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Zachary White discusses how a tighter capital environment is impacting VC
Key Takeaways
- When capital is easily accessible, capital raising becomes much easier and much quicker, and so far more companies are spun up, with a greater volume of innovative ideas.
- The present period, in contrast, can be characterized by very high-quality innovation - because funds are more cautious - rather than a high volume innovation environment.
- During these periods of greater adversity, only founders who are dedicated and persistent in pursuing their ideas stand out. These special founders are more likely to succeed and create impactful companies.
Transcript
My name is Zachary White. I run a fund called Exits Capital. Exits Capital is a seed-focused venture capital fund, $20 million, and we help companies with their distribution.
When capital is abundant, you kind of tend to get people that I sort of deem like tourists, people who are sort of in it. They are more for the status, more for the prestige of being an entrepreneur or a founder. And because money is easy to get, these companies are easy to spin up and build and, in some instances, make successful. In the market over the last 2 to 3 years, everything was quite quick. You know, you had to sign term sheets in under a week and do all of your diligence and a series of days to be able to participate in the best kinds of deals. I think you get a higher volume of innovation in times where capital is abundant because people can just try whatever idea they have, and if it works, it works. And if it doesn't, it doesn't. Nobody's really too stressed about it. But I think in these kinds of periods, you really get like the depth of innovation where, you know, people are only really putting money behind the companies that are really working and allowing them to go super deep in whatever the process is that they're sort of going after.
Right now, we're in a period of, like, instead of like volumetric innovation, we're just in a period of like very high-quality innovation because everyone's a little bit more cautious and, you know, taking their time with things a bit more. I feel like you're actually able to dive in and understand these companies in a lot more granular type of where the direct impact is. Things have slowed down, and the bar has probably been raised as to what a good company is versus what it might have been a year or two years ago.
These crucible moments where things are quite a lot harder, and you're facing headwinds. The only people that really want to be building in those types of environments are people who are extremely dedicated to the idea at hand. You know, a lot of people will just either give up or let their company fail, etc. But the people who keep pushing forward and keep making it through these moments, I think, are the special founders.
And if you look at cycles past, you know, right after 2008, we got an influx of amazing companies, Uber, Airbnb, you know, the first sort of generation of companies that were app based. And I think that you know, right now, you're starting to see artificial intelligence and that sort of ecosystem coming to the forefront of the economy. And I think that, you know, whenever there's these massive moments in time, there's just an incredible amount of opportunity to capture.
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