btov just turned 20. What will the world look like when we turn 40?
A not-to-be-taken-entirely-seriously preview.
Welcome to 2040. There are no more smartphones, air tires, or fireworks. No more online forms, call centers, and passwords to remember. There are almost no more traffic fatalities, organ donations, or people in wheelchairs. There are no more notaries, bookkeepers, and translators. No more pilots, truck drivers, and seamen. No more market research analysts, economists, and journalists.
There is now a cure for most cancers, online voting, smart glasses with AR, remote education with VR, the first semi-algo governed nation (Estonia), 3D-printed social housing, OlympiaX for “enhanced” humans, on-demand air mobility (we love you, Volocopter!), 8G, dry-aged cultured meat, and vertically-farmed ox heart tomatoes, the first domed city (in the Middle East), clean rivers and oceans, environmentally friendly ammunition and anti-matter weapons. The first fully autonomous companies have just been granted business permits.
Some technologies were introduced earlier but prohibited again due to severe incidences that ignored tail risks: GMO, AI-brain-implants for teenagers, the reintroduction of extinct species, incubator-only babies, and autonomous drug development. Most nations in the world made the precautionary principle part of its constitution.
What is there still? Hotels, churches, insurance. Traditional restaurants (though way more expensive than robotic kitchens), printed books, and kindergartens. Mining, forging companies, and foundries. Real teachers, judges and lawyers, writers, magicians, singers, philosophers, and bartenders. Climate change. Jewelry, diapers, vinyl, computer viruses, and — no worries — also social events¹ providing wine and beer.
Most companies that existed in 2020 have disappeared, but many of the former tech giants are still around. Amazon now accounts for 12% of the world’s GDP with less than 2,000,000 employees². In order to counter vanishing revenue from income tax (corporate tax never really worked on multinational corporations), some countries introduced a reverse productivity tax: The more revenue per capita, the more taxes you pay. Most countries though have switched to an efficient automated payment transaction tax after they introduced national digital currencies.
10 years ago, a nano-hardware virus shut down a great part of AWS’s data centers in an unprecedented attack. While the virus was spreading, Jeff Bezos, still CEO at the age of 76, made the choice of protecting Amazon’s own servers at the expense of the data center clients’ infrastructure that all became destroyed and caused half of the entire connected world to be offline for three weeks. What followed besides damage claims were public demands to nationalize AWS in almost every country, which Amazon managed to settle partially by paying off 10% of each country’s debts³.
It has since increased its spending on AI tenfold and worked relentlessly⁴ to create a ZU (zero uncertainty) environment to never again experience any form of business disruption. This year, Amazon announced its AI to be capable of predicting third-order effects with near certainty and doing this continuously in real-time and in all areas. In order to do this, every little process along the value chain is fully integrated and controlled in a tight closed-circular manner, from the raw materials to the end customer and back, requiring no input from and reliance on third parties. Amazon is 98% self-sufficient.
While Amazon has led the way, some other big tech companies have grown enormously too. Google has organized 85% of the world’s information and made it universally accessible and useful⁵. Stephen Wolfram became Google’s CEO at the age of 75 after a treatment by Calico reversed his age by about 20 years, making him in his own words “the best computational machine in the universe”. His algorithms paved the way to killing the observer effect, allowing Google to re-organize knowledge bottom-up based entirely on physics in what has become known as their “particle-to-scale ontology”.
Apple was bought by Xiaomi, but the deal was blocked by US Congress until Xiaomi agreed to open quantum encryption for the FBI, which Apple had always refused (there is rumor the other reason was that Amazon was allowed to buy Alibaba in exchange). Microsoft suffered severe losses in market share due to Chinese and Indian competition. Facebook’s products all die a slow death, but it always manages to buy the newest upcoming platforms a few years before they become popular and remain ahead of the game as an entertainment company. In Europe, despite some very notable IPOs, the largest software company is still SAP⁶.
And VC? Ever since tokenization became ubiquitous, VC is now clearly split into traditional VC (doing mainly primary investments) and traders in the VC space (often called secondary VCs). For the VCs, just like today, it’s all about getting into a deal, but thanks to tokenization, VCs can focus on exactly the company stage where they can add most value and often liquidate their holding afterwards. Very few VCs hold stakes for anything longer than 3 years, and LPs have embraced this development with allocations of up to 50% into the VC asset class since their LP stake has become tradeable too. While lock-up and sales restrictions exist, flipping is widely accepted and encouraged, and some VCs and LPs even sell their stake only hours after an investment.
The same applies to founders. Most investment terms don’t include a vesting period and sales restrictions anymore, but simply some rules of procedure. The basic principle is: It is ok for anyone to exit at any time. Some founders have made themselves a name by selling right after their first big customers. On average though, a founder exits after 6 years. The main lever on the company valuation, besides performance of course, is therefore transparency and communication. So good IR is now considered a key position from very early on⁷.
Needless to say, the secondary market has boomed and created many new, powerful global players. All secondary VCs are heavy users of AI-supported trading platforms. Buyers and sellers rely on software calculating the discounted future value of the equity stake, and in many cases, the trade is done fully automatically via robo-negotiators.
The VC tech champions league, though, is sourcing. VCs still sell themselves with their past investments, their brand name, their network, and through the personal relationship they are building with the founders. But some players leverage their edge in AI and with a different approach. Since every person on the planet is a potential founder under the right circumstances, all available information on talent is constantly analysed and monitored. Once a certain score threshold has been reached, a person is given an automated offer for a stake in the future equity, often right before the person thinks of starting a company.
Automated predictive sourcing (APS) has discovered many founders of all genders and backgrounds that would have never even come close to meeting a VC. It is also noteworthy that APS does not focus on tech deals alone. While tech-founders have greater outlier potential, APS has branched away from typical VC spaces, identifying gifted carpenters, plumbers and electricians, and supplying those to the industry.
VC as a whole has become more fast-paced, tradeable and transparent, and as a result, average yields have dropped. While anything above 3x was still considered good 10 years ago, no one compares multiples anymore due to very different fund terms on the market. In fact, typical fund structures are not used that often anymore. It is more common now for a VC to fundraise on the spot with some indiscriminate auto-commitments by long-term LPs. An average VC will now do about 10% IRR p.a. albeit with a much lower risk profile than before.
More VCs are on the market, but the power law is still the same, so outstanding performance is thus rarer than ever. Three things are necessary:
- A risk-embracing VC that dares to invest in relatively “unpredictable” teams and spaces
- Founders and teams who are deeply purpose-driven
- Both team and VC need to decline all offers along the way to cash out and must play the long game
Not many of the VCs that were around in 2020 have resisted the temptation of shortening their investment horizons. In addition, the most difficult challenge has been to attract and keep talent. As a gifted investment manager in VC, you can now flip your entire portfolio in three years, then retire and travel to the moon with your friends. There is an incredible number of successful single GP VCs who enjoy the nomadic lifestyle.
In 2040, btov just celebrated its 40th anniversary. Much has changed, and btov, like many others, also uses automation tools and employs a dedicated secondary trading team. Against the general industry trend though, btov’s investment performance has become even better over the years.
While this, like the entire article, is of course pure speculation, we strongly believe that investment in people and relationships are the one thing that will always matter. Trust cannot be built overnight, and values need time and the overcoming of crises to show their credibility. btov is an equitable partnership, where we intend to literally hand over equity from one generation of partners to the next. With relationships and with companies, some investments will be fruitful, while others won’t. But we believe that if you truly care about people, the universe will find a way to thank you, whatever technology might bring.
[1] On that note: Our 40th anniversary portfolio day will take place on Thursday, 6th September 2040, please save-the-date. (I have three young children; I need to plan ahead a bit.)
[2] That will be the case if Amazon keeps growing at 25% p.a. on average, and the world’s GDP at 3%. And Amazon would have to increase productivity by 20% p.a. At current productivity levels, it would otherwise have over 91m employees. (After all, we have all seen those business plans with constant, never ending growth, haven’t we?)
[3] With >12 trillion cash on hand (having grown 30% p.a.), you can pay off a lot of debt.
[4] Remember that Jeff Bezos thought of naming Amazon “relentless.com” initially, and this URL still leads to amazon.com today.
[5] See Google’s mission statement: https://about.google/. I remember reading somewhere (can someone help me verify this?) that when Google was started in 1998, they estimated it would take them about 200 years to complete their mission. Depending on how you define “all the world’s information” I would argue it’s safe to assume this process to follow a power law, so all the “easily organizable” information should already be accessible by 2040.
[6] A personal note: I don’t mean this is in a negative way. The fact that large US companies are built and destroyed at a much faster rate is usually seen as a weakness of the European economy. Europe is home to many old, mid-sized family-owned businesses though that have learned to adapt and be flexible in order to survive long-term. Subjectively, I have always considered SAP to have retained some of this spirit, despite its size.
[7] Due to abuse, the authorities now supervise startups and their communication. Made a tech break-through? File your ad-hoc on the SEC blockchain.
