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CHAPEL HILL — Mark Yusko, CEO and Chief Investment Officer of Chapel Hill’s Morgan Creek Capital has a long history of raising funds and backing companies. These days, he leads investment for the Digital Innovation arm of Morgan Creek and believes we’re poised at a pivotal time in technology development and investment. And he’s not afraid to say so.

“The ’24 vintage for venture capital is likely to be one of the best vintages in the past three or four decades,” Yusko told me on our call.

By his own admission, Yusko knows this is a really “big statement.” But looking at the cyclical nature of both investment and technology development, Yusko is convinced that there’s a sweet spot coming.

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Investment Timing

According to Yusko, previous cycles of liquidity led to too much money, allowing for too many deals, and too high valuations. The result? “Outcomes are less good.”

However, these phases are invariably followed by market corrections. And while the resulting slowdown may mean less investment and fewer deals, there’s more potential.

“There’s less money chasing fewer deals. And what tends to happen in these economic downturns is the really good ones survive,” Yusko said.

Those who are “intrepid enough to step up and invest,” Yusko said, are well-positioned for big returns. But make no mistake, we are in the “trough” according to Yusko.

“I would say it’s probably the toughest fundraising environment that I’ve seen in you know, the 35 years I’ve been doing this.”

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Technology Timing

According to Yusko, the next year is primed for not only more investment but bigger tech. Yusko identifies a 14-year cycle in major technological breakthroughs.

“[19]54 was the mainframe. ’68 was the microchip. ’82 is the personal computer,” says Yusko. “So it’s a half generation. ’96 was the internet. 2010 was the mobile net, and 2024 which is next year will be — the truth net or the blockchain net or whatever we want to call it.”

Yusko also believes this will be the biggest digital return yet. However the innovations of the next year become defined, we’re clearly working our way into a third “dimension” of technology, and Yusko points out that each jump generates a tremendous amount of wealth.

“Web 1.0 created $2 trillion. Web 2.0 created $5 trillion. With a Web 3.0 it’s $15 to $20 trillion because it’s an exponential growth. You’re building on top of better technology.”

The ABCD’s of Digital

Morgan Creek’s Digital Innovation group is ready to take advantage of this imminent “sweet spot.” For example, Yusko firmly believes that Blockchain technology has been unfairly devalued by recent news.

“[People] got spooked by the whole nonsense with FTX and Sam Bankman-Fried and I think there’s a lot of conflation of Sam Bankman-Fried and FTX and being a crypto or blockchain problem,” Yusko said. But the truth is simpler. “Bad people do bad stuff, but it doesn’t have to do with the underlying technology.”

The investment group is raising money for its fourth fund, and eyeing opportunities in Blockchain and the other “ABCD’s” of digital innovation: Artificial Intelligence, Computing Infrastructure, and Big Data. Since initiating the “Digital” fund in 2018, the company has completed funds in 2018, 2020, 2022. Up next: 2024.

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The latest fund is just getting seeded but already has “amazing” anchor investors, according to Yusko. The goal for this round will be to raise $200-300 million by the middle of next year. As for where that goes, Yusko anticipates “about 30 companies at the seed [level], and early stage [funding] will follow on in about two-thirds of those.”

“Humans are going to human”

The next phase of technology is currently being formed, and it needs support and infrastructure. Morgan Creek is in a great place to deliver. Whatever happens in the next year, Yusko is clearly bullish on the new fund, and on innovation in general.

“There will always be innovation. Humans are going to human,” Yusko told me. “There are 650,000 tech workers that got laid off in the past 18 months. They don’t just say, ‘Oh, you know what, I’m not gonna do anything.’ The really smart ones say, ‘Hey, I’ve got a good idea. I’m gonna start this company,’ and the venture capitalists who fund those are funding innovation.”