equation, especially on sourcing. But it also, you know, it removes advantage. It kind of levels the playing field, right? And this is happening in lots of different ways across private markets, whether We talk about secondaries. The more frequent something trades, the more frequently it gets priced, and that brings pricing transparency to the market. Anybody who wins in private markets, whether it's venture growth or buyout, will tell you they have an information advantage. There's information asymmetry, and whether it's AI or something else that levels the playing field and removes that advantage, it becomes harder and harder to win.

Yeah.

Yeah.

Well, and I don't mean that they're raising smaller funds in terms of capital, but you know, you've talked to some firms and they're like, actually I had lunch today with a friend of mine who runs a fund, who works at a fund, and he was like, I took all the diligence materials, I dropped it into Anthropic, and he's like, honestly, it produced a better investment memo than I could have done. And it flagged more critical questions for me to ask. And, you know, he was like, I don't need an analyst to do that work for me anymore. Right. And so I'm wondering if like the end state of this is we get to a point where we have a lot of like kind of single GP funds because venture in general is kind of a, you know, we say it's a team sport and that you have partners and so forth, but each of those partners kind of acts a little bit more independently in terms of how they source and underwrite deals, sits on boards, et cetera. But I don't know if that's just an anecdotal viewpoint or if, you know, that's something that's happening at large.

I think that's definitely a direction of travel. And if I turn that back to HarborVest, We, we host this GP forum every year where we bring managing partners from all the firms we invest in to kind of talk about running a firm. And so we're a general partner in the room along with a bunch of other general partners. I had to lead a panel 3 years ago on technology and innovation and how private markets uses it. And the provocative thing I tried to throw out is what if I told you I could I could raise, start a firm that will have over a trillion dollars of AUM and I could do it with fewer than 50 people with a technology-first kind of perspective where, you know, we have over 1,000 people at HarborWest right now, right? Yeah. But that's becoming true, right? Like if you were to start from scratch today to build a venture firm or an asset management firm and you leveraged all the technology that's available, it's kind of like the Sam Altman I could build a billion-dollar company with one person using AI.

Yeah, yeah. I wonder, you know, so a lot of what we do, we teach and train students how to do venture investing, and I've thought about how maybe the pathway is not going to be so much this approach where, hey, John, I love you, dude, but When you type, we can't— it's like very loud. Oh, sorry. Sorry.

We'll edit this out.

I can't hear it at all. Okay. Well, um, just that's why I'm giving you the feedback.

Um, but I was looking for something. I've got—

I have a question after you're done with this one. Great. Um, anyways, my point is like, I wonder if the new pathway into venture capital is not going to be, oh, I'm going to go work as a, as like a junior person and hope that maybe I can cross that chasm to senior partner, or I'm going to, you know, go to business school and then get on like a, um, a partner track position. But rather, I'm just going to go raise my own fund and maybe I'll start super small, but I'll have all these tools at my disposal and, you know, I'll be able to run it as an individual and just build it. And there's no need to go join a larger platform and that maybe these larger platforms at the end of the day, I was having this conversation with one of my former students. I was like, I was like, look, like you can go to the larger platforms, but it's just a job. You're, you know, you know, you're not, you don't have that entrepreneurial side of being a venture investor, you know, where it's a small group making decisions. You're, you're more like a cog in a very, very large machine. And so I don't know, I wonder if that's kind of the path we're heading is that you'll have these single GPs and maybe the big thing will be as a founder, you want a living, breathing human that you can call at, you know, 11 at night and complain and they'll hear you and support you and, you know, be there for you. Right. And that's where the value comes from. You know, I don't know.

But also think about it this way. So when venture growth became a thing maybe 10 years ago, like, you know, Mary Meeker kind of entered the industry and she was using her investment banking fundamental underwrite pattern recognition to identify companies to invest into. I put venture investors into two different categories. There's the early-stage investor who needs to be the nonlinear futurist who can see a market before it exists and then find an amazing individual that probably shares the vision, but also has the ability to build a company that grows into that market. That's hard. That's in stage or whatever you want to call it, right? And when you move later stage, you become more of a linear investor that's more fundamental. I think that's where there's technology tools that are available to you that can do that underwrite on your, you know, for you instead of a person, right? And so I don't know, I don't, do you ever replace the ability, you know, I'll throw, I put Vinod Khosla in the futurist category, like the ability to just see the future before everybody else sees it.

Yeah. Yeah. Now it's, it's, it's a good question. And I don't know if AI maybe gets there, but it doesn't seem like it's anywhere close at the moment.

I, I think technology does break down these barriers or these, these walls that, you know, decide who or who cannot participate in, in our industry or any other industry, right? And, and that's probably a good thing because I, I think what's also interesting about the futurist characteristic that I identified, there's no profile that is just this consistent profile that that's that it's that person, right? Whether it's Vinod Khosla or Mike Moritz or pick your, you know, pick your great venture capitalist. They all have these different backgrounds, but they have the same ability to see the future and find great entrepreneurs.

Yeah.

Yeah, absolutely.

What are your thoughts on the, I feel like there's a new model like Dave McClure for 500 Startups. He's now, he's now trying to find analysts and help them start their own fund. Or Jonathan Swanson from Thumbtack, he's got PowerSet where they're giving the top founders $1 million for angel investing. Do you see that as like a, just kind of a, as a unique blurb, or is this like a new trend as you're talking, as we're seeing more and more like, you know, solo, solo funds? Where VCs are now trying to be kind of like pseudo back offices for these, these founders who might have unique access?

Yeah, I, I love that model, right? And, and we saw like Index was the first firm that I think had this give check writing power to bid level executive at XYZ technology company who's closest to that entrepreneur that's gonna go start the next company. And, and then you have this portfolio of options on the table that you need to kind of mine and,, you know, sift through to identify the great opportunity. I don't know if you guys are familiar with Antler Capital. It's very much like 500 Startups where, you know, they have a portfolio of relationships with seed funds around the world where the responsibility to raise that initial capital comes from the single GP many times who is investing at the earliest stage in their market. But then there's a complex enterprise system that kind of aggregates all of the information from these portfolios and feeds it up to the mothership where they can then mine the portfolio to make follow-on decisions. It's kind of like the Draper Global model from years ago, but I think the moat is in the architecture of how you systematically cover, you know, those 30 seed funds and the 1,000 underlying companies so that you can, you know, get signal on them when you should be following on investing. So I think there's all different types of models like that where you just want to spread your options. Your network's as good as the number of nodes at the end of your network. And then how well do you process what's growing up within, you know, those networks?

Do you think this will be a growing trend or is this just kind of like a unique model being tested?

Right now, I think it's probably unique and there's really just a handful of folks that are going to bite off the ambitious, like it is ambitious to try to go do this, right? And the execution becomes very complicated, which when I talk to these guys, I say, I want to see the proof of concept. Once you prove it to me, I believe in it and I will invest in it. But, but execution is, is critical. And, and maybe, you know, maybe technology helps to make that execution easier.

Yeah. One of the things that Peter and I do is, uh, an event called the, the Founder 100, and it was based on an event that Paul Ahlstrom did when he was at VSpring. That fund's no longer around.

Yeah.

But the concept is that founders in a specific geographic area know better or have a better idea of what the successful founders will or won't be. And so he did a, a private founder-only kind of like voting, peer-to-peer voting. And he claims that if you invested each year in the top founders that were voted by other founders in that geographic area, at least from a Utah perspective, you would have one of the top-performing funds in the world.

It totally makes sense, right? That's your signal right there. You're trying to invest in the best people at that stage. And regardless of what their business strategy is when they launch, they might have to pivot along the way. But if they're great people, you know, there's some that are more likely to have success than others, right?

Yeah. It makes me wonder if I have a better idea of the Utah market compared to Peter. 'Cause I feel like when people talk to Peter, they're incentivized to lie, or when they're talking to me, that's a very different conversation perspective.

Well, that's the other, like, you gotta see how do you find the truth, right? Like, and when I challenge, you know, truth is probably a strong word, but when we're talking about deals in our investment committee and I have a deal team that says, oh, this is the answer to this question, I'm like, okay, do you believe the answer to that question or are they just telling you what you want to hear? So sometimes depending on who you are really dictates what answer you get out of the founder.

Like you talked about. Very true. It's very true. It's hard to know, you know, if people are actually your friends or if they just, you know, like the fact that you have money to deploy.

Yeah, I think that's right.

That's right. I think the answer is 70%. At least when I left the venture world, 75% of my friends just disappeared over a 3-month period.

I, you know, I have a former colleague who's retired who was a great mentor of mine, and we were having lunch over the summer and he's like, Scott, you know, it's interesting when you retire, you see who returns your emails and who doesn't. And it's really telling. It's telling on the relationship that you thought you had with those individuals kind of when you were working, right? Like, why were they responsive to your emails?

Right. So do they actually enjoy your company or was it something else? Yeah. Oh yeah.

Interesting.

Well, as we wrap up, we, we want to run you, run a few lightning questions by you. Um, so the first one is, what's your big prediction for venture over the next 2 years? What, what do you think is going to happen?

Oh, my light went off.

Hold on.

The lightning hit. You know, so I did one of these in this room before and the same thing happened right at this type of moment. So it's kind of, it's I think somebody's listening. Don Brand. Yeah. So here I referenced a predictions piece that I published like 3 weeks ago, and one of those is I referenced the 50, 500, 5,000 club will become a thing. And what I mean by that is $50 billion, $500 billion, $5 trillion. And at the time I wrote it, The largest leveraged buyout deal that was done was EA take private at $55 billion. So it was a club of one in that category. SpaceX had not raised yet, so OpenAI had raised at $500 billion. So it was a club of one in that category. And then NVIDIA has obviously danced across the $5 trillion line. I think it'll be interesting if SpaceX can ultimately go public at a trillion or $1.5 trillion, but then transcend the $5 trillion club kind of over the course of 12 months or so. So that, that could be an interesting thing to look for. I don't know if that answers your question, but that's— I'm trying to be provocative here, and I hope that kind of ticks the box. Yeah.

So we'll have some, some very, very large companies. Yeah. I don't, I don't disagree. It's always been something that's been hard to wrap my brain around just the scale that these companies keep reaching.

Yeah, it's crazy.

It's crazy. What advice do you have for emerging managers that are out fundraising right now, knowing that this is one of the most challenging fundraising markets it feels like for venture investors, particularly those that are emerging?

Do you have advice for them? Yeah, look, there's a consolidation that's kind of happening in the venture industry right now, and there were lots of new funds that got raised during 2021. So I would just tell anybody that's setting out to raise a new fund that's in the emerging manager category, just look yourself in the mirror and ask yourself how you're built to win in a market that's really kind of tightening its belt a little bit. HarborVest, one of the cohorts or models that we really like is that individual that has DNA from an A or A+ rated firm. That firm has now become scale and they just want to go back to pure venture capital. I think those types of profiles will have very good success as emerging managers in this market. If you don't have a track record or the right kind of background to kind of make the case on why you're going to be a great venture capitalist, it's going to be really hard.

Yeah. Yeah. Maybe time to reevaluate and do something else.

And who, like your investor base can evolve over time. So your first fund might need to be friends and family who know you really, really well, and then you build a track record on their capital, and then you can ultimately kind of move into the institutional world. 'cause you'll tick the boxes that the institutional investor's looking for.

Yeah. So I've got one out of left field we didn't prep you for, but I'm curious. Let's do it.

Do you have any favorite book recommendations?

My favorite book recommendations?

Or something you've read recently? I'll give you two. So, and they're investment related. So, One is just Devil Take the Hindmost, I think is the right title for that. It's about speculative investing, and I think we can all learn from that. Book number two that I tell a lot of young people to read if they're interested in venture capital, and it was a controversial book when it was published, it's called E-Boys. It was written by Dave Byrne of Benchmark Capital. So little anecdote here. I went to Bryant University. Dave Byrne went to Bryant University. I read E-Boys literally The first 2 weeks I started at HarborVest, and the first chapter was about, you know, drinking grain punch out of garbage cans in dorm rooms. And I reached out to Dave and we had a good dialogue. This was when he was at Benchmark. Then we kind of separate, you know, we, he left Benchmark. I didn't talk to him, but now we both sit on the board at Bryant and we kind of had this reunion like 20 years later. And And what, what's interesting about that book, I think at the time the venture industry was investing in the dot-com bubble and, you know, Webvan was featured in that book. And I think today it, it's kind of become a Bible for a lot of young investors on what can happen when you're in these very speculative moments of time where there's capital intensity, but, you know, binary risk. In the technology that you're investing into. And it's been interesting for me to see how that book has evolved its profile over time. And it can be a good learning for anybody that wants to just kind of get indoctrinated into the venture capital industry.

I love it. Yeah, that's a great book.

Those are some good recommendations. I don't know if you guys know Dave. He's a great, great guy. He's just a phenomenal leader and a great role model for young kids in particular.

Yeah, I don't, but obviously know of him. I have a lot of respect for what he's done. Yeah. Well, Scott, this has been a really fun conversation. I feel like I've learned a lot, so I appreciate you joining us for the podcast and sharing kind of your insights and wealth of knowledge with us and our audience. For those in the audience, how can they, you know, find you, stay up to date with what you're working on and publishing?

So I'm not on social other than LinkedIn. I'm off every other social media. So, but you, I do publish frequently on LinkedIn and I try to be interesting without being too serious. So if you want to kind of hit my LinkedIn, you can do that. HarborVest also has a library of insights pieces. Some of them are more kind of fundamental industry related, others are meant to be more perspective-oriented. I tend to try to lean into, you know, kind of the more of the what's happening in the world and how should we interpret that as investors. So those are two ways to kind of gain access to stuff I'm doing.

Perfect. And for those in our audience, please like, subscribe, and review this podcast so that we can get it out in front of more people.

Until next time.

Thank you, guys.

Appreciate it.

Thanks. Thanks, Scott.