The State of Venture Capital and the Significance of Down Rounds
Venture capital can be a complex and ever-changing world, but for Hans Tung, managing partner at Notable Capital, formerly known as GGV Capital, it’s all about the long game. In a recent interview on TechCrunch’s Equity podcast, Hans discussed his views on the state of venture and why he still believes down rounds can be a sensible investment strategy.
Contrary to popular belief, Hans sees an initial public offering (IPO) as just a milestone, not the ultimate goal. He explains, “An IPO is actually just a milestone, not the end game. An IPO is the beginning of public investors being along for the ride. So when you think in longer-term valuations, up or down temporarily doesn’t matter as much as generating a big outcome at the end.”
This perspective is supported by data from PitchBook, which revealed that nearly 11% of all venture capital deals in 2023 were down rounds. While some investors may view down rounds negatively, Hans believes that focusing on long-term outcomes rather than short-term fluctuations is crucial for success in the venture capital industry.
Hans has built an impressive portfolio that includes successful companies like Airbnb, StockX, and Slack. He attributes his continued belief in down rounds to his understanding of the bigger picture. By looking beyond temporary valuation changes, he aims to generate substantial returns for his investors in the long run.
During the podcast interview, Hans also expressed his bullish stance on the fintech sector. He highlighted the potential for growth and innovation in various areas within fintech and shared his excitement about specific sectors within the industry. While he did not delve into specific examples during the interview, recent studies and reports have shown significant growth in areas such as digital payments, blockchain technology, and robo-advisory services.
Notable Capital itself has recently undergone a transformation. Formerly known as GGV Capital, the firm rebranded its U.S. and Asia operations to Notable Capital and Granite Asia, respectively. This move reflects the ever-evolving nature of the venture capital landscape, where adaptation and repositioning are essential for staying relevant and competitive.
Notable Capital’s rebranding follows a series of changes in the venture capital industry. Other prominent firms, such as Founders Fund, Benchmark, and Thrive Capital, have also experienced personnel changes and shifts in their strategies. These developments highlight the dynamic nature of the industry and the need for firms to adapt to new market conditions and trends.
In conclusion, Hans Tung’s perspective on down rounds challenges the conventional wisdom surrounding this investment strategy. By focusing on long-term outcomes and looking beyond short-term fluctuations, he believes that down rounds can still be a viable option for venture capitalists. Additionally, his bullish stance on the fintech sector showcases his optimism for future growth and innovation. With Notable Capital’s recent rebranding, the firm is positioning itself to navigate the ever-changing landscape of venture capital successfully. As the industry continues to evolve, it is crucial for both investors and firms to embrace change and adapt their strategies accordingly.
If you prefer reading over listening, you can find the full interview transcript and access a comprehensive archive of podcast episodes on Simplecast.