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Summary
Valuations: Pre-seed post-money valuations are up in March (
). More than 80% SAFEs have a cap (
). Investors are telling some startups to close shops (
). How sector plays a role in pre-seed valuation (
). While it is easy to draw comparisons to the 2001 dot-com bubble, things are different (
).LP & GP dynamics: What LPs think about emerging managers (
). VCs are returning money to LPs (
) As there is no analog to beta, VCs incline more towards intangibles (
). How to raise capital for your Fund (
).Market sentiment: Founders feel investor relationships are positive (
). 36% drop in exit count from 2021 to 2022 and a 91% drop in exit values over the same period (
).Europe needs to pull up. Some are raising voices to reboot EU-wide programs and start over from scratch (
). Promising early-stage deeptech founders increasingly feel they can’t build something big in Europe (
).Special topics: Silicon Valley Bank fallout and related discussions were the biggest news in the VC industry this month (
). Next, for some reason, VCs were bashing TAM - that too all at once (
).
This month's ‘All Things VC’ edition focuses on topics relevant to VC GPs & LPs on a strategic level, i.e., valuations, market dynamics, fundraising, D&I, portfolio construction & more. Individual investment areas like ClimateTech are not covered in this collection.
Tweets
Elizabeth Yin
1. On running a VC firm
2. ‘on successfully raise money for a fund’
Top quote from the tweet
2) So much so that @ericbahn and I did 700+ mtgs to raise our $11.5m fund. We asked *EVERYONE*. We asked my eye dr. Our lawyers. Our bankers. Ppl we met at friends’ houses and at parties.
We didn’t try to convince ppl who were not really bought in. We moved on & found new leads.
Samir Kaji on ‘the right VC model’
Storytelling is equally important for VCs, as for Founders.
When I am talking to a GP, I'm also trying to assess how they make me "feel"? If I feel inspired or excited, it's easy to draw a line to this feeling passing to founders, other LPs, and co-investors. This does map back to authenticity.
VCs on biases
Rick Zullo on VCs overestimating the quality of their deal flow
Mitch Lasky on ‘pedigree chasing’
Tweets on market sentiment, valuations & startup fundraising
VC meme’s
Reports
AngelList live valuation tracker
AngelList live tracker is one of the coolest tool I have seen. Pre-seed looks like going up in valuation.
ChartMogul - SaaS Retention Report
Benchmarks and Insights on retention from studying over 2,100 SaaS businesses.
Few highlights from the report
Cowboy Ventures - Can My Open Source Company Raise Series A?
Investors’ definition of ‘greatness’ has changed — this is what founders need to know
Research on ‘Maneuvering the odds: The dynamics of venture capital decision-making’
Snippet from the article
Each year venture capitalists receive hundreds of investment proposals, but is every proposal received by a venture capitalist processed equally? In this study, we show how the source of a proposal and the available amount of investment capital, factors that are not contained within the pages of a proposal, may influence the investment decision-making process. Our results highlight the impact of being referred to a venture capitalist by a trusted source, as more time is spent evaluating these proposals and they proceed further along in the process. We also find that venture capitalists process proposals more quickly as the capital in the fund is invested over the life of the fund.
NFX - Founder Sentiment Report: The Post-SVB Edition
NVCA - 2023 Yearbook
Highlights of the U.S. Venture Industry in 2022
- 4,825 companies raised first-time funding (the first round of equity funding in a startup by an institutional venture investor) and attracted $23.7 billion, with both metrics comparing favorably to 2021 records.
- First-time deals accounted for 31% of the total deal count and nearly 10% of the total deal value.
- Median fund size of $40.6 million was at a 13-year high and total AUM was at $1.1 trillion.
- Exits decreased precipitously, with a 36% drop in exit count from 2021 to 2022 and a 91% drop in exit values over the same period.
Articles
TechCrunch: Investors propose some struggling founders close shop and return funding
Snippets from the article
Their argument is that some startups simply raised too much, at valuations into which they will never grow, and that clean, well-planned exits are better for everyone than messy ones. After all, the money could be invested in something more impactful. Importantly, the founders’ time could also be focused on more productive endeavors, greatly improving their mental and emotional well-being.
Economist on ‘tech slump encouraging VC to rediscover old ways’
Snippets from the article
The downturn inevitably draws comparisons to the dotcom crash of 2000-01, when deep winter set in and vc investments froze. Luckily for both founders and their backers, conditions are not so frosty today. Startups’ balance-sheets are stronger than they were 20 years ago; valuations are not quite so detached from revenues. In America alone, venture capitalists have about . Nonetheless, the industry that is emerging from the and into an era of dearer money looks different from the one that went into it. In many respects, vc is returning to the ways of decades past.
Kauffman Fellows - The Hard Questions Venture Capital GPs Need to Be Prepared For
Snippets from the article
In evaluating a manager, LPs are thinking about the job of a VC: e.g. sourcing, picking, winning, and helping. A few questions LPs might ask are:
- Do you have interesting and unique deal flow?
- Do you have a thoughtful and differentiated point of view or thesis?
- Do you have a strong reputation for treating founders well and being able to add value?
- Are you an expert in a certain industry or business model?
- Are you able to win deals in a competitive market?
- Does the portfolio construction make sense for the strategy? Do you have sufficient bandwidth to support the strategy? How do you get leverage?
- How will this be at least a 3-5x fund?
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