Opportunities emerging for today’s founders
Rick Prostko, San Francisco-based Senior Managing Director at Teachers' Venture Growth (TVG), shares insights on how focusing on sustainable growth, leveraging AI and building resilient teams can help founders thrive in today's environment.
At a glance
Rick Prostko, TVG’s Senior Managing Director, discusses significant changes in the venture capital landscape, the commercial opportunity during times of rapid change and what investors are currently seeking from founders.
Artificial Intelligence is driving a monumental shift. Founders who leverage emerging technologies to empower their teams will establish enduring, influential companies.
Founders seeking product market fit in less obvious, but substantial, areas of the economy can significantly enhance their odds of long-term success.
Attracting, motivating, retaining and equipping top talent with technology remains essential for building generational companies.
A focus on sustainable growth
Despite market volatility and geopolitical considerations, now is an ideal time to be an entrepreneur.
Whenever established industry norms and rules of engagement are “re-written”, cracks appear in established players’ moats. While this may be an uncomfortable time for many, it presents a tremendous opportunity for those looking forward with agility. Companies across sectors will begin investing in new tooling and partnerships to enhance their own competitiveness and adaptability in the new world. For founders hoping to build a leading business, now is the time to assemble and motivate a strong team, look past the headlines, and focus efforts on solving difficult problems that arise from the changing landscape.
In this interview, Rick Prostko provides insights into the evolution of the venture capital industry, the qualities that define successful companies and what investors are currently seeking from founders. He emphasizes that a strategic approach, combined with the ability to adapt to technological advancements, is crucial for long-term success.
"Like the best companies, investors pivot quickly as well and today are asking more probing questions about underlying technological differentiation and the sustainability of growth."
How do you see the venture capital landscape evolving?
Rick Prostko: It’s important to recognize that the venture capital (VC) landscape is far from static – the capital available, the firms actively deploying and their risk appetites are constantly evolving. Further, the VC industry itself underwent significant transformations in recent years due to global events, including the 2008 Financial Crisis and the COVID-19 pandemic. In 2019, near-zero interest rates encouraged a focus on funding rapid growth at all costs which led to unsustainable financial practices and a lack of durable market resilience within companies. While this period of misplaced enthusiasm led to a lot of revenue generation, it did not always lead to stable, generational company formation.
Like the best companies, investors pivot quickly as well and today are asking more probing questions about underlying technological differentiation and the sustainability of growth. This evolution reflects a more prudent funding approach that prioritizes long-term viability over short-term gains.
Moreover, venture capital is expanding beyond traditional technology and software sectors. Over the next three to five years, we will see increased investment into technologies built for companies across industries that were historically underserved by Silicon Valley such as energy, agriculture and advanced manufacturing.
How is AI helping accelerate company formation?
RP: Artificial Intelligence (AI) is revolutionizing the entrepreneurial landscape by enhancing tooling, speed, and overall efficiency. This creates vast opportunities for innovators. The current entrepreneurial energy is at an all-time high, reflecting strong potential for growth and innovation.
AI is not confined to specific industries; it is transforming sectors across the board. This presents a unique opportunity for businesses to evolve into tech-driven enterprises, harnessing AI to enhance operations and drive growth.
What does it take for entrepreneurs to be successful today?
RP: In today's business environment, prioritizing sustainable growth over top-line expansion is crucial. Founders should seek product-market fit in less obvious areas, particularly in large industries that have been slower to adopt technology, such as manufacturing, energy and healthcare.
As these sectors embrace technological advancements, significant opportunities for innovative use cases will emerge. Founders should leverage data to identify where customer traction and product-market fit are developing.
Successful entrepreneurs also prioritize team formation, ensuring they have individuals who are willing to embrace emerging technologies and rethink their own roles. Agility is essential, as the market evolves rapidly, and founders must remain flexible to adapt to changes.
What sectors or types of companies have the most potential for growth?
RP: At TVG, we have refined our approach over the past six years to focus on sectors with substantial long-term growth potential. Our investments are concentrated in enterprise software, driven by opportunities in AI and data infrastructure; financial services, particularly insurtech and fintech; and the climate sector, focusing on energy transition and opportunities with unit economic sensible models.
We also seek companies exploring commercialization of technologies that significantly impact our world positively. Unlike traditional venture funds, which typically operate on a ten-year fund cycle, we enjoy greater flexibility in financing. This allows us to collaboratively determine the right amount of capital to inject into businesses, set milestones, and build supportive syndicates, enabling long-term partnerships with the companies we invest in that are pursuing opportunities with global impact.
For inquiries about long-term partnerships, please contact us at tvg@otpp.com.
