Tech Today with Eric Tarczynski Why Capital Efficiency Still Wins with Larry Cheng
Jun 9, 2025
Larry Cheng, co-founder and managing partner at Volition Capital, dives into the importance of capital efficiency for tech startups. He explains how companies can grow sustainably without overspending while highlighting lessons from Chewy's early days. The discussion includes the resurgence of capital expenditure in frontier tech and the potential of hardware-enabled SaaS. Cheng also analyzes Circle’s IPO, the Rippling–Deel legal conflict, and AI's impact on academic results at Alpha School, offering insightful frameworks for evaluating return on capital.
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Chewy's Capital Efficient Growth
- Chewy grew from $75M to over $1B revenue in three years with only about $50M capital raised.
- This shows high growth is possible with capital efficiency rather than heavy funding rounds.
AI Boosts Capital Efficiency
- AI enables companies to reach $10M ARR with under 10 employees in under 10 months.
- It creates unprecedented capital efficiency, making lean growth more attainable now.
Control Working Capital Strategically
- Manage working capital tightly as a strategic priority to achieve capital efficiency.
- Negotiate vendor terms to delay payments and convert working capital into negative working capital when possible.