6 years ago I wrote a post titled Fear of a VC Monoculture.
In those innocent years, there was the seed of a trend beginning to brew; namely, that LPs were choosing to back fewer and fewer funds thus consolidating their dollars into a handful of proven VC managers. In turn, those managers were consolidating their dollars into fewer, surer, bets as they hunted for the next Uber or Facebook.
In Q3 of this year, a single fund made up over 20% of invested capital into US based startups (WSJ). That number alone is staggering. But, even more staggering is that the number represents investments into only 2 companies.
The fund? Softbank’s $100 billion Vision Fund.
A quick look at their website reveals little detail of their scope or ambition, but it appears may still in their opening act. As Recode wrote last night, there are already discussions underway for a second, even larger Vision Fund.
The “vision” in this case is that of one man- Softbank’s Chairman and CEO, Masayoshi Son.
Masa’s vision of the future involves a deeply networked, automated, autonomous, artificially intelligent world. One where lines between the virtual and the real are nearly imperceptible. Where robots move seamlessly between our needs at home and the office. And he’s arming himself with the team and resources to make that vision a reality.
As eye popping as their nine and ten figure investment checks may be, their strategy appears to be more of the same.
Even more money into the same companies that Silicon Valley has always funded.
One look at their investments and we can see this sameness already playing out- to date, they have only backed companies led by guys.
One look at their team, and we can see that sameness playing out another way- the team is all men. Mostly bankers.
95% of current VC dollars go to guys just like them, so it is no surprise that they’re doing more of the same.
Same types of founders. Chasing the same types of Unicorns.
More of the same on an unprecedented scale.
And therein lies the blind spot. As I wrote in my prior post:
If you’re an early stage investor whose companies rely heavily on upstream capital, you’ll be less willing to take risk on ideas and entrepreneurs who don’t fit the classic Sand Hill Road mold. Say you’re not a techno Wunderkind, proven executive or repeat entrepreneur. Or, you ARE one of the above, but you happen to be working in an area of technology that isn’t in vogue just yet. The less diversity in upstream capital, the less diversity in the people and ideas that receive funding there will be. And the less risky, too early, too small a market, too crazy to work ideas that get funded the worse off we’ll all be.
The Vision Fund represents one man’s vision for the future informed by investment models and founder archetypes of the past. As cash continues to consolidate to him, and others who share that vision, the risk of a tech and VC monoculture becomes even more acute.
If you’re a founder whose vision may differ from Masa’s, you’d be well served to recognize the winds shifting in the funding environments and forge your own independent path.
Removing a reliance on the movable milestones of fewer and fewer funders will ensure more diverse visions for the future will unfold.
And that’s a future we’ll all be better served by.