Old-school Sand Hill Road and networking in Lake Tahoe aren't ever coming back, according to a VC whose business boomed at the height of the pandemic.

<p><img src="https://static2.businessinsider.com/image/602bdec62edd0f001a8d5daa-1178/TJ.jpg" border="0" alt="TJ Nahigian" data-mce-source="TJ Nahigian" data-mce-caption="TJ Nahigian."></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>To say that the COVID-19 pandemic was business as usual for someone who runs a VC fund is actually inappropriate: it was actually the busiest period since my cofounder and I started our firm three and a half years ago.</p><p>At the height of the pandemic, not only did we lead 11 investments in four months but we were able to stretch our four-person investment team to work more closely with our portfolio companies than ever before. We built Base10 with the ethos of research like a hedge fund, outbound sourcing like a private equity firm, all while investing like a data-driven venture capital fund, which left us perfectly set up to operate in a fully remote investing landscape.&nbsp;</p><p>Since 2017, we at Base10 have been fortunate enough to lead investments in 36 companies across 4 continents, 14 cities, and 19 industries. More than 60% of our investments are outside of Silicon Valley and (surprise!) more than 50% of our founders are minorities, many of whom are working on automating the same industries they used to work in, including trucking, agriculture, construction, and restaurants.</p><p>When I started my career in venture capital 12 years ago, things looked quite different than they do today. 20 or so firms on Sand Hill Road reigned over the industry and had been dominant for years. It was actually an oligopoly and founders physically had to come to a palatial office at Sand Hill Road to kiss the ring of investors. Investors who all knew each other and shared neighboring ski houses in Tahoe.&nbsp;</p><p>Back in 2009, there were three skills required to succeed in the business: networking, networking, and networking. Skiing in Tahoe was also absolutely necessary, with a popular VC networking group handing out free season passes to Kirkwood Report. Associates from the top firms would use their tickets as many as 30 times per season, expanding their networks while also keeping them as tightly knit as possible.&nbsp;</p><p>Each of those firms would do about six investments a year and, according to data from Pitchbook, about 4,500 companies were getting funded annually. And (surprise!) ~90% of all those rounds would go to all white and male teams, mostly Ivy League, Stanford, and Berkeley gradsand the occasional Ivy League dropout who would eventually go on to be the subject of a major motion picture. Some firms were so fixated on Silicon Valley that they had rules, unwritten or otherwise, limiting potential investments to a 30-minute radius around their office.&nbsp;</p><p>Fast-forward to 2020 and there are 1,000+ early stage venture firms and over 9,200 companies raising early stage rounds each year. Best of all: you can't network (except maybe on Twitch). And a lot of old-school VCs are holed up in their Tahoe houses, waiting for the pandemic to end so they can return to business as usual.</p><h2><strong>Here's the truth: the Sand Hill Road "old-school" model of VC is never coming back.</strong></h2><p>This model was already mortally wounded before COVID and that is actually a very good thing for innovation and for the world.&nbsp;</p><p>COVID was a step function for automation across many industries, venture included; prior to this year, retail was already dying, so we're seeing the survivors shift to e-commerce, thanks in part to<a href="https://links91.mixmaxusercontent.com/5c538c40d7ccca0f92010099/l/U7cjx4W2Y6I7gE3LQ'messageId=VTW6takyMLBAS2ixL&amp;rn=ISb1VEIyVmZp5mblpkI&amp;re=ISbvNmLyVGZpNnbpN3cl5WazVnYA1WdlpmI&amp;sc=false"> Shopify.</a> Restaurants could no longer rely just on in-person dining and takeout, they had to build out their online presence and find a<a href="https://links98.mixmaxusercontent.com/5c538c40d7ccca0f92010099/l/NPwn2ASbyBOptZTgM'messageId=VTW6takyMLBAS2ixL&amp;rn=ISb1VEIyVmZp5mblpkI&amp;re=ISbvNmLyVGZpNnbpN3cl5WazVnYA1WdlpmI&amp;sc=false"> home on delivery apps</a>. The same thing is happening in venturethe Silicon Valley model was already struggling, and many investors refused to adapt when the world around them changed overnight.&nbsp;</p><p>A few trends killed the old model of VC:&nbsp;</p><h2><strong>1. The explosion of global talent outside Silicon Valley</strong><a href="https://links95.mixmaxusercontent.com/5c538c40d7ccca0f92010099/l/Uitmb0GcdaIsBMQ2b'messageId=VTW6takyMLBAS2ixL&amp;rn=ISb1VEIyVmZp5mblpkI&amp;re=ISbvNmLyVGZpNnbpN3cl5WazVnYA1WdlpmI&amp;sc=false"></a></h2><p><a href="https://links95.mixmaxusercontent.com/5c538c40d7ccca0f92010099/l/Uitmb0GcdaIsBMQ2b'messageId=VTW6takyMLBAS2ixL&amp;rn=ISb1VEIyVmZp5mblpkI&amp;re=ISbvNmLyVGZpNnbpN3cl5WazVnYA1WdlpmI&amp;sc=false">89% of software developers</a> live outside of Silicon Valley and rent across Bay Area cities<a href="https://links92.mixmaxusercontent.com/5c538c40d7ccca0f92010099/l/Ls1pARPzIADKAFEtW'messageId=VTW6takyMLBAS2ixL&amp;rn=ISb1VEIyVmZp5mblpkI&amp;re=ISbvNmLyVGZpNnbpN3cl5WazVnYA1WdlpmI&amp;sc=false"> continues to fall</a>, showing signals that people are taking their talent elsewhere.&nbsp;</p><h2><strong>2. The increase of available capital</strong></h2><p>According to data from Pitchbook, in 2009, venture capital funds closed $39B in funding globally. Last year, funds closed $289B.</p><h2><strong>3. The incursion of institutionally-run investment firms</strong> (hedge funds &amp; PE) into growth-stage ventures</h2><p>This has caused crowding in this part of the industry, making it difficult for venture firms to win competitive deals.</p><p><img src="https://static4.businessinsider.com/image/6022dad067d1e300113c513b-1436/Total raised in late stage venture rounds.png" border="0" alt="Total raised in late stage venture rounds" data-mce-source="Crunchbase" data-mce-caption="Total raised in late stage venture rounds that included a Top HF or PE firm."></p><h2><strong>4. The explosion of data-driven analytics and remote productivity tools.</strong></h2><p>These enable younger firms to operate trans-nationally in a post-networking world.</p><p>My cofounder Ade Ajao and I built Base10 around these emerging principles, largely based on my experiences as a hedge fund investor at Coatue, a private equity investor at Summit, a venture investor at Accel, and an entrepreneur at Jobr.</p><p>I believe it is critical for for the VC industry to adapt or die, and there's data to prove it:</p><p>A smaller share of early stage companies are based in Silicon Valley, with a majority of growth occurring outside the US.</p><p><img src="https://static5.businessinsider.com/image/6022db2767d1e300113c513f-860/Bay Area vs US vs Global.png" border="0" alt="Bay Area vs US vs Global" data-mce-source="Crunchbase" data-mce-caption="Percentage of Seed or Series A Companies by Year"></p><p>While most of the worlds largest private companies do come from the US, new opportunities increasingly exist globally.</p><p><img src="https://static4.businessinsider.com/image/6022db69cca90200129b745c-592/deal count by global regions.png" border="0" alt="deal count by global regions" data-mce-source="Crunchbase" data-mce-caption="VC deals w/ $1B valuations by year &amp; company HQ"></p><p>And founders are slowly realizing that investments from one of those top 20 firms are no longer critical to success. According to Pitchbook, the 20 most active VC funds from 2000 to 2009 accounted for 17% of deals in 2009. Those same 20 funds only accounted for 5% of total deals in 2019:</p><p><img src="https://static4.businessinsider.com/image/6022dbb0cca90200129b745d-416/top 20 in 2009.png" border="0" alt="top 20 in 2009" data-mce-source="Pitchbook" data-mce-caption="According to Pitchbook, the 20 most active VC funds from 2000 to 2009 accounted for 17% of deals in 2009."></p><p>This data is indicative of what we think the future of venture will be: diverse portfolios, with founders representing the 99% and starting companies all over the US and the world.</p><p>While other investors stay in their comfort zones with startups in Palo Alto and San Francisco, more and more industry-leading companies are being founded outside of Silicon Valley, founders are taking investor meetings virtually, and fewer investments are made from networking.</p><p>This is all to say venture isn't going anywhere, but investors certainly need to adapt to shifting with a heavy focus on a data-driven investing process. If a firm decides change isn't for them, don't be surprised if they become the next poster child for why venture capital is dying.</p><p><strong>NOW READ:&nbsp;<a href="https://www.businessinsider.com/venrock-vc-camille-samuels-top-10-tips-successful-merger-acquisition-2020-12" >I've seen common themes from successful M&A journeys during my 20 years as a VC. Here are my top 10 lessons for companies looking to get acquired.</a></strong></p><p><a href="https://www.businessinsider.com/base10-tj-nahigian-venture-capital-neworking-never-coming-back-2021-2#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/warren-buffett-modest-home-bought-31500-looks-2017-6">Warren Buffett lives in a modest house that's worth .001% of his total wealth</a></p>
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