2019 was a turbulent year for investing and the economy at large, and many venture firms had to learn hard lessons on what makes a business profitable and sustainable. To learn more about what the new year could hold for the economy, we spoke with Andy Medici, senior staff reporter for the Washington Business Journal.

ABERMAN: Let’s get caught up on the big trends from 2019. What are the big stories you think really shaped the year, and how do you see them teeing up how our economy is going to look for next year?

MEDICI: 2019 was a big year for venture capital, because it was a year that showed us what didn’t work. We had a lot of angst around WeWork, a model that, for years, had been taken as a given in venture capitalism, which is that growth at the expense of everything else is always preferable. And in this case, we saw how quickly that collapsed. We looked at a 47 billion dollar valuation drop to below 10 billion, a bailout by Softbank, huge layoffs, divesting the business. And that was just one of these massive startups that have sprung up over the years that have been fueled by investor dollars. And we saw this year that it just didn’t work. So in 2020, you know, we’re going to hopefully see what does.

ABERMAN: Well, we’ll see that. Also, Amazon was a huge story throughout the year. You covered it a great deal. How much do you see Amazon as shaping things in 2020, in our region?

MEDICI: Well, it’s interesting, because as Amazon moves here physically in the region, it seems like they’re taking up more and more of the debate, too, which is: in what way should Amazon exist? You know, 2019 in many ways was sort of their debut in terms of national politicians talking about this company, in terms of the company taking stands on individual issues. Some of it good, raising their minimum wage to 15 dollars. But some of it bad. You know, whether they have anti-competitive practices or not. So 2020 really is going to be: what does Amazon look like in the future, and how are national politicians and Congress going to look at this company from an antitrust perspective, from a regulatory perspective, as they go into new markets, as they continue to acquire new businesses?

ABERMAN: So we have Amazon, we have the whole sort of venture capital bubble, which burst not just with WeWork, but with other high-profile companies that went public, and traded down since then. What was the other big thing that you saw last year that really sort of shapes things as you’re looking forward?

MEDICI: Well, I think what we saw was a focus on these companies going public, these companies finally trying to get an exit. Uber and Lyft. But what happened was that people didn’t clearly value them as much as the venture capitalist did. So you have Uber, which has traded down, Lyft, which has traded down, Blue Apron, which has traded down. All these companies that professionals had, for years, sort of groomed and molded to have these successful exits. And they didn’t do well. And I think that begs the question, which is: what should venture capital be going forward, and how should a venture capitalist invest in these companies going forward? Because we think about venture capital as having been around forever, but it’s still a very young, and very new industry. Maybe you could say it’s 30 or 40 years old. Which means that, there’s plenty of room for change. And it will be interesting to see how that does change in 2020.

ABERMAN: For me, one of the big things of 2019, heading to 2020, and you touched on it: the biggest funds, most of them were raised by institutions that really didn’t have any particular nexus in the D.C. early stage community. For example, NEA raising a huge fund. You know, Sands Capital, really successful money management firm based in Arlington, started a new venture effort with some of the guys from Valhalla. And it seems to me that what’s happening now is: there’s a tremendous fusion that’s going on where private equity, hedge funds and venture, it’s all sort of coming out of the same bucket. And it’s just a question of where it gets deployed.

MEDICI: I think that’s a great point, Jonathan. That’s true. A lot of companies that have traditionally not been in venture have branched out into venture. As you said, Sands Capital, The Motley Fool, which for years had sort of prided itself on public company statistics and information and news, also with its own venture fund. And I think what is happening is that you have these large players in public markets, these large investment players, and they increasingly realize that the best way to get access to deals, as they come up, is to have been an investor in them the whole time.

So you see them creating a pipeline. You know, Sands Capital has more than 40 billion dollars in assets under management. So, a small venture fund really isn’t a huge investment for them. They can target these companies, and they can invest in them at every stage of growth, so that when they do go public, they’re there already. And I think you’re going to see that in a lot of places. Private equity in general is reaching earlier and earlier into the liquidity stack to pick up. You know, in D.C., several companies were bought by private equity, but they were only raising B rounds, which before was unheard of. Usually private equity comes in a lot later. So, I think what you’re seeing is people looking at the risk profiles and realizing that they would rather reap better rewards than wait down the road to see what comes out of that pipeline.

ABERMAN: You know, for me, as I look at 2020, what I am most interested in and concerned about is that there is an enormous amount of liquidity around the world. You know, we have trillions upon trillions of dollars of government debt now that’s trading below below zero interest rates. And you see more and more behavior where investments are being made to try to get a higher risk-based return. It seems like we’re in the middle of a bubble, and it’s very concerning to me. As you look at 2020, what’s your view?

MEDICI: I think a lot of people are going to look at 2020 as a time to make your bets before any possible recession. I know we’ve been talking about a recession for a while now, generally in the media and across the country. But what we’re really looking at is the fact that, as you said, there’s this been availability of cheap money for a decade or more now, at 0 at 1 percent interest rates. They’re going down still, even as we speak. They’ll probably go down again before I finish the sentence. And that’s how fast that’s happening. And that creates this excess amount of capital.

And people need to invest it, and they need to invest in their return. And you put it into huge rounds, like Softbank’s Vision fund, which hasn’t done as well as people would have hoped it would be. You put into these large companies, you put it anywhere you can. And does that create problematic issues? It definitely does. And it also means that capital, which is cheap, people borrow against, and it creates all sorts of risks, so that if there is a downturn of any kind in the economy, you have a lot of dominos that are ready to fall.

ABERMAN: So we’re here in D.C., I have to ask: as you look at the election, you talk with other folks in the financial industry. Do people really think that the election is going to make a particular difference?

MEDICI: I mean, a lot of these economic issues are macro, and they’re baked in. So it might not matter who you elect. You know, it doesn’t seem that long ago when Barack Obama got elected in the face of a recession that seemed to be happening, whether or not he was elected. He did a lot of things to try and mitigate the issues there. But all of these issues: high corporate debt, high student loan debt, credit risks, you know, all these little bubbles that are springing up, those are the results of years of the current situation and monetary practice. Will any president be better than any other at solving those problems? I think that remains to be seen, but that’s definitely something that I think will be on the top of people’s minds as people continue to campaign in 2020.

ABERMAN: Oh, absolutely. I know that though they’ll campaign on the difference, and they’ll say, the sky is falling, and you’ve got to vote for me, or the world’s going to end. As I look at it, and I think you’re right from the standpoint of there being certain macro issues, the largest one being the large amount of liquidity around the world, that’s not going to matter whoever the president is. But to my mind, the other thing that’s very likely, whether the Democrats or Republicans hold the White House: I think this will mean more regulation of tech. That seems to be, particularly antitrust, seems almost inevitable right now. Are people talking about that?

MEDICI: I think a strong dislike of social media companies now might be one of the few areas where both parties seem to agree, at least on some level, whether the specifics really pan out. But, you know, large companies like Google, Facebook, Amazon, they are such key factors in all of our lives. And, you know, I shop on Amazon, and I use Google, and I’m on Facebook. And I think people are realizing now that what they signed up for, maybe, is not what they really wanted. And Congress is trying to struggle with these issues, and see what they can do about it. And in a lot of cases, that means regulation. There has been general chatter about, how do you break up tech companies? Should Facebook and Instagram be separate companies? Should Amazon be able to be both a marketplace and a seller? And these are debates and issues that are playing across the world stage. But I think in 2020, you’re going to see a lot more of those take front and center.

ABERMAN: As you talk with entrepreneurs, or you look at the community, it’s pretty clear that large amounts of capital are pooling in professional hands. Are you seeing, or do you think that we’ll see, an emergence of more angel funds, or smaller funds, or should entrepreneurs really understand that getting money is now a big company game?

MEDICI: I think what you’re going to see is small funds being raised. They’re not going to really hold a candle to the huge players that have very deep pockets. I think in 2020, you’ll see a few funds, you’ll see a couple of successor funds to small groups. But I think what you’re really going to see is more corporate capital, more corporations, more large scale asset managers get into the space. It’s too attractive to ignore for them. So, sure, there’ll still be small funds, and there will be some new funds, especially in this area. But these large players, they’re going to continue getting into the space. And I think we’ll see a lot more of that.

ABERMAN: So if you were looking at the conditions for being an entrepreneur in town, do you think 2020 is better than 2019, the same, worse? How are you feeling about it?

MEDICI: I think 2020 might be a good time to raise money, if you can get it in before any possible recession. I would say that entrepreneurs are always optimistic, and that’s probably why they’re entrepreneurs. But I think there is going to be a big side issue of realism, which is, how much time do we have before there is a downturn? And what should companies and entrepreneurs do to make sure that they are secure?

ABERMAN: Conclusive proof that entrepreneurs are not economists.

MEDICI: That’s exactly right.

ABERMAN: Well, Andy, as you look at 2020, what are some of the stories you think are going to be most interesting for people to pay attention to?

MEDICI: We have to take a look at venture capital, and what that’s going to turn into. There’s already talk about what big investors are valuing, and it might be a return to more realistic measures like revenue, possibilities for profit. For years, it was growth at almost all costs. And those models haven’t exactly borne a lot of fruit for a certain stage of investor. So, you know, you have companies, and D.C., I think, might reap some of the benefits of that. Because a lot of the companies in D.C. are focused more on revenue, they’re focused more on software and growth.

They have very few of those companies that are about growing without a product, or growing without a real customer base. You’ll still see some of that. But I think more and more, you’re going to see a shift towards: what can we do to make sure the company can thrive financially, even if that means sacrificing maybe a little bit of that growth on the top end? And there’s going to be all sorts of new models that, I think, will come up. You know, the traditional committed fund within a company getting equity, I think people are going to do a lot more experimentation to see what works better for them.

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