20VC: Inside Coatue's $70BN Machine: Why Price Matters Least | Why Mega Markets are the Most Important | How to Assess Durability of Revenue and Margins in AI with Lucas Swisher
Lucas Swisher from Coatue's $70B growth fund reveals how mega funds are fundamentally reshaping investment strategy in the AI era. He argues that vertical SaaS—once a reliable category for billion-dollar exits—is no longer viable for large funds, while explaining why market size now trumps even exceptional founders when making investment decisions.
Key takeaways
- •Vertical SaaS has become uninvestable for mega funds because the outcome sizes can't generate the massive returns needed to move the needle on $70B+ portfolios.
- •A good founder in a mega market beats a great founder in a small market—market expansion potential now outweighs individual founder brilliance in investment decisions.
- •Portfolio companies will inevitably compete as they expand into adjacent markets, requiring funds to accept overlap rather than avoid it.
- •AI's rapid technology cycles are destroying the durability of revenue and competitive moats that traditional SaaS companies relied on for stable valuations.
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Best moment
Why Coatue won't invest in vertical SaaS anymore despite billion-dollar exits
“You know, we always hear an early stage in my business, oh, it needs to be a fund returner.”
plus funds, which are several now, vertical SaaS is no longer an investable category just because the outcome sizes will not be enough to generate the mega outcomes needed. Listen. Vertical SaaS, I think you could talk about it a lot of different ways. Constrain TAM, AI risk, all kinds of stuff. They're still great businesses today. People have made a lot of money in vertical software over time. Think about Insight. Right? They've had incredible exits in vertical software over time. Multibillion dollar exits. In today's world, if you have a big fund, I don't think that's where you should be focused. I think you should be focused on the absolute mega outcomes, the platform companies that are gonna generate that disproportionate return, and you're actually gonna get liquidity out of. Don't laugh. What is an attractive enough upside scenario
to get you excited? You know, we always hear an early stage in my business, oh, it needs to be a fund returner. Sure. What is attractive enough for you? Like, Revolut, I think, is a phenomenal company. I'd love to be ambassador. 75,000,000,000,
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