“Venture Scale”

“It’s not venture scale”.

“It can’t get to venture scale”.

“It will never be venture scale”.

In my experience as an investor over the last 15yrs, this is far and away the most used reason for investors to pass on making an investment. The idea, the product, the market, the team is simply not “venture scale”.

Historically, “venture scale” has been used to mean companies who can scale quickly, in size and valuation, to capture opportunities with billions (trillions?) of TAM. More often than not they’re evaluated on depth of their differentiated technology, defensiveness of their network effects and scope of their vision.

But then, in the last 12 months…

A protein bar maker sells for $600M.

An artisanal coffee shop sells for $700M.

A streetwear brand is valued at $1B.

An app with a talking cartoon cat sells for $1B.

A coworking space is valued at $20B.

The definition for “venture scale” may have been clear in the past, but it is much more murky today.

Not only are the opportunity sets changing, but the reality of venture dollars are not playing out as the definition implies.

On the surface “venture scale” would suggest that companies who raise venture capital have a much likelier chance of achieving outsized scale, valuations and returns. But the numbers simply don’t bare this out.

Of the roughly 60,000 venture backed software/internet related startups funded in the past decade, only .14% have achieved this elusive “venture scale”. An impressive achievement, no doubt. But, suggesting that something is “venture scale” when 99.86% fail to achieve it is a bit misleading.

Turns out “venture scale” is the financial equivalent of “almond milk”- nearly non-existent in the product it describes.

The playbooks and opportunity sets to achieve massive scale and impact are changing so quickly that those writing the checks are slow to see it. Boxing yourself into their outdated definition of success won’t get you any closer to your end goal. In fact, it may make your odds worse.

Nowadays not being “venture scale” may be the best thing you could possibly be.