We are still riding the conference wave! Last week, we hosted an online gathering that brought together around 200 private bankers and wealth managers from across the globe. We delved deep into the current state of private markets, including the secondary market, and zoomed in on venture studios and AI-based solutions. To make it easy for you, here are the distilled key takeaways, enjoy 👇

In 2023, investment decision quality increased dramatically

Ihar Mahaniok, the mastermind behind Geek Ventures, boasting over 12 years of experience and an impressive IRR of 64%, shared the inside scoop on the current state of the private market landscape. 

Let's break down the main points:

• In 2023, the market is leaning heavily towards investors, a shift from the founder-friendly vibe of 2021. While it's become more challenging to secure larger investments, finding excellent investment targets at the right valuation has become considerably easier. We can anticipate this trend to persist into 2024.

• There's a noticeable decrease in the number of priced rounds, and round sizes have also shrunk, including instances of downrounds. Companies that used to secure $5M now settle for $2-3M rounds.

• Valuations have taken a dip. In the early-stage venture markets, current multiples range between 10x to 20x  to annual revenues at the seed stage and 6x to 8x at series A.

• Startups are getting stuck at seed, but the good news is they're expected to return to a more standard 27% graduation rate, akin to the period before 2020.

• The "second seed" at a $15-30M valuation, a concept that did not exist before 2023, is becoming more conventional. This round follows a seed round, which is typically raised at a valuation between $10-15M.

Ihar also emphasized a significant increase in the allocated time for due diligence. In contrast to the hectic pace of 2021, top VCs now have the freedom to take a month for talks and tests without the fear of losing out on a promising project. The remarkable uptick in the quality of investment decisions in 2023 is expected to become the new norm for 2024.

Curious about the situation of VC firms? Well, feast your eyes on this picture.

Image: Ihar Mahaniok’s presentation

The AI revolution is our generation's electricity moment 

Nick Davidov (the visionary who has been investing in AI since 2015 and currently serves as the managing partner of DVC, a US-based rolling fund) promoted the idea that the AI revolution is challenging the status quo of large enterprises and rewarding fast tech startups.

By 2030, AI is projected to add a whopping $4.4T in additional value per year. And it won't be one or two corporations grabbing the pie; instead, numerous small but nearly fully autonomous enterprises will play a pivotal role.

To achieve this, companies need to kickstart their day-to-day lives by creating a digital trace for every operation or document. The key is to formalize all business processes and, ideally, create a digital twin — not just for factories but also for software providers, service agencies, and others. And workers should leverage AI as a co-pilot, skyrocketing their productivity by tens or even hundreds of percent.

In this context, the odds of automation and, therefore, success are considerably higher for small and flexible companies that digitize every step from the beginning. This contrasts larger companies with significant resources but also a significant non-digitized component.

However, the journey to fully autonomous enterprises will not be a quick one. Despite the advances in technology, we are still five "AI autonomy levels" away from achieving a state where a human can conceive a business concept, input it into a smart system for execution, and witness the generation of value. 

For a detailed breakdown of each level, see the screenshot below.

Image: Nick Davidov’s presentation

The time of opportunity for secondary markets

According to Marco Sutic, a registered representative and private equity broker at Rainmaker Securities, a top-tier firm specializing in secondary shares, the current landscape is defined by an optimal entry threshold.

2021 witnessed soaring valuations, creating a scenario where almost every share is now trading at a substantial discount (barring exceptions like SpaceX and AI companies). An illustrative example is Klarna, which is valued at $1,600 in 2021 but has a current trading price hovering around $230 per share. 

Since the next few years are anticipated to bring more stability than the tumultuous 2023, secondary investments could be more lucrative than ever.

In addition, many startups opt to stay private. The median time from founding to IPO has significantly increased, shifting from 6.5 years (considering the turn of the century) to twice as long at 12 years. This extended timeline opens up additional opportunities for private investors.

Venture builders bypass accelerators, incubators, and independent founders

Max Pog, the author of the viral Big Startup Studios Research and the driving force behind the Venture Studio family community, took the stage to delve into the builders' topic. By the way, Max is also the co-lead at the Foundation cartel — the world's first investment syndicate with an exclusive focus on investing in startup studios.

Here are the noteworthy statistics he presented:

• Studios accelerate the startups' success, achieving a 41-51% faster funding timeline and an exit speed that's 31-33% quicker.

• Studios excel in creating viable ventures, with 60% reaching Series A funding, potentially double the rate of non-studio startups.

• Studios graduates boast an impressive 53% IRR, compared to the 21% seen in regular startups.

• In terms of TVPI, studios projects shine a score of 5.8, leaving independent founders trailing at 1.57.

The success of venture studios is attributed to the wealth of experience gained from serial entrepreneurship: the efficiency of factories surpasses manual labor. The numbers presented in the screenshot speak volumes for themselves.

Image: Max Pog’s presentation

If you're interested in delving deeper into other intriguing insights, such as the forecast for late markets in 2024-2025 (now it's a significant drop from 129 mega-rounds of $100M+ in Q1 2023 to 13 in Q3 2023), be sure to check out the summit recording!

Cover image: Unsplash