EC venture capital

Maybe we didn’t deserve any IPOs this year • ZebethMedia

By zebethcontrolPosted on October 17, 2022Posted in EC Newsletter, EC venture capital, IPOs, startup exits, Startups, The Exchange, VentureNo Comments

From one perspective, DoorDash is a bargain today. The same goes for Coinbase, UiPath, AppLovin, Oscar Health, Bumble, and Qualtrics. Indeed, if you pick nearly any 2021 technology IPO and compare its debut price to where it trades today, you will find that the market is offering yesteryear’s standouts at a massive discount. So much of a discount that it’s hard to not wonder if at least part of the reticence of the 2022 IPO market is not predicated on macro conditions, but the more specific — dare we say microeconomic? — awful performance of the public debuts that we saw last year. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. The declines in question are not small, and they are not merely extant when measured from all-time highs. We’re talking bad returns here from the perspective of any time frame. Part of the issue is the simple fact that 2021 valuations were higher than what we see today. It is valid to handicap negative outcomes with pertinent fluctuations in the underlying market; that said, we often cannot provide enough handicapping to get anywhere close to eliminating the fact that so very many 2021 tech IPOs were, from a returns perspective, hot garbage once they were floated.

Finding an exit from the ‘messy middle’ • ZebethMedia

By zebethcontrolPosted on October 17, 2022Posted in 2023, Column, EC Column, EC venture capital, fundraising, limited partners, Startups, Venture, venture capitalNo Comments

Eric Tarczynski Contributor More posts by this contributor University entrepreneurship — without the university To predict what 2023 will look like for venture capital, we need to start by understanding where we are now. We’re entering a messy middle where prices continue to drop and the “2021” deal, industry slang for an investment made at an exorbitant price, is long gone. Companies can no longer raise $5 million to $10 million seed rounds with nothing but a deck and the assumption that revenue multiples will skyrocket beyond historical norms. The VC landscape has started to bifurcate, and it will continue to do so during 2023 both for fundraising and investments. Fundraising: A tale of two worlds Even though the best vintages originate during downturns, it’s difficult to allocate to something you’re already substantially overexposed to. In 2023, we will see two worlds emerge. The companies with the best talent, products and positioning will command capital at normalized market prices, and everyone else will experience a depressed market. Due to the Fed’s rate hikes and geopolitical tensions, the macro environment has slowed and inflation hit record levels. Investor confidence is down across the board and growth rounds are largely dead on arrival, with both seed and Series A valuations down by 30%-50%. It’s now questionable to pump money into a company that doesn’t have the traction to back up its worth. But this doesn’t mean all deals are off. Venture firms still have tens of billions of dollars to deploy, but they’re more hesitant about doing so now — growth, in particular, is experiencing a hanging-around-the-hoop effect that is likely to linger as the overall macro environment stays depressed.

Carving out conviction around the future of AI with Sarah Guo • ZebethMedia

By zebethcontrolPosted on October 15, 2022Posted in artificial intelligence, EC venture capital, Sarah Guo, Startups, Venture, venture capitalNo Comments

There’s no better way to show you have high conviction in yourself as an investor than being the biggest LP in your $101 million fund, right? Especially if you name your firm Conviction, as Sarah Guo did after leaving Greylock following a decade of investing for the well-known venture group. Last week, she announced that she raised $101 million for her new fund to back companies that are building artificial intelligence and what she describes as software 3.0. Guo spoke to ZebethMedia’s Equity podcast, co-hosted by Natasha Mascarenhas and Alex Wilhelm, about her inaugural fund and the broader market that she is investing in today. The entire conversation is live now wherever you find podcasts, so take a listen if you haven’t yet. Below we extracted four key excerpts from the interview to discuss further. Guo’s comments were edited lightly for clarity. Think of venture in innings Part of the allure of startups is that when things don’t go wrong, which they often do, you might just find yourself as an early employee of a rocket ship. That counts in VC, too, of course, if you were the first person to back a company like Airtable or see the power of connected fitness. But what happens when you want to disrupt a category that has been around the block a few times? Guo shared her framework around venture innings, and how that plays a role in her new focus areas at Conviction:

The highs and lows of Q3 venture capital data for women startup founders • ZebethMedia

By zebethcontrolPosted on October 14, 2022Posted in EC DEI, EC venture capital, startup, Startups, Venture, womenNo Comments

Perhaps unsurprisingly, <a href=” target=”_blank” rel=”noopener”>new PitchBook data found that U.S. companies with all female founders are raising less capital this year than the last amid current economic woes. Last year, women raised around 2.4% of all venture capital allocated, a figure that stands at 1.9% through Q3 of this year. That number becomes even lower and even worse if we factor race into account. When the overall number for all-female teams was 2.4% last year, Black and Latinx women hovered around 0.05% each, while Indigenous Americans raised approximately 0.004% of known capital in the United States, according to Crunchbase. It has long been a worry that, as the venture market slows, the most marginalized groups would be pushed aside as investors retreat to old networks and deals that feel most familiar to them from the founders they don’t hesitate to trust. The direct line between the venture haves and have-nots has always been stark, but there is some good news on the front. Year-to-date capital invested in all-female-founded companies in the United States is slightly higher than what was disbursed in all of 2020. (Last year was a record-breaking year, and given the current market conditions, it’s not shocking that present-day numbers are meager in comparison). All-female teams raised $3.6 billion (out of a total U.S. figure of $194.9 billion) across 742 deals so far this year. In all of 2020, all-female teams raised $3.3 billion (out of $168.7 billion) across 771 deals. It’s clear that 2021 was an outlier: all-female teams raised $8 billion across 1,132 deals. “There is no logical justification for why female founders should be impacted any more so than any other founder category, be it in a bear or bull market.” Pippa Lamb of Sweet Capital It’s jarring to note the difference between deal counts and the amount of money raised when the founding teams are mixed-gender rather than all-female. Compared to $3.6 billion worth of deals all-female teams closed this year, teams with at least one male co-founder raised $32.4 billion in 2,811 deals. So far, mixed-gender teams have also been able to secure the same percentage of capital they raised last year, around 17%.

Is this really the second-best time ever to raise early-stage capital? • ZebethMedia

By zebethcontrolPosted on October 14, 2022Posted in EC Newsletter, EC venture capital, Startups, The Exchange, VentureNo Comments

“The 2022 venture capital market” is nearly a misnomer, as each quarter that passes seems to bring with it a new normal for startup investment. The pace of quarterly change in how venture investors are disbursing capital is making full-year numbers almost misleading. The change inside of 2022, in other words, may at times mask just how much things have been evolving more recently; January and February feel like years ago in startup time, not merely a few quarters back. Such is the case with the early-stage venture capital market in the United States. PitchBook data paints two perspectives on what’s going on today for younger startups. The first is that 2022 will be, when it closes in less than three months, the second-wealthiest early-stage startup investing period in history. That’s good and we presume welcome news for founders. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. At the same time, however, given successive quarterly declines, we are also looking at an early-stage market in retreat. So is it more important to look at Q3 2022 data for venture segments than year-to-date data for the same, if our goal is to grade, or at least understand, the current startup investing climate?

Q3 data reminds us that venture debt is not a Hail Mary

By zebethcontrolPosted on October 13, 2022Posted in EC News Analysis, EC venture capital, pitchbook, slowdown, Startups, Venture, venture capital, venture debtNo Comments

Venture debt was never meant to be used to bail a company out of financial trouble. And yet, when venture capitalists started to pull back from equity investing earlier this year because frothy market conditions made them realize that valuations were too high, it became a topic of discussion again. Across the industry, from founders to investors to reporters, the rhetoric among many was that we’d see a drastic rise in venture debt this year. But why would lenders want to loan cash to businesses that are being abandoned by their investors due to questionable financials — especially in a turbulent market? Well, they don’t. And despite people thinking they would, Q3 data from PitchBook shows that venture debt will likely see fewer deals and less loan volume this year than during last year’s robust equity market.

Is the venture market slowing or did crossover funds just bounce? • ZebethMedia

By zebethcontrolPosted on October 13, 2022Posted in EC Newsletter, EC venture capital, Kyle Stanford, late stage startups, pitchbook, Startups, The Exchange, Venture, venture capitalNo Comments

As third-quarter venture capital data rolls in, the ZebethMedia crew is busy parsing the numbers. We’ve looked at fintech results, we’ve touched on the crypto market, and we have a climate startup venture analysis coming this weekend. We’ve also looked at the U.S. venture market and its global analog. The main gist is that while VC investment in the United States is slowing, it appears that the global venture capital market is retarding more rapidly. The macro picture is, however, an aggregated dataset. By that, we mean that when we consider all venture capital activity, it often includes some non-venture funds. Say, a hedge fund piling into startups in partnership with traditional VC deal-making. Last year, an influx of non-traditional capital helped push total venture capital numbers to new heights, raising startup valuations, and, at times, cutting into the due diligence process and generally shaking up the VC game. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. But now it appears that non-venture capital is ebbing away, leaving us with an interesting question: How much of the venture market slowdown is predicated on venture investors cutting check sizes and slowing their own deal-making cadence, and what fraction comes from non-venture investors simply bouncing?

Orlando has all the ingredients to be the next big startup hub • ZebethMedia

By zebethcontrolPosted on October 13, 2022Posted in EC venture capital, Orlando, Startups, VentureNo Comments

There’s much potential for Orlando to be what Austin is to Texas, what Atlanta is to Georgia — a booming hub where startups flock from around the world to dream, innovate and grow. The numbers are already showing potential: New PitchBook data found that in the first half of this year, a little more than $360 million was invested in the Orlando-Kissimmee metro area, way more than the $144 million invested in H1 last year. Q2 2022 saw $320 million invested, tracking higher than the $90 million and $30 million allocated in Q2 2021 and 2020, respectively. Not totally surprisingly, Q3 saw a dip from the $160 million invested last year to just near $23 million this year. But compare that to the numbers PitchBook has for Gainesville: Gator City has received just $9.57 million in capital investment this year. Or even Port Saint Lucie, where around $12 million in capital was allocated this year. “We have tremendous amounts of velocity happening and we’ve been quiet in how we’ve told the story, but there is a huge underswell of stealth technology being built here.” David Adelson of the Orlando Economic Partnership “When people hear Orlando, they don’t think tech,” Jordan Walker, the Orlando-based co-founder of the messaging platform Yac, told ZebethMedia. “People automatically think Disney World theme parks, but there is a lot of innovation out here.” “The Orlando tech community is a very inclusive and very collaborative community,” David Adelson, the chief innovation officer at the Orlando Economic Partnership, added. “We have tremendous amounts of velocity happening and we’ve been quiet in how we’ve told the story, but there is a huge underswell of stealth technology being built here.” ZebethMedia conducted a vibe check to see what’s happening right now in Orlando’s burgeoning venture scene, as well as what needs to occur for it to continue thriving. Founders and investors mentioned efforts tapping into the entrepreneurial community, while Adelson highlighted the city’s plans to become the center of the metaverse. All of this could lead to the one thing Orlando really needs in order to make a bigger splash: a beacon. “Every major city has a beacon,” Walker’s co-founder, Hunter McKinley, told ZebethMedia. He pointed out that Miami Mayor Francis Suarez and Austin’s Capital Factory have been leaders in driving innovation to their cities. “Look at niches that seem to stand out in the city and find the most influential people to incentivize them to become a beacon,” he continued. “Orlando needs a Suarez or Capital Factory to take ownership.” Orlando: The Silicon Swamp? Orlando would do well as a venture hub. It has an emerging art scene, an incubator of talent from the University of Central Florida, which is one of the largest schools in the United States, and good weather with a low cost of living compared to Los Angeles, San Francisco and even Miami.

Crypto VC deployment still slow as investors wait for even lower valuations • ZebethMedia

By zebethcontrolPosted on October 13, 2022Posted in Crypto, Crypto Economy, cryptocurrencies, EC Blockchain, EC Cryptocurrency, EC venture capital, Startups, venture capitalNo Comments

Ongoing volatility in the crypto markets is leading to mismatched conversations between venture capitalists and founders — and entrepreneurs aren’t often finding themselves on the winning side. While some crypto-native and general funds are actively deploying capital into the digital asset world, others are taking a slower approach. Over the summer, some market participants anticipated deals would ramp back up in September, but that still seems to be on hold as we move into mid-October and crypto market conditions remain shaky. “A lot of VCs paused deployment over the summer and there’s a record amount of cash right now sitting on the sidelines; that’s not just specific to crypto,” Alex Marinier, founder and general partner of fintech and blockchain-centered firm New Form Capital, said to ZebethMedia. “My sentiment is that the pervasive feeling in crypto right now is fear.” However, Marinier said that the more bearish climate is an attractive time to keep investing, adding that “now is the time to be allocating.” “My sentiment is that the pervasive feeling in crypto right now is fear.” New Form Capital founder Alex Marinier New Form has allocated about 30% of its $75 million Fund 2 to date, Marinier shared. The majority of New Form’s deals for its second fund have been in its target “sweet spot” of crypto startups valued in the range of $15 million to $35 million. But not every fund is going full steam ahead. “Many of us were expecting September to be a gangbuster type of moment where sentiment would be fully back and the events that happened with LUNA, Celsius and BlockFi would have been moved on from,” David Nage, venture capital portfolio manager at the crypto-focused firm Arca, said to ZebethMedia. “But what you’re seeing with these events, while they’re in the past, they still come back to bite us in the proverbial ass.”

Founders shouldn’t bet on a Q4 venture capital resurgence • ZebethMedia

By zebethcontrolPosted on October 12, 2022Posted in EC venture capital, Kyle Stanford, pitchbook, Startups, VentureNo Comments

For the first time in years, it felt like venture capitalists slowed their cadence this summer. In days of yore, such “summer slowdowns” were par for the course, as investors took long holidays in August, leading to a general paucity of VC activity. Then the market went nuts for a few years, and such breaks became rarer as investors, by our read, wanted to stay close to their workstations to avoid missing out on a hot deal that might close in hours or days, instead of the traditional weeks and months. The decline in activity that many of us felt has been reflected in Q3 data that ZebethMedia has analyzed to date. What about a Q4 comeback? But the slowdown was tied in the eyes of many to a possible rebound. Our own Rebecca Szkutak wrote in September that some folks were anticipating a Q4 resurgence of venture capital activity. The bounce back was partially expected due to a “wait and see but come back later” vibe among venture players we’ve spoken to in recent months. But even more, it’s been argued that venture investors sitting on funds that they held in reserve would want to do some deals in the fourth quarter to avoid going to their backers (LPs) and saying, thanks for the management fees; we did nothing with your capital.