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VC 3.0 and the democratization of venture capital
Steve Case, founder of AOL, and early evangelist of ‘rise of the rest’ cities, posited recently in an interview that we are now living in the third wave of the Internet. “First-wave companies like AOL were building the internet, building the on-ramps,” argued Steve. “The second wave was building apps and software on top of the internet —think Facebook. This third wave is when the internet meets the real world. And it’s health care, it’s food and agriculture. These are big parts of our economy, and the domain expertise in those sectors and the partnerships you need to form to be successful in those sectors are often in the middle of the country, not on the coasts.”
For our part, Catapult has been at the forefront of advocating the importance of founders and venture investors to ‘think outside the Silicon Valley box.’ Early on we offered the proposition that a “decoupling of geography and capital” was afoot and being accelerated by an order of magnitude by the pandemic. This notion of a global decoupling of capital and geography — and, with it, the waning importance of geography as a competitive moat for capital and talent — is now being embraced by many fellow investors, most notably Endeavor’s Allen Taylor in his prolific writings on cross-border investing.
The changes wrought by this ‘Third wave of the Internet” and the idea that VC has become more distributed than ever have scrambled the playing field for startups and venture investors alike and, with it, rewritten the rules for VC going forward.
Internet 3.0, meet VC 3.0
The “Third Wave” construct is a convenient prism in which to examine how VC is being altered by these powerful forces because, in many ways, venture capital is experiencing a third wave of its own. The changes somewhat parallel the shift Steve Case alluded to when he discussed how the partnerships, talent and innovations necessary for Internet 3.0 were now in geographies outside the traditional tech centers of Silicon Valley and Boston where, to date, the vast majority of venture dollars have been deployed and many venture funds have been domiciled historically.
