The Upside of Venture Capital’s Slowdown

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After years of explosive growth, much of the tech world is notably less frothy than it was — which may mean a return to some more sustainable business practices. On the latest Pivot podcast, Kara Swisher and Scott Galloway discuss the current state of venture capital and the benefits of higher interest rates.


Twice weekly, Scott Galloway and Kara Swisher host Pivot, a New York Magazine podcast about business, technology, and politics.

Kara Swisher: Let’s talk about the start-up BeReal, which is a very good product. Their downloads are down 95 percent from their 2022 peak. Venture capitalist Sasha Kaletsky tweeted that the numbers show how difficult it is to keep consumer apps growth once you’ve crossed a chasm. The home-fitness start-up Tonal, another pretty cool product, is looking for a buyer after spending big on hiring — sort of the Peloton of this year. It feels like a lot of stuff has been tried and a lot of stuff’s not sticking. What do you imagine is going to stick?

Scott Galloway: Well, first off, I advise two VC firms. They want to talk about where we go from here — which investments, which categories. My advice is to sit on their hands and do nothing right now. Because what’s happening in the housing market is happening in the venture market, which is that everybody’s anchoring off. People think, “The Smiths sold their house for $800,000 15 months ago, so I should get $800,000.” Well, no, the market’s changed dramatically. And so even if they put their house up for sale, they don’t want to accept a lower price. Meanwhile, buyers read everything in the news about a recession or housing prices coming down and think, “This house is worth $650,000.” So right now, there’s total stasis. The same thing’s happening in the small-business and entrepreneurship community. Companies that raise money still have capital, but they don’t want to acknowledge that their valuation is probably down 50, 70, maybe even 80 percent.

I think there’s a ton of opportunity in what I’ll call tech-enabled services. I’ll tell you where I’m investing — I invested in a company called Zero100 that collects a ton of data and research on supply-chain innovation. Because every company, slowly but surely, is elevating the supply chain to the top-level decision-making and capital allocation. They’re realizing that supply chain is how Amazon won, and it’s also how almost every company got taken down through COVID. It’s no longer this necessary evil; it’s a key component of strategy. And this is a tech-enabled firm, but it’s a bunch of smart people writing research, hosting events, and helping big companies figure out their supply chain.

I think a company like that, and I want to be clear — we’re not going public for $5 billion — but it’s a great business. The guy who runs it is a fantastic operator. He’ll build it slowly, he’ll build enduring value, and in seven to ten years, we’ll have a company doing $30 million or $40 million in ARR, that’ll get sold for $200 to $300 million. And that’s an amazing way to make a living.

In a world of zero interest rates, where money is free, you end up with Wag. You end up with a cute concept that’s not a business. You end up with Cathie Wood talking about bitcoin at a million dollars. You end up with just all of this crap, and it’s got to get cleaned out.

Swisher: It does.

Galloway: There’s a lot of underbrush that needs to be burned in a bit of a super-fire, which will spawn new ideas. The first advice I give to entrepreneurs, and I’m old school — is that the thing that makes a business is revenues. Find something another person or a company will pay you for immediately. And that’s how I always built businesses. Granted, I never had a big win. All my companies did tens of millions and got sold for three to six times revenue, but I found that this was a lower-risk way of building enduring value. I’m writing this book, Algebra Wealth, and I generally believe I know how to get you rich. That’s the good news. The bad news is the answer is slowly. It’s thinking thoughtfully.

Swisher: I do think people have got to let this idea of boom go a little bit. They tried to boom with cryptocurrency. They tried to boom with AI, which, yes — but now they’re overinvesting in it. Unless aliens show up and give us new technology, which is my great hope, I feel like we’re in a period of technology that will be very slow in how beneficial it’s going to be. And I would agree with you: Start off slow and stay slow. It’s not going to be this sudden crop of billionaires just out of nowhere.

This transcript has been edited for clarity.

The Upside of Venture Capital’s Slowdown