2024 VC Vintage: A Potential GOAT

2024 may be one of the best VC vintages ever, of this decade & the next.

When we look at successful vintages, there are 2 patterns:

1) they were raised around a bear market, and

2) they were raised 4-5 years before a bull market peak.

Let's dive into the reasons.

Bear market vintages, especially early-stage, investing in pre-seed/seed, can access 1) cheaper deals & 2) better founders.

What we call "tourist founders" exit from the arena of entrepreneurship, and founders that are left to play are inherently more resilient & persistent.

At the same time, it's much harder to raise a VC fund during bear markets when a lot of GPs are left naked as the tide recedes. And LPs are much less risk-tolerant.

This decreases startup valuations & the competition to get into deals that were considered "too hot to touch".

Examples include the vintages of 2007 (Twilio, Heroku, AirBnB, etc.) & 2010 (Uber, Stripe, Coinbase, etc.), riding the 1) Social & Mobile and 2) Cloud & Big Data tech waves.

On the other hand, vntages raised 4-5 years away from a bull market peak have the advantage of being in the Goldilocks zone for an intensifying IPO & M&A market.

Growth- and late-stage funds benefit enormously from this optimal timing and raise larger funds due to greater optimism among LPs.

Examples include the vintages of 1996 (Google, Amazon, PayPal, etc.) & 2017 (Anduril, Scale AI, Cameo, etc.), defining the 1) Dot-com Era, 2) Cloud & Big Data, and 3) AI & Automation tech waves.

I'm a big believer that timing in VC trumps all. If GPs can't get the timing of their fund right, you end up with meagre or negative returns, as the '20 & '21 vintages will likely be.

With timing as a tailwind, whatever the tech wave/hype is, great GPs will return great DPIs.