The venture capital market & implications of AI

**Matt Witheiler** (0:05)
So, the kind of final stage of grief is upon us. And the acceptance is that the world doesn't look like it looked in 2020 through 2022, and isn't going to look that way anytime soon. And so, with this kind of acceptance phase hitting in, there's been a more constructive posture from a company's perspective. Capital is available for those companies. And so, I believe we're really entering a potentially productive period for both deployments as well as returns in the venture capital world.

**Thomas Mucha** (0:40)
welcome to season three of WellSaid, where we explore the cyclical and secular forces shaping financial markets and learn how Wellington investors apply investment research in the pursuit of better investment outcomes. I'm your host, Thomas Mucha.
Today's topic is private equity markets and the late stage market in particular. Activity here rebounded in 2023 from an abysmal 22 Price is also normalized and some degree of sanity has returned. So what's ahead for venture capital in 2024? Here to dive into that subject is one of the best people for the job. Matt Witheiler, a portfolio manager and deal lead for consumer and technology sectors at Wellington focused on late stage venture capital. He's an expert on the late stage PE market and spent several years as an early stage venture capital investor as well. So Matt, I'm excited to talk to you today. Thanks for being here on WellSaid.

**Matt Witheiler** (1:42)
Thank you so much for having me. I'm excited for this conversation.

**Thomas Mucha** (1:45)
All right. Let's start with your career arc. What brought you to Wellington? What are some of the key lessons that you brought with you to Wellington?

**Matt Witheiler** (1:52)
When I was in college, I helped start a consumer internet site. So kind of got the entrepreneurial bug at that point and helped run that business through my college career and left there when I graduated. The company continued to operate, but I left and went to a large technology company. Just about three and a half years as a product manager, where I was in charge of developing new technology. I left there to actually go to business school. And when I was in business school, I actually thought with near certainty that I was going to start a company out of business school. In fact, a friend and myself created a business plan in my second year of business school. And we went around and tried to raise money behind the idea.
And funnily enough, we both got the same feedback as we went to go pitch various investors about this idea. And that feedback was our idea was not so good, but maybe we would be interested in coming to work at the firm to learn a little bit more about how to develop a good idea. And so I guess I became an accidental venture capitalist by taking the opportunity to say, okay, I'll go to a venture capital firm and kind of learn about what it takes to be a great operator and a great entrepreneur, and then take those learnings to the company that I would start. And fast forward to 16-something years later and I'm still a VC. Ultimately, I came to Wellington from the early stage firm that I was at previously because I just became convinced that there was a change in the market and that as companies were staying private longer, there was a really interesting opportunity to help partner with those companies, both from a capital perspective as well as from an experience perspective, to help them get ready to be great public companies. And ultimately, decided that Wellington was the best place to actually practice that art because of the unique capabilities we have both as a large asset manager, as well as with the very collaborative culture we have as a firm.

**Thomas Mucha** (3:46)
Yeah, you anticipated my question there, is what attracted you to Wellington? So it's that breadth of resources, the breadth of research, the expertise we have in bringing companies to market.

**Matt Witheiler** (3:56)
It's a combination of all those things plus what is maybe a little bit more tactical, but also was important in my decision making to come here, which is we decided to invest in these private companies out of dedicated funds. And so that allows us to continue to invest through cycles, as opposed to being reactive to where the market is at a particular point of time.

**Thomas Mucha** (4:14)
Long-term focus.

**Matt Witheiler** (4:15)
Long-term focus, exactly.

**Thomas Mucha** (4:17)
All right, Matt, what's the state of the overall venture capital market? You know, with interest rates holding steady, potentially coming down, valuations and DL activity normalizing, you know, is there less dry powder in many cases? What do we expect in 2024?