As I work on financing Prelude Fertility, the venture that will change the way people start families, a new company that lies in between a private equity investment and a VC investment, I am finding out that there is a real animosity between these two types of firms. For me they are just investors, but they see each other as rivals. And I understand why. PE firms would like for the world to stay the same. VCs invest in change. PE firms bet on the status quo. VCs invest in blowing it up. When PE firms buy a chain of restaurants, they want people to keep buying food the same way, they buy a chain of drug stores, they want people to buy drugs the same way, they buy a car part maker they want people to buy and drive cars the same way. PE firms just want a growing, predictable economy, but what they don’t want is what entrepreneurs and VCs are doing to them: changing the world as they know it. For every PE model there is a VC disruptor. For PE firms who own restaurants, there is Seamless, GrubHub and others delivering food without the real estate or companies like Soylent changing what we eat. For PE firms investing in the car industry there is now Uber/Lyft and driverless coming to disrupt car transportation. For PE firms who invest in hotels there is AirBnB, for PE firms who invest in media, there is Google and Facebook destroying their traditional revenue sources, for PE firms who invest in the banking industry there is now Square, Lending Club, Bitcoin VC backed ventures and others coming to desintermediate them. For PE firms investing in commercial real estate there is WeWork and all the other coworking start ups making a much more efficient use of office space and Amazon, Ebay and all e commerce destroying retail. And in this war the VC firms, like Sequoia, Andreessen Horowitz, Accel Partners, Index Ventures, Atomico are more likely to earn better returns in the end, because the world is changing, and is changing fast. In terms of investing it is becoming clear to me that the future belongs to VC firms who are large enough to do growth rounds or PE firms who are willing to invest in transformations.
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