A cohort of high-valuation SaaS companies is now stuck, not growing fast enough for an IPO with a frozen M&A market. This "SaaS Apocalypse" traps billions in paper gains that can't be returned to investors, stalling the entire venture ecosystem.
To find startups at great prices, VCs look for "undiscovered gems" in two categories: high-potential first-time founders lacking a track record, or proven founders who are temporarily "damaged" reputationally, creating a brief window to invest at a discount.
Startups building on proprietary AI platforms like Anthropic or OpenAI face significant risk. The platform can analyze token usage, identify successful applications, and then launch a competing, integrated feature, as Anthropic did to its partner Cursor with Claude Code.
Instead of relying on expensive cloud models, startups will increasingly use powerful local workstations to run open-source models. This provides data privacy, eliminates token costs, and avoids platform competition, signaling a renaissance for powerful desktop computers in the developer community.
For most startups, training a custom foundation model is a waste of capital. The winning strategy is to focus on workflow and proprietary data, building a "headless" product that uses a model router to switch between the cheapest, most effective LLMs for any given task.
SpaceX bought developer IDE company Cursor not just for its tech, but to create a captive audience for its massive compute resources (Colossus). This vertical integration provides Cursor with unlimited compute and SpaceX with a guaranteed customer, solving critical problems for both companies.
True founder support isn't about constant agreement; it's about providing candid, difficult feedback. The best VCs frame a disagreement by outlining options, stating their view, and then fully committing to supporting the founder's final decision, building long-term trust and respect.
Unlike other platforms, Apple often purposely "ankles" its own products—making them intentionally basic. This strategy avoids alienating its developer community, which is crucial for the health of the App Store and ensures Apple's continued 30% revenue share isn't threatened by developer revolts.
Success in venture capital requires mastery of four distinct skills: securing quality Deal Flow, making sound investment Decisions, correctly Doubling Down on emerging winners, and engineering successful Distributions (exits). The last two are the most difficult and separate elite from average VCs.
Regulatory crackdowns on M&A have a chilling effect far beyond the companies involved. When successful startups can't exit via acquisition, capital gets trapped. This prevents VCs from returning money to LPs, who in turn can't fund the next generation of founders, grinding the innovation engine to a halt.
Frontier AI labs are knowingly losing vast sums on token-based services, a classic "J Curve" strategy to achieve mass adoption first and profit later, mirroring Uber's early ride subsidies. However, tokens may ultimately become a commodity like bandwidth, making this a risky long-term bet.