Everything is Technology

Packy McCormick’s piece Everything is Technology has triggered heated debate in SV, including his views on VC megafunds. To keep this brief, I will expand on megafund returns in a later post.

The world can flip faster than we expect. What feels essential today may vanish in a decade, replaced by things we didn’t even know we wanted.

He illustrates this with a pair of famous photos from NYC’s Easter Parade on 5th Avenue — one from 1900 (left), showing a street filled with horse-drawn carriages and a single car; the other from 1913 (right), showing the same street filled with cars and just one horse-drawn carriage.

Ford launched the Model T in 1908. Had he asked people, they’d have wanted “faster horses.” Five years later, NYC was nearly horse-free. By 1919, carriage makers produced $118M in goods — while Ford sold 900K Model T’s for $324M, nearly triple that. Technology had won the day.

When a new technology succeeds, it often sheds the “technology” label and becomes its own industry. In the internal combustion engine’s (ICE) case, that was the automotive industry.

By the early 2000s, the world’s twelve largest automakers had a combined market cap of $450B. Because they were mature companies, that $450B wasn’t seen as tech market cap — it didn’t count as VC Addressable Value (VCAV), the pool VCs can actually invest in.

If Elon Musk had asked customers what they wanted, they likely would’ve said “faster ICE SUVs.” Like Henry Ford, he didn’t ask. He built EVs instead. Today, Tesla alone is worth over $1T, more than double the combined value of the entire auto industry when it started. It pulled the $450B value back into tech market cap and VCAV, and grew it.

Can you imagine the replacers not being built on new technology?

Tech companies disrupt industries in two main ways:

1. Direct Displacement: Competing head-on in large, existing markets with a better, cheaper, faster product — like Tesla

2. Market Creation & Aggregation: Building new markets by unifying fragmented ones through superior tech — like Uber

Again and again, technology companies frequently overtake incumbents and give rise to entirely new industries. These shifts happen faster than you’d think, usually within a decade or two. And the companies built on new technologies often end up larger than the entire industry they replaced.

But there is a difference now. The 19th and 20th transitions were financed through a variety of means. JP Morgan funded Thomas Edison, Boeing used government contracts and retained earnings to fund the development of the 707, etc.

While those businesses were built on the modern technology of the day, they were not VCAV, because there was no VC.

Many believe we are about to witness something bigger unfold over a compressed timeline in the next two decades, and this time, all of the winners will be backed by venture capitalists. All of the value will be VCAV.

If you believe that, you must believe that there will be tens of trillions of dollars of value both transferred from incumbents and created, all of it VC-addressable.

Moreover, companies like Stripe and SpaceX are staying private longer and compounding value in the private markets. If everything is technology, these late-stage startups could surpass anything we have seen before. That’s undoubtedly good news for megafunds — they can keep investing in companies they believe are poised to become far bigger and more valuable than most people realize.

In Summary

If the current shift is “everything is technology,” then it makes sense that VC funds are sizing up.

If you believe that some of today’s late-stage startups will outgrow the incumbents they displace (like Anduril in defense), and others will create entirely new markets (like OpenAI), and if you recognize that they’re staying private longer — with fresh capital and secondary tender offers making that possible — then it makes perfect sense to raise larger VC funds.

Conclusion

“I am on the side of the megafunds. I think they understand that everything is technology, and are the first to position themselves accordingly. My bet is that the current vintage of eye-poppingly large funds will seem quaint in a few years, as everything becomes technology”.