Tag: startups

I read Rob Go’s thread and follow-up post about seed investing facing an existential crisis and wanted to share an alternative point of view.

It is the best time to be a seed investor.

It will never be worse to be a seed investor than it is today.

Looking Back: The Early Days

When True Ventures started in 2005, the consensus was that the internet was dead. Seed investing as we know it didn’t exist; institutional investors didn’t believe in it as a valuable asset class. The prevailing market belief was, “you don’t get paid for taking seed stage risk.”

True Ventures Fund I’s return model assumed there would be a handful of companies started on the internet each year worth $500 million – and that True Ventures would invest in two of those companies per fund.

While my partners who started True were not the only investors with this insight (First Round Capital, USV, Floodgate, and Y Combinator all started around the same time) – the market was tiny and mostly filled with individual angel investors and small funds.

According to Crunchbase, the entire seed stage venture capital market was only ~$500 million in 2007.

So while the total supply of venture capital dollars was small, the opportunity set for seed stage investments was similarly small. 

The next set of foundational horizontal platforms were just emerging—AWS launched in 2006 and the iPhone launched in 2007– but it took time for them to mature and for founders to learn how to build on them efficiently. Open-source technologies and social distribution channels would similarly lower the cost to experiment with new product ideas.

By the time I joined True in 2010, it felt like the seed stage venture capital market was hitting its stride. 

Mobile, cloud, and social were creating an explosion of new opportunities for founders to build products that were never before possible. These products, built on existing infrastructure, addressed much larger markets than expected, with revenue growing faster than expected.

True Ventures’ Funds II, III, and IV experienced large successful outcomes, including companies in consumer media (Goodreads, WordPress), enterprise software (Connectifier, Cetas, Assistly), infrastructure software (Duo Security, HashiCorp), and consumer hardware (Fitbit, Ring, Peloton), just to name a few.

My Framework for Thinking About This Business

With that context, my framework is simple. Our primary input is new investable opportunities, which are a function of a founding team and a new idea. I believe each new idea combines two existing ideas in novel ways.

A major driver of this is new horizontal technology platforms, but all ideas are valuable in that they grow the supply of other new ideas in a combinatorial way. This means the supply of potential ideas is infinite and constantly growing, as are the potential businesses that combine existing concepts to solve new problems for customers.

Therefore, the scarcest resource isn’t ideas—it’s creative, high-quality founding teams that can execute. 

Compared to 2006, the barriers to starting a company have fallen dramatically:

• Social Acceptance: Founding a company is now a respected career path.
• Deeper Talent Pool: The number of experienced, repeat founders is larger than ever.
• Accessible Knowledge: An incredible wealth of best practices information is available online and through programs to help founders get started.

This increases the total number of high-quality founders starting companies each year.

Why Now Is Different

While there’s way more supply of seed capital, the quantity of quality investable opportunities is also way higher.

Additionally, potential terminal value of companies we’re investing in today is way larger – definitely larger than the expected valuations of the social + cloud + mobile era (which investors assumed would be $500 million), but I’d argue will end up being larger than the valuations we actually saw in that era ($5 billion to $50 billion).

This is true for a simple reason: innovation compounds.

Just as the last wave of innovation built on infrastructure from prior waves, this next wave will build on top of all the existing infrastructure built over the past 50 years.

Right now, we’re seeing incredible horizontal technologies mature:

– Deep Learning
– Biotech
– Blockchain infrastructure

Each of these alone will support massive new companies. There are opportunities to build large companies using combinations of these technologies.

I’ve never been more excited about the quality and quantity of opportunities we’re seeing. We invest in companies when they may seem uninteresting (that is the magic of our business model) but when they start to mature, it becomes clear why they’re exciting: 

Enveda

Enveda highlights this trend perfectly by combining one of humanity’s oldest technologies (natural medicine) and one of its newest (AI) to create a completely new path for drug discovery for challenging diseases. The platform harnesses nature’s complexity with cutting-edge advancements in knowledge graphs, machine learning, and metabolomics.

What makes Enveda particularly compelling is how it combines AI with one of humanity’s oldest sources of medicine – plants. For thousands of years, traditional medicine has used natural compounds to treat disease, but the pharmaceutical industry has largely moved away from nature-derived drugs due to the complexity of identifying and developing these molecules at scale.

Enveda’s AI platform can analyze the chemical fingerprints of medicinal plants, predict which molecules might be therapeutically active, and understand how they work in the human body – all before expensive lab work begins. This represents a fundamentally new approach to drug discovery that leverages both the wisdom embedded in traditional medicine and the power of modern AI to identify promising compounds that would have been impossible to discover through conventional screening methods.

The Nuclear Company

The Nuclear Company is tackling a massive infrastructure challenge by combining proven physics with modern, scalable construction techniques. The company is focused on the construction of fleet-scale nuclear reactors to help meet global energy demands.

The energy landscape in the United States is facing a critical inflection point. Data centers powering AI workloads are projected to consume between 7% and 12% of total U.S. electricity by 2028, up from 4% in 2023. Meanwhile, the push toward electrification of transportation, heating, and industrial processes is driving electricity demand growth at rates we haven’t seen in decades.

Renewable sources like solar are critical but intermittent – and the scale of additional baseload power needed is staggering. The U.S. electricity market represents roughly $400 billion in annual revenue and meeting projected demand growth will require trillions of dollars in new infrastructure investment over the next two decades.

Nuclear power is the only proven technology that can deliver carbon-free baseload electricity at the scale required. Yet the traditional nuclear industry has been plagued by decades-long construction timelines and massive cost overruns. The Nuclear Company is attacking this problem with a fundamentally different approach – focused on larger projects, best practices in construction, and replication

This represents exactly the type of massive infrastructure opportunity where the combination of proven physics, new manufacturing approaches, and urgent market need creates the potential for generational companies.

Moderne

Moderne demonstrates how new platforms create entirely new capabilities, in this case by leveraging AI to solve the compounding problem of code complexity at enterprise scale. The company accelerates software development through organization-wide code search and transformation. The company enables engineering teams to understand, refactor, and maintain massive codebases at scale – turning what used to be months-long migration projects into automated transformations that happen in days.

Think about the challenges every large engineering organization faces: legacy code that needs to be updated, security vulnerabilities that need to be patched across hundreds of repositories, and framework migrations that require touching thousands of files. Moderne’s platform can automatically discover, analyze, and transform code across an entire organization’s codebase, regardless of programming language or repository structure.

What makes this particularly exciting is the timing – as AI development accelerates, the ability to programmatically understand and modify code becomes a competitive advantage. Organizations that can evolve their software infrastructure faster will be better positioned to adopt new technologies and respond to market changes.

Final Thoughts

Rather than view the current moment through a lens of scarcity, my lived experience of the past 15 years points to an incredible moment of abundance in company creation.

In fact, I’d even go a step further and argue that very early stage company creation remains underfunded.

I’d love more programs like Y Combinator, a16z Speedrun, South Park Commons, and Betaworks to exist. I’d love more seed managers to be in business – more capital will fund more opportunities and more experiments will lead to more new ideas and more experienced founders.

However, an abundance of opportunity doesn’t guarantee success for everyone. Every venture capital business is different – and to be successful, each needs its only specific business model and edge. In this environment, managers who lack a clear viewpoint on portfolio construction and a unique differentiation will likely struggle. The explosion of enterprise value over the next 30 years will not lift all boats equally.

Finally, while this post focuses on the opportunity set with new horizontal technologies today (where I think we have 10+ years to invest in applications built on top of these maturing technologies), I continue to bet on continued human ingenuity. I believe we will continue to develop new horizontal technologies and to see ambitious founders combining those technologies in new ways to go after increasingly larger market opportunities.