Salesforce's head of corporate development and investments was asked how he makes sense of today's valuations. He says the problem is exits: few companies IPO and few acquirers can write a check above $10 billion.
I just think there are too many of them. There are too many of them. There's too much funding going into them. And I think the VC community should focus on really new, important areas that haven't been done before.
And as you think about the VC community at large, we're in a unique funding moment in time. I'm curious what you make of it, how you're making sense of valuations these days.
I think there's a lot of irresponsibility going on. I think that there is the valuations are, of course, way too high, but also just the buyer universe is so small. When you think about investing, you want to think about what are my exit opportunities. And not every company is going to go public. In fact, very, very few companies go public, probably 1% or less. And so it is so the exit opportunity is critical. You want to think about who could be buying it. And once you get above $10 billion, for example, the buyer universe is so small. And yet, you're seeing so many of these enormous multi-billion dollar valued companies out there. And there simply is going to be, there will be a reckoning that happens. I don't know when, but it is inevitable because a lot of these companies have valuations that are not sustainable that they won't live in, they won't be able to grow into and are also, I think, going to be bad for their employees. And so this is why I say it's irresponsible. And unfortunately, you try to have this dialogue with entrepreneurs and they have, you know, they just want the highest valuation that they can possibly get. But that is not the best decision usually.
And do you think so much of it is a result of just like power law thinking? Like, you know, Anthropic is likely to go out at a valuation north of a trillion. Let's just say obviously SpaceX at $2 trillion. Those companies grew to those valuations in, you know, certainly in Anthropic and then…
Right. And those are generational companies that are very, very rare. And when you, when you find one of those, they're amazing. And that's why we invested in six rounds of Anthropic because it was clear. It was clear from the first meeting we had with Dario and Daniela that these were special…
I agree that in certain pockets of the ecosystem, that exists. I think part of my optimism comes from what a top 1% outcome was 10 years ago is very different from what a top 1% outcome is today. Even on the MA side, you mentioned Wiz earlier, Cursor. So there have been these larger outcomes that…