Hans Tungmanaging partner of Notable capitalPreviously GGV Capitalhas a lot of thoughts on the current state of the business.
Notable Capital is a venture capital firm with $4.2 billion in assets under management, focusing on investments in the United States, Latin America, Israel and Europe.
Tung, whose portfolio includes Airbnb, StockX and Slack, recently spoke with TechCrunch Equity Podcast to discuss valuations, why founders need to play the long game, and why some venture capital firms are struggling.
He also told us why he is still bullish on fintech and which sectors of the fintech space particularly interest him.
We also discussed recent changes in own company, which spun off 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 transformation is the latest in a series of changes we’ve seen in the venture capital world, including personnel changes at Founders Fund, Benchmark and Thrive Capital.
Below are excerpts from the interview, which have been edited for clarity and brevity.
TechCrunch: Last year we talked about declines. At the time, we thought that wasn’t necessarily a bad thing. Do you still have the same state of mind?
Hans Toung: I have been in this business for almost 20 years. We approach things in the long term. And I always know that tags don’t matter. It’s like getting a bad report card or getting a test score, it doesn’t really matter until you actually have an exit. The IPO is actually just a milestone, not the end of the game. The IPO is the beginning for public investors to join the journey. So if you think longer term, a temporary up or down valuation doesn’t matter as much as generating a big result in the end.
I think whatever is needed to scale the business is what the company, founders, and board need to focus on to run the business the best they can every step of the way.
I think what founders don’t realize is that this choice is not between closing and doing a down round, because in that situation you will choose a down round every time. The challenge comes when you are faced with the prospect of holding on to a valuation or launching a down round. If you don’t do this, you run the risk of stopping later. But I will tell you that if you are about to close, no one will invest in you
CT: Overall, when it comes to the investment landscape, how different is it this year compared to last year?
Excl. VAT: I think this is a continuation of what we saw in the second half of 2023. Obviously, AI is an exception. AI is vastly overrated at the moment. You could say we’re only in the first round, or the first half of the first round for AI, so people are willing to overpay… You see a lot of crazy tricks happening early of a boom, but there will be There will be a fork in the road, and some companies will eventually succeed, and most of them may not.
Essentially, I always advise founders not to compare themselves to industries that are doing well, but to focus fully on running their business.
CT: What is your rate of investment compared to recent years? How have venture capital firms been affected by the downturn?
Excl. VAT: I think we are more at the level of 2022. So more than 2023. But 2021 was an aberrant year. And that’s not good for business. And that’s not good for the ecosystem. Without naming names, you actually see that companies are being hit by what they did in 2021, which has caused them to slow down a lot more now, which is unfortunate because a lot of them are great investors, they are in big companies, and it’s a shame they can’t participate because of simple indigestion.
For example, some companies have raised a large round of funding in 2021. And even though the company is growing its revenue by around 40-50% per year and will likely go public soon in the next year from a maturity perspective… but because the valuation they raised in their last funding round is so high that they are not at that valuation level in the current public market, where the multiples have compressed considerably. So they have to wait. And therefore, the funds invested there in 2021 cannot obtain liquidity. because there is a lack of liquidity and LPs cannot get their money back either. So we don’t have this recycling of money coming back to LPs who continue to invest in new funds. The whole system suffers.
CT: I was surprised to report recently that fintech funding fell to its lowest level in seven years in the first quarter of this year. What do you think of that?
Excl. VAT: I think for fintech, given the high inflationary environment that we’ve had and certainly high interest rates that are coming down, but not quickly, it’s more difficult for people to make a decision about fintech. But if you look at the other set of metrics, financial services as a category, the market capitalization of all public companies in the banking-insurance financial services space is over $10 trillion. And of that $10 trillion, only less than 5% is invested in fintech companies. And so, if we all know that the best fintech companies are growing faster than financial services companies, it’s only a matter of time before penetration and single-digit market caps increase over time. time. So there will be ups and downs. Like e-commerce, fintech may not have many winners, but those who can win can have a huge market.
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