PodcastsLiquidityE7: Sequoia & Union Square Returns, the Post-AI Labor Market, and the Return of SF?

E7: Sequoia & Union Square Returns, the Post-AI Labor Market, and the Return of SF?
LiquidityFri Mar 01 2024
Sequoia & Union Square VC Returns and Industry Trends:
- UTemco revealed that Union Square Ventures achieved an impressive 9.14x cash-on-cash return across 9 funds, with standout investments like Twitter contributing to this success.
- Guy highlighted the historical growth of the global VC market from $30 billion to $300-$400 billion over three decades, noting returns ranging between 1.8x and 3.2x but emphasized significant variances between top and bottom quartile performers.
- Jason explained the concept of the J curve in VC returns, stressing the importance of assessing fund performance over years due to different vintage stages.
- LPs' considerations for GPs' exit strategies and decision-making consistency were discussed.
Startup Employment Market Trends and AI Impact:
- In January 2024, layoffs exceeded quits for the first time since February 2023, signaling unease among startup employees about job security.
- Jason highlighted Silicon Valley's shift towards automation and offshoring rather than immediate AI replacement of roles, focusing on efficiency gains through automation.
- Eric raised concerns about potential long-term threats from AI replacing human labor while emphasizing that current risks primarily stem from offshoring positions.
Impacts of Technology Advancements on Labor Markets:
- Concerns were raised regarding how AI advancements may lead to job displacement, prompting discussions about potential shifts in labor demand as technology becomes more efficient.
- The conversation explored induced demand creating new career paths despite technological advancements potentially reducing traditional job opportunities.
Miami vs San Francisco Tech Ecosystems Shift:
- Eric shared his temporary move to Miami due to family reasons and curiosity about emerging tech communities led by figures like Keith Rabois.
- A comparison was made between the network effects of established tech hubs like San Francisco against emerging locations like Miami, highlighting how robust networks can outweigh governance issues or location incentives.
San Francisco's Tech Landscape Evolution:
- San Francisco is seeing a transformation in its tech landscape with a notable increase in political engagement among entrepreneurs, showcasing a heightened awareness of local political issues.
- Entrepreneurs are actively involving themselves in local politics, indicating a shift towards greater political consciousness within the tech community.
- The region's growth potential is compared to other areas like Austin, Miami, New York, and LA, which are projected to grow at a faster rate due to space limitations and high living costs.
- Despite being home to major tech giants like Apple, Google, and Facebook, San Francisco is viewed as nearing capacity with limited room for further expansion.
Unique Traits of US-Based Venture Capital:
- American venture capital ecosystems offer distinct advantages driven by robust university-industry relationships that facilitate technology transfer seamlessly.
- The US government has historically funded ventures independently from military interests, leading to significant technological advancements throughout history.
- A key distinguishing feature of the US ecosystem is its culture that encourages risk-taking behavior even in cases of failure, setting it apart from approaches to entrepreneurship seen elsewhere.
Importance of Capital Allocation for Defense Companies:
- Capital allocators play a crucial role in supporting defense companies and emerging technologies such as space exploration through high-risk investments.
- Encouraging founders despite potential failures significantly contributes to fostering innovation and progress in defense-related industries within the American context.
Innovative Startups Making Strides:
- Jam aims to simplify communication between non-engineers and engineers similar to Figma's impact on design collaboration. It targets rapid bug resolution post-detection.
- Antares focuses on developing micro nuclear reactors catering to entities like the Department of Defense seeking resilient power sources lasting years without refueling requirements.
- Perplexity offers a conversational search engine challenging Google's dominance with less biased information retrieval capabilities.