Hans Tungmanaging partner Remarkable capitalearlier GGV capitalthinks a lot about the current status of the venture.
Notable Capital is a venture capital firm with $4.2 billion in assets under management focused on investments in the United States, Latin America, Israel and Europe.
Tung, whose portfolio includes companies like Airbnb, StockX and Slack, recently sat down with TechCrunch Equity capital Podcast discussing valuations, why founders need to play the long game, and why some VC firms are struggling.
He also let us know why he’s still bullish on fintech and which sectors in fintech he’s particularly excited about.
We talked about that too recent changes in his own company, which emerged from 24-year-old cross-border firm GGV Capital and rebranded its U.S. and Asia operations as Notable Capital and Granite Asia, respectively. GGV’s transformation is the latest in a series of changes we’ve seen in the world of venture capital, including personnel changes at Founder’s Fund, Benchmark and Thrive Capital.
Below are excerpts from the interview, edited for clarity and brevity.
TechCrunch: Last year we talked about down rounds. At the time, you thought that wasn’t necessarily a bad thing. Do you still have the same attitude?
Hans Tung: I have been in this business for almost 20 years. We think about things in the long term. And I always know that it’s not about the serves. It’s like becoming poor [report] If you get a card or get a test result, it doesn’t matter much until you actually have an exit. The IPO is actually just a milestone, not the end game. The IPO is the beginning for public investors to get involved. So if you think longer term, what matters is not so much that the valuation goes up or down temporarily, but that there is a big result at the end.
I think that the company, the founders and the board need to focus on everything needed to scale the company, to run the company as best as possible every step of the way.
I think what founders don’t realize is that this election is not about shutting down and doing a down round, because in that situation you’re going to choose a down round every time. The challenge is that you are faced with the prospect of holding on to a valuation or causing a downturn. If you don’t do this, you risk switching off later. But I’m telling you, if you’re about to close, no one will invest in you
TC: How different is the overall investment landscape this year compared to last year?
HT: I think it’s a continuation of what we saw in the second half of 2023. Obviously, AI is an outlier. AI is currently way, way overrated. You could argue that we’re only in the first inning or the first half of the first inning for AI, so people are willing to overpay… While a lot of crazy rounds happen at the start of a boom, that’s what they’ll do if If a split occurs, there will be companies that end up doing well, and most companies may not.
On the whole, I still caution founders not to compare themselves to industries that are doing well, but rather to focus entirely on running their company.
TC: What is your investment pace compared to recent years? What impact is the downturn having on VC firms?
HT: I think we’re closer to 2022 levels. So more than 2023. But 2021 was an outlier. And it’s not good for business. And it’s not good for the ecosystem. Without naming names, you can see that companies have been influenced by what they did in 2021 and that has caused them to slow down a lot now, which is unfortunate because a lot of them are great investors, they are working in great companies and it’s a shame they can’t attend due to indigestion alone.
For example, some companies made large capital increases in 2021. And even though the company is growing its revenue by about 40-50% year-over-year and maturity-wise they can probably go public soon in the next year or so… but because of the valuation they fetched such a high value in their last round , that they are not at that valuation level in the current public market where valuation metrics have fallen quite a bit. So they have to wait. As a result, the funds that invested in them in 2021 will not be able to receive cash back because there is a lack of liquidity and the LPs don’t get any money back. So there is no return of money to the LPs who continue to invest in new funds. The whole system suffers from this.
TC: I was surprised to recently report that fintech funding had fallen to its lowest level in seven years in the first quarter of this year. What do you think about it?
HT: I think that with the high inflation that we’ve had and the definitely high interest rates that are coming down but not going fast, I think it’s harder for people to choose fintech. However, if you look at the other metrics, financial services as a category, the market capitalization of all listed companies in the banking and insurance financial services sector is over $10 trillion. And of that $10 trillion, only less than 5% goes to fintech companies. So if we all know that the best fintech companies are growing faster than financial services companies, it’s only a matter of time that low single-digit penetration and market cap will increase over time. So there will be ups and downs. As with e-commerce, there may not be too many winners in fintech, but those that can win can have a huge market.
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