Today’s VC is interested in capital wars, not capital efficiency When I was trying to break into VC, I bought every book I could on private equity and corporate finance I could. I asked my bosses to put me on consulting assignments that would give me more finance experience. After all, the job was to be able to evaluate the merits of a business based on the numbers - that’s investing, right? 15 years later VC is very different. I’m a disciple of folks like Charlie Munger and @mjmauboussin - I believe that the long-term DCF is the only sustainable way to evaluate businesses over time. I think revenue multiples are BS and the company’s competitive advantage is what matters most. If you have that, then growth is just a function of how much capital you want to put to work to achieve that growth and where you see diminishing returns from burning that capital. The ultimate measure of a business boiled down to its efficiency in turning capital into long-term FCF. But today’s VC isn’t operating like that. Very little of what I see today has anything to do with numbers. At the very most, momentum driven investing is thrusting folks to point to GMV, CARR and contracted orders, without any consideration of the actual efficiency of the business. Capital efficiency doesn’t matter…it’s actually a deterrent. The categories en vogue are ones where winners are crowned by capital, not performance. This is a huge advantage to the increasingly concentrated list of funds that can play a game that far fewer funds can. In private conversations, funders will admit "We know the numbers don't work, but if we plow enough capital into and pull enough others into invest, it will become inevitable that they figure something out." VCs are making "Team Bets" (i.e. picking the winners regardless of business performance or quality) at $10b+ valuations. Its particularly advantaged to the large funds that can continue to capitalize these companies to outlast their competitors. Capital becomes the enabler of advantage in a war of attrition, so those with the biggest balance sheet (usually) wins. Fwiw, this is the approach VCs took to WeWork, Convoy, Webvan, etc. This strategy IS working right now. Will it work forever? I have no clue. But I know that this is at least part of the game on the field today and that it's a pretty distinct break away from what I've viewed as the role venture capitalist should play in the innovation ecosystem. Is there opportunity for the capital efficient plays? Depends. You need to be able to stay solvent and have backers who are patient. If you can do that, you might be in rare air. - VC with a tiny balance sheet