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Invest Like the Best with Patrick O'Shaughnessy

Ramtin Naimi on the State of Venture Investing - [Invest Like the Best, EP.499]

46 min episode · 2 min read
·
Ramtin Naimi

Episode

46 min

Read time

2 min

Topics

Productivity, Investing, Startups

AI-Generated Summary

Key Takeaways

  • ✓Deal Tranching Reality: Rounds now close with simultaneous secondary tranches priced 3-5x above the primary, not the 2x "fast follow" seen in 2021. VCs who lose primary allocation pay a massive premium to enter the same round concurrently. Founders benefit because capital-intensive AI companies genuinely need this volume without inflating a single primary round valuation.
  • ✓LP Liquidity Crunch: Traditional endowment LPs with 35-50% venture exposure often have 30-50% of their AUM concentrated in just three to four companies — SpaceX, Anthropic, OpenAI, Databricks. Only LPs with meaningful exposure to those specific names are receiving real liquidity; everyone else is effectively locked up regardless of broader portfolio performance.
  • ✓Fund Deployment Acceleration: Mega platform funds are deploying 3x faster than their modeled 18-24 month windows, forcing them back to market sooner and at larger sizes. One fund raised $2.5B in July and planned to return in January. Another returned seeking $5B just nine months after receiving $3B, creating downstream funding delays for portfolio companies.
  • ✓Proactive vs. Reactive Alpha: Reactive investors who back obvious opportunities can achieve top-quartile returns; proactive investors backing non-obvious markets with strong founders target top 5%. The Conduit BCI investment — seeded nine months before BCI became a popular category — received 13 term sheets at a dramatically higher valuation once the market caught up to the thesis.
  • ✓Revenue Quality Distortion: Companies reporting 10-20x growth often carry structural revenue weaknesses: negative or sub-20% gross margins from data labeling costs, heavy customer concentration, annualized monthly figures, or usage-based rather than contractual recurring revenue. Founders should benchmark their growth against companies with comparable revenue structures, not absolute top-line figures from incomparable business models.

What It Covers

Ramtin Naimi of Abstract Ventures analyzes the current venture market in 2025, comparing deal velocity, LP liquidity constraints, fund deployment acceleration, seed pricing dynamics, and compute capital structures to the 2021 cycle, rating opportunity at 10/10 and frothiness at 6.5/10.

Key Questions Answered

  • •Deal Tranching Reality: Rounds now close with simultaneous secondary tranches priced 3-5x above the primary, not the 2x "fast follow" seen in 2021. VCs who lose primary allocation pay a massive premium to enter the same round concurrently. Founders benefit because capital-intensive AI companies genuinely need this volume without inflating a single primary round valuation.
  • •LP Liquidity Crunch: Traditional endowment LPs with 35-50% venture exposure often have 30-50% of their AUM concentrated in just three to four companies — SpaceX, Anthropic, OpenAI, Databricks. Only LPs with meaningful exposure to those specific names are receiving real liquidity; everyone else is effectively locked up regardless of broader portfolio performance.
  • •Fund Deployment Acceleration: Mega platform funds are deploying 3x faster than their modeled 18-24 month windows, forcing them back to market sooner and at larger sizes. One fund raised $2.5B in July and planned to return in January. Another returned seeking $5B just nine months after receiving $3B, creating downstream funding delays for portfolio companies.
  • •Proactive vs. Reactive Alpha: Reactive investors who back obvious opportunities can achieve top-quartile returns; proactive investors backing non-obvious markets with strong founders target top 5%. The Conduit BCI investment — seeded nine months before BCI became a popular category — received 13 term sheets at a dramatically higher valuation once the market caught up to the thesis.
  • •Revenue Quality Distortion: Companies reporting 10-20x growth often carry structural revenue weaknesses: negative or sub-20% gross margins from data labeling costs, heavy customer concentration, annualized monthly figures, or usage-based rather than contractual recurring revenue. Founders should benchmark their growth against companies with comparable revenue structures, not absolute top-line figures from incomparable business models.

Notable Moment

Naimi describes how the consensus strategy of passively deploying large capital into a handful of obviously elite companies — Anthropic, OpenAI, Databricks — has become so widespread among VC firms that its widespread adoption alone raises serious questions about whether it can continue generating outsized returns.

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Episode Transcript

Ramp is the only platform built to make your finance team leaner, faster, and better, saving businesses 5% annually on average so you can stay focused on growth. Ramp customers grow 3.2 times faster than the average American business. Visa, Vercel, Cursor, Stripe, and 70,000 other businesses all run on Ramp. Mine does too, and so should yours. Learn more at ramp.com. Rogo is the AI platform purpose built for financial institutions serving tens of thousands of bankers and investors at hundreds of leading firms worldwide. Rogo's AI agents autonomously execute large chunk of your firm's workflows. They can screen deals, draft sims, run buyer outreach, and due diligence on data rooms, all with full security and compliance handled. Every action feeds Rogo intelligence, the firm's context layer, turning years of deal experience into a secure, governed institutional memory that makes each new transaction stronger than the last. To learn more, visit rogo.com/invest. OpenAI, Cursor, Anthropic, Perplexity, and Vercel all have something in common. They all use WorkOS. And here's why. To achieve enterprise adoption at scale, you have to deliver on core capabilities like SSO, SCIM, RBAC, and audit logs. That's where WorkOS comes in. Instead of spending months building these mission critical capabilities yourself, you can just use WorkOS APIs to gain all of them on day zero. That's why so many of the top AI teams you hear about already run on WorkOS. WorkOS is the fastest way to become enterprise ready and stay focused on what matters most, your product. Visit workos.com to get started. One of our mutual LPs describes you as the person from whom he learns the most per minute about what's going on in venture markets when he talks to you. And we're kind of trying to recreate that here today and really focus on not big picture stuff, the history of abstract, etcetera, which we did the first time, but really just like zoom in on this moment in time. How would you describe the state of things right now, like zoomed all the way into the deal level here around San Francisco? It's very fast paced, insanely fast paced in the sense that rounds are happening quicker than ever. Follow on rounds are happening quicker than ever. There are certain companies that just get a lot of attention very early in their life cycle, and they get a lot of demand for their financing, whether it's their seed or their series a or their series b. There's a handful of firms that those founders wanna raise capital from and those guys get preferential pricing, which is really tranche number one. And there's a bunch of VC firms that lose that deal. And historically, the VC firms that lost the deal would say, okay, we'll maintain a relationship. We'll put in a small check or something to maintain that relationship. And as the thing performs, we'll do the next round. And in 2021, you have the fast follow, which was a …

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  • “SPONSORS: Ramp (https://ramp.com)”
  • “SPONSORS: Rogo (https://rogo.com/invest)”
  • “SPONSORS: WorkOS (https://workos.com)”
  • “SPONSORS: Vanta (https://vanta.com/invest)”
  • “SPONSORS: Ridgeline (https://ridgeline.ai)”

company

  • “Ramtin Naimi of Abstract Ventures analyzes the current venture market in 2025”
  • “Traditional endowment LPs with 35-50% venture exposure often have 30-50% of their AUM concentrated in just three to four companies — SpaceX, Anthropic, OpenAI, Databricks.”
  • “Traditional endowment LPs with 35-50% venture exposure often have 30-50% of their AUM concentrated in just three to four companies — SpaceX, Anthropic, OpenAI, Databricks.”
  • “Traditional endowment LPs with 35-50% venture exposure often have 30-50% of their AUM concentrated in just three to four companies — SpaceX, Anthropic, OpenAI, Databricks.”
  • “Traditional endowment LPs with 35-50% venture exposure often have 30-50% of their AUM concentrated in just three to four companies — SpaceX, Anthropic, OpenAI, Databricks.”

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