Hans Tunga managing partner in notable capitalin the past GGV CapitalThere are a lot of views on the state of enterprise today.
Notable Capital is a venture firm with $4.2 billion of assets under management, focusing on investments in the US, Latin America, Israel and Europe.
Tung, whose portfolio includes Airbnb, StockX, and Slack, recently sat down with TechCrunch equity Podcast to discuss valuation, why founders need to play the long game and why some VC firms are struggling.
He also told us why he is still excited about fintech and which areas of the fintech sector particularly excite him.
we also discussed Recent changes in his own firm, which evolved from 24-year-old cross-border firm GGV Capital and rebranded its US and Asia operations to Notable Capital and Granite Asia, respectively. GGV’s change is the latest in a series of changes we’ve seen in the world of venture capital, including personnel changes. founding 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 they weren’t necessarily a bad thing. Do you still have the same mentality?
Hans Tung: I have been in this business for almost 20 years. The way we look at things is long term. And I’ve always known that markup doesn’t matter. it’s like being poor [report] Getting the card, or test exam scores, doesn’t really matter until you have a chance to actually go out. The IPO is really just a milestone, not the end game. IPO is the beginning of the journey for public investors. So if you think about the long term, valuations being up or down temporarily may not matter as much as producing a big result in the end.
I think whatever it takes to grow the business, the company and the founders and the board need to be focused on managing the business in the best way possible every step of the way.
I think the founders don’t realize that the choice is not between closing and doing a down round, because in that case, you would choose the down round every time. The challenge comes when you are faced with the possibility of maintaining valuations or raising a downside round. If you don’t do this, you risk being laid off later. But I will tell you that if you are close to closing, no one will invest in you
TC: Overall, with respect to the investment scenario, how different has it been so far this year compared to last year?
ht: I think this is a continuation of what we saw in the second half of 2023. Obviously, AI is an outlier. AI is of immense importance at this time. 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 pay more… You see a lot of crazy rounds happening at the beginning of a bullish trend, but that’s There will be divestments, and there will be companies that ultimately perform well, and the majority of companies that may not.
For the most part, I still caution founders not to compare themselves to sectors that are performing well, but to focus solely on managing their business.
TC: How is the pace of your investments compared to recent years? How have VC firms been affected by the recession?
ht: I think we are at 2022 levels. So even more than 2023. But 2021 was an outlier. And this is not good for business. And this is not good for the ecosystem. Without naming names, you can see that companies are being affected by what they were doing in 2021 and that has slowed them down a lot now, which is unfortunate, because many of them are great investors, they are in great companies, And it’s so bad that they can’t participate simply because of indigestion.
For example, some companies raised a big round in 2021. And even though the business is growing revenues by about 40% to 50% year over year and from a maturity point of view they could probably do an IPO next year or soon after…but because the valuations they got in their last round were so low More funds have been raised that they are not at that valuation level in the current public market, where multiples have compressed significantly. So they will have to wait. And as a result, funds investing in them may not get cash in 2021 Back, because there is liquidity crunch and LPs can’t even get the money back. So we don’t have recycling of money going back to LPs who continue to invest in new funds. The entire system has to suffer the consequences of this.
TC: I was surprised to report recently that funding into the fintech sector fell to its lowest level in seven years in the first quarter of this year. What do you think about that?
ht: I think for fintech, given the high inflation environment that we have, and certainly the high interest rates that are coming down, but not coming down quickly – for people to make decisions about fintech It is difficult. But if you look at the other set of metrics, financial services as a category, the market cap of all public companies in the banking insurance financial services sector is over $10 trillion. And of that $10 trillion, only less than 5% is in fintech companies. And so if we all know that the best fintech companies are growing faster than financial services companies, it is only a matter of time that they will see low single digit penetration and market cap growth over time. Therefore there will be ups and downs. Like ecommerce, there may not be too many winners in fintech, but those that do win may have a huge market.
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