Unveiling the Reality of Venture Investments: They Want Less Humans

In the realm of venture investments, there exists a clandestine truth that few dare to acknowledge. Whether the funds flow from venture capitalists, angel investors, banks, or private equity firms, the primary concern revolves around a singular pursuit—how much profit can be reaped with minimal human involvement. Founders, employees, fellow investors, and customers are all subject to this relentless scrutiny (don't worry, we'll get to that).

Let us delve into the cryptic language of investors and decipher its true meaning.

"Are you a services business?"

Translation: Does your revenue growth depend on a linear relationship with headcount? In other words, is your scalability limited by the number of people you employ?

"We only invest in SaaS businesses."

Translation: We seek repeatable revenue models where products are built once and sold infinitely. Ideally, we aim for businesses that minimize the need for human intervention in the sales process.

"We love product-led businesses."

Translation: Naturally, SaaS businesses pique our interest, especially those that involve fewer humans in the selling process. The key lies in leveraging product excellence to drive growth.

"AI is a key vertical for our fund."

Translation: Are you developing systems that enhance companies' capabilities while reducing their dependence on human labor? If so, count us in. Artificial intelligence is a territory we eagerly explore.

"We expect to see gross margins of 80%+."

Translation: Your costs appear to be excessively high, possibly due to supply chain inefficiencies or an overabundance of personnel. Streamlining operations and reducing headcount could significantly improve profitability.

"Your ACV is too low."

Translation: To reach $1 million in annual recurring revenue (ARR), your sales pipeline requires a greater number of humans. Increasing the efficiency and effectiveness of your sales process is crucial.

"Your churn rate is too high."

Translation: Customers find it too easy to abandon your platform. If you can cultivate a customer base that commits to your product or make it arduous for them to switch, you can bolster retention rates.

"How many pilots are you running?"

Translation: It seems multiple stakeholders must be convinced to make a purchase. We anticipate you have a strategy to establish a dominant presence in the market, leveraging the pilot's competitive advantage.

"Your net margin needs to increase."

Translation: You're hemorrhaging funds after accounting for direct costs. We wonder who and what you are allocating resources to in order to sustain your operations.

"You're in CPG/DTC?"

Translation: If you target individual consumers, you must devise a plan to stimulate increased purchasing through automation, employing streamlined funnels and leveraging subscription models to encourage repeat sales.

"VR and Metaverse platforms are the future."

Translation: Once users immerse themselves in these virtual environments, we can control their narratives and purchasing journeys without distractions. In-app/world purchases represent the holy grail—unfortunately, we can no longer market to children as Club Penguin once did.

"You're selling into construction/public-health/waste-management/etc."

Translation: Industries like these tend to be slow to adopt new technologies, and your revenue growth is at the mercy of these tech laggards' ability to embrace change. If we had influential connections, perhaps we would reconsider. But for now, we must pass.

"This sounds like a magic money machine."

Translation: Let me ensure I understand correctly. You've automated your customer acquisition engine and transactional system, with minimal human effort required to keep the machinery running smoothly. It's all about maximizing margins, all day, every day? I'm afraid I find it hard to believe.

It is disheartening to realize that our ultimate goal is to maximize returns, even if it means considering human involvement as the most significant risk to growth.

However, this is the stark reality of venture investments. The push for automation and AI is driven by the aim of reducing labor costs and increasing efficiency. The dream is to have a self-sustaining machine that generates profits without human intervention.

Now, this is not to say that humans do not play an essential role in businesses. On the contrary, creativity, innovation, empathy, and leadership are all human attributes that machines cannot replicate. A business’s ability to grow and thrive is often deeply tied to the quality and dedication of its human workforce. But when it comes to venture investments, the hard truth is that the less human involvement, the better.

This, however, poses a significant question. If we continue to value businesses based on their ability to minimize human involvement, what becomes of our society? What happens to the jobs that people rely on for their livelihoods? This is a conversation that we need to have sooner rather than later.

We need to balance the relentless pursuit of profits with the social implications of such a pursuit. We need to recognize that businesses not only serve to generate profits but also play a crucial role in providing employment and contributing to the overall well-being of society.

We also need to remember that while automation and AI can certainly enhance efficiency and reduce costs, they can never replace the human touch that is so vital to many aspects of business. Customers crave authenticity and personal interaction, and businesses that can deliver this will always hold a competitive advantage.

Therefore, we should not simply celebrate businesses that reduce human involvement to maximize profits. Instead, we should also celebrate businesses that effectively utilize human talent and creativity, that prioritize employee satisfaction, that build strong relationships with their customers, and that make meaningful contributions to society.

In conclusion, while venture investments may prefer less human involvement, let us not forget that it is humans who create, innovate, and ultimately drive business success. A world with less human involvement in business may be more profitable in the short term, but it is not necessarily a world that is better for all of us in the long term. Let's strive for balance and remember that profits and people are both critical components of business success.