VCs ask founders a lot of questions. It’s a big part of their job. They’re deploying other people’s money and just as founders have an obligation to make money for their investors, venture firms have an obligation to bring preferably significant returns to theirs.
Founders need to ask investors questions, too. The most important one (or two): are you still deploying funds/when was the last time you made an investment?
PitchBook recently reported that the number of VCs in US deals peaked at 18,504 in 2021 and fell to 9,966 last year.Read More...
We recently hosted a very successful serial founder and sometime investor at our online Investor Insights, who just launched yet another company – his third. It was fascinating to listen to both his advice – and his history. His first company was quickly acquired by Google, which was ‘clearly’ a win, but careful there, founders: great to be ‘adopted,’ but not all ‘parent’ companies are the same. He served his time, celebrated the day the golden handcuffs came off, and quickly launched his next company, which pivoted a few times, as all companies do, but did find its footing and a sustainable revenue stream. Acquisition offers were proffered and rejected, perhaps since the entrepreneur had been there, done that.
The company is still alive and well and turning a profit to the tune of hundreds of millions a year.
Tech is and has been referred to as the wild, wild west since the early days of Web 1. Like those pioneers who ventures out into terra incognita when the west was being settled, those web pioneers didn’t know what they’d find, and even in their travels, they were making it up as they went along.
Head’s up: the same goes for investors. There’s no startup handbook, although there are books that bear that title. There’s no investor handbook, either. Which is why founders may hear one thing from one investor, get totally different feedback/advice from another. And yet different feedback/advice from a third, and so it may go, all the way down the line.
How often have we heard that slow and steady wins the race? We’ve been looking at funding reports lately and there’s no doubt that this has been a banner year for both funding – and exits. Win-win for both sides of the table, and all the better when seemingly everyone wins, what, eh? Or do they? And funding, in some cases, seems to be happening at incredible speeds.
According to Pitch Book, Venture capital rewrites the record books, with “Venture-backed companies having attracted $150 billion in 2021, more than 90% of last year’s record total…IPOs and SPACs helped to drive the exit value of venture-backed companies to $372.2 billion in the first half of 2021. That was 30% higher than 2020’s all-time record…Firm-level fundraising also (took off), with investors closing funds worth $74.1 billion, about 91.5% of 2020’s record-breaking amount. And Deals, exits, funds—US VC’s records for value are going to get even biggerRead More...
Ok, so you’ve done your pitch deck – revised it ad infinitum, based on the feedback you’ve gotten from everyone you know and his or her fourth cousin twice removed. Now you’ve secured a few investor meetings, via Zoom. Where’s that investor pitch meeting template when you need one?
Brian Cohen spoke at our virtual investor breakfast recently and imparted some pearls of advice to help you with that one, some of which we’ll share with you today, with a few additions of our own, along with points other investor friends and previous Investor breakfast speakers of ours have made in the pas.
First, meetings these days are done via Zoom. Show your face. At least at the outset of the meeting. Not a photo, nyour initials, not your LinkedIn photo, which is no doubt a selfie and doesn’t look all that great anyway – the real you – and the other team members who may also be on the call. Why? Investor(s) want to get to know you and yours, and much is conveyed via your visage and facial expressions. Do you smile? At least occasionally? Investors – and Brian referred primarily to angels – after all, he was Chairman of the New York Angels for a decade before co-founding New York Venture Partner – and has invested in literally hundreds of companies over the years – have to like you. This is a partnership and a potentially a long one, so they want to see you – if only on a video call. For now, at least.Read More...
Trends in Funding: The Silicon Valley Climate Change
If you want to know what investors are thinking/looking at these days, a must-read is Elizabeth Yin’s (@dunkhippo33 @HustleFundVC – VC investing in hilariously-early founders) recent series of tweets:
“1) At the early stages (call it pre-A or the whole “seed range”), I’m seeing lots of bifurcation. On one hand, in the Silicon Valley, for some founders, it’s never been an easier time to raise. 2) These founders, largely serial entrepreneurs/pedigreed founders (based on schools & work), are highly sought after even at the pre-seed stage. 3) So with these founders (mostly in SF), I’m seeing massive party rounds — like $3m-$5m seed rounds. Sometimes higher! No product / no traction. My friend – fantastic founder – raised $8m recently. $30m+ post-money, no product. If you have this background, raising is EASY. 4) For non-pedigreed founders, if you are running a SaaS company & have some rev traction, also pretty easy to raise. VCs have gone gaga over SaaS in the last 2 months. They think predictable cap efficient companies are the way to go in light of issues at unnamed marketplace cos 5) And then, there’s everyone else. Still HARD to raise money. Even in the Bay Area, if you don’t check said boxes above. Outside the SF Area, even harder. 6) So we have a weird Goldilocks & the 3 bears situation. Some companies are really HOT. Others are really cold. The range of valuations are insane. Everything from < $1m post valuations to $30m+ for PRE-SEED! 7) The press mostly writes about the hot deals. After all, no one wants to read about someone’s poor fundraising situation. So, now everyone thinks Silicon Valley is littered with gold. The reality is that SF mostly has poop on the ground. 8) Then there’s the downstream. The later stages. In 2020, I think raising a series A or a series B will become incredibly challenging. (fundraising always is, but even more so than last yr). 9) Why? VCs all of a sudden care about profitability. Your co still needs to be growing at 30% MoM AND also profitable! (unclear why you need VC in this case but that’s beside the pt 🙂 )”
Actually, that is the point.
We know that raising funding is considered by many an entrepreneur to be a trophy of sorts, or a even proof of concept. Great! If you need the confirmation, go talk to investors – but bootstrap as long as you can. As an investor pointed out at one of our breakfasts, once you’re on the VC treadmill, there’s no getting off. And it’s not free money: You’ll be under more pressure and scrutiny that comes with it, especially in this funding climate.Read More...
