Most folks in venture think the primary trends that drive innovation are technological and adoption matters, and they often publish theses around ideas that are ready to be huge. USV is thesis driven, and they invest (in version 3 of their thesis) in brands that make networks/marketplaces in health, learning/information, and finance. They used to just do networks.
There is an important theme people ignore, and I think it drives the long waves and short waves more than you guess.
Energy prices. The anchor LPs in the top large funds and in many of the mid-grade funds are sovereigns, along with pensions and endowments.
Endowments don’t really matter. The biggest is maybe 30bn.
Pensions do. Calpers and the other California pensions for workers are nearly a trillion together.
But the pensions have a high payout requirement to service their pensioners, around 3-5% per year. And a long-term insanely imbalanced liability for health care costs and imbalance from a younger workforce. Many folks think they don’t have enough money to meet their aspirations. They need impossible returns and impossible safety. And as a result they are also closely politcized and can rarely do cool stuff. Those are the US ones. There are some big ones in Japan (state managed, too) that are large. But rarely found in venture. Maybe in PE firms.
So the sovereigns. Five Middle Eastern groups have around 3T between them, Norway has 1T, Singapore has 1T, and there are a few more.
—more to say—-
But also address how interest rates modulate the search for return – lower rates means must go for some higher risk equity.