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Meet an Investor: 186 Ventures Co-Founder and Managing Partner Giuseppe Stuto



As we enter 2024, the big question on every founder’s mind is how investors will position themselves after last year’s rapid uptick in interest rates and cooling in the tech sector. This year holds new promises and longstanding risks, including the prospect for falling borrowing costs and a renewed surge in AI – along with continued talk of recession. 


Giuseppe Stuto is in a perfect position to discuss these developments, as the Boston-based venture capital firm he co-founded, 186 Ventures, focuses on early-stage tech investments. They raised a $37 million fund in 2021 for their generalist, early stage investment strategy to back tech enabled innovation across a wide range of industries, and are looking to invest in 8-10 new businesses in 2024 alone.


In this wide-ranging interview, Giuseppe discusses his macro and investment outlook for the year, plans for 186 Ventures, and perspective on the blockchain space and AI boom. Here’s a transcript of that conversation.


SB: As you look at 2024, coming off of an unusual couple of years, what kind of things are you telling founders about what to expect?

 

GS: Be smart about the amount of capital you burn and raise, because it impacts you the founder the most. And the less capital efficient you are, the weaker you are as a business for customers who depend on your services and products, as well as for your team. 


If it took you $5 million to get to $1 million in revenue, and this other team needs a half million to get to the same revenue marker, we're (VCs) going to like the latter more. People weren't looking at that a lot in a zero interest rate environment. But now money is not being thrown around like crazy. And founders – the smart ones – are taking notice and adjusting accordingly.


SB: Do you see conditions easing at all this year with forecasts of rate cuts from the Fed, for example?

 

GS: They won't go back to 2020 or 2021 because dollars just aren't there – and thankfully they're not – but conditions are relaxing. Interest rates are flat and expected to come down, so money at the institutional level will eventually start flowing out of safe things like T-bills and back into riskier assets that yield a higher return profile. 


And a lot of people made a lot of money last year in public equities; I've heard that sovereign wealth funds, endowments, pension funds all the way to family offices are starting to think about where to put all of the money that they respectively generated over the last 12-18 months. It's going to go in some capacity to the private markets, which gives confidence to VCs – making them a little bit more lax. 


Not to mention, there's still a lot of dry powder out there from a VC perspective.

 

SB: As you look at the coming year, what are your goals for 186 Ventures – is there a shift in strategy or plan you want to talk about?

 

GS: We are a seed-stage firm, and are investing out of fund I of $37 million. We are building out our portfolio of 25 to 30 companies over a 36-month period, and have entered the third year of that. So this year, we're looking to build out the rest of the portfolio and invest in anywhere from 8 to 10 more companies. 


We are actively thinking about fund II, and ways to bring our product to more founders. We will always have a strong Boston presence, but we also have exposure outside of Boston that will continue to be the case, including our meaningful presence in New York.

 

SB: I saw from your fundraise that your areas of focus were fintech, Web3, future of work and media. Is that still the case, or are you expanding beyond that?

 

GS: Yes to all the above. We are primarily a software investor, but we look at ourselves as tech enabled, early stage investors, so the industries are very wide and far. There's everywhere from fintech to blockchain and AI, enterprise, SaaS, and developer tooling. We hit across the entire stack because for us, it's all about the founders and operators. They're the ones who are going to lead us to solving the world's largest problems. Our job is to guide them along the way, and most importantly to be patient.

 

SB: How are you feeling about blockchain, in light of the Bitcoin ETF and talk of a bull market this year?

 

GS: We may be entering the most exciting period for blockchain technology over the next year to two years. The infrastructure has been laid down over the last several years. A lot of unfortunate but necessary things have happened to demonstrate not just the potential for good, but potential for bad if we don't do things the right way.


Policy makers are starting to understand that this can be regulated in an effective way without really intruding on innovation. It really (blockchain tech) helps a lot of people – and forget just enterprises and how it helps corporations save on costs and make more money. This helps consumers throughout the US and throughout the world. And there's just no arguing that. We're finally starting to see a lot of exciting applications that are helping everyday people in the US and beyond, including from within some of our portfolio companies.

 

SB: What are your thoughts about the AI boom? Is that something you're trying to jump into?

 

GS: We see AI as an enabling technology and an enabling feature. It is inevitable that every industry and every application will have some component of AI. About half of the companies we have invested in to date leverage some form of AI. 


Within the world of technology, we're going to see a lot of exciting opportunities from a venture standpoint at the application layer. From an AI perspective, I think a lot of the infrastructure opportunities have already sailed, and incumbents are better positioned to capitalize on them. But for upstarts, it’s going to be prime for AI enabled applications both within an enterprise B2B and a consumer B2C context. And we're well positioned to help founders on that given our backgrounds. 


About the author: Randall Woods is a former editor at Bloomberg News and currently is a Senior Vice President at SBS Comms, a communications agency for technology companies and startups.


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