Capital Chronicles #15

Hello there! Welcome to Capital Chronicles, saving you hours every week with ~2-3 minute summarised insights from the best venture builders, investors and capital allocators out there. This week: using the ‘Value Stick’ to price your product, Sam Lessin asks ‘WTF VC?’, 30+ GPs offer their advice on venture capital, and 100+ CXOs tell you how they are allocating their $35B+ technology budgets.

As subscriber #TBD, each web link below takes you to:

• A link to the original article (read time: varies)

• Summary / insights / implications per article (read time: 2-3 minutes)

Now, read on for the latest…

🛠️ On venture building…

A Beginner’s Guide to Value-Based Pricing, from the Harvard Business School. The author introduces the concept of value-based pricing and the ‘value stick’ framework.

• Why you should read it: while you may be familiar with the three main pricing methodologies or the concept of willingness to pay, the value stick framework uniquely ties these key concepts together. This simple yet effective visual tool illustrates the dynamic between customers, profit margins, and suppliers, providing essential pricing fundamentals.

🧭 On venture investing…

WTF VC - Fall 2023: A Thesis on the Future of Venture Capital by Sam Lessin (GP at Slow Ventures). Sam argues that the "factory system" era of venture capital is ending (h/t to subscriber #21 for the share!).

• Why you should read it: Sam has become known for his dissenting points of view, often shared via 'screenshot essays' on social media. This piece is no different. Non-consensus and thought-provoking, he suggests the future of VC at Seed stage will involve more artisanal, one-off investments in businesses that may not fit the traditional high-growth, VC-backed model. He also offers great perspectives on opportunities for small businesses, franchise models, and creators with distribution.

📖 Learning resource…

The Investors Guide to Venture Capital from The Generalist. A 10-part series breaking down the challenges of raising capital, running a firm, and succeeding as a private market investor.

• Why you should read it: essential for emerging managers, this guide is based on interviews with over 30 well-known General Partners from funds including Union Square Ventures, Greylock, Floodgate, Lightspeed, FirstMark, Index, and even the Australian firm Blackbird. While the full articles are behind paywalls, they offer substantial portions of the content and valuable insights for free. The series is currently live and worth following as the remaining seven articles are released.

📊 Market insight…

Battery Ventures’ State of Enterprise Tech Spending report, a survey of 100 CXOs representing $35B+ in annual technology spending. The report aims to gauge budget planning and the overall sentiment of large enterprise technology buyers.

• Why you should read it: AI-enabled software is in a strong hype cycle, making it crucial to understand if there is demand to match the supply. The good news: 55% of respondents plan to increase their tech budgets, deploying ~$1.5B on AI and data-related technologies over the next five years. Additionally, 84% of buyers plan to increase spending on AI/ML tools. Can you guess the number one priority for CXOs over the next 12 months (slide 14)? It's not GenAI/LLMs (that was #2).

🎲Lucky dip essential reads…

• Deal multiples for public companies, VC rounds and exits

• Best practices for managing software spend

• Feedback: honest, kind and timely

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Have a great week!

Josh