VC Minute – quick advice to help startup founders fundraise better.
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I think people speak about venture capital and its sort of swift decline from the peak of 2021, and there’s not a lot of nuance about that discussion.
If you just look at total invested capital across all of the , 30 7,000 startups on Carta, It did peak in 2021, right? There was a gigantic spike. It was close to 66 billion in a single quarter in Q4 of that year. And then Q1 of this year, it was 12 billion. So you’re going from 66 to 12. That’s a giant decline.
But what’s missing from that is that A ton, a huge percentage of the capital that is not invested in those intervening quarters. , it was going to go to late stage companies. So you’ve got places like, Series D, Series E, these close to IPO companies where invested capital is down 80 to 90% over that time period.
Whereas if you’re focused on the seed stage or Series A, yes, there is less capital going into it, but it’s only down 30 to 40%. It maybe took a real shot, but it is in no way sort of down for the count the way that late stage financing has been. So early stage venture has hold up much better than late stage venture.
We have a lot of great data on Carta about the number of angel investors that are investing into a given company per month. We define angel investors on the platform as any individuals that are writing a check between $1 and $25,000 into a pre-seed company. So maybe your definition of Angel is bigger than that, smaller than that, but that’s the one that we’re working with.
in 2020 there were about six to 700 individual angels that wrote a check into a company every month on Carta. There in 2021, that number was up close to 1200. So basically twice as many. And in 2022 it was still really high, like 1100 or so
. A lot of people found their way into angel investing. I think in 2020 there was a big boom in it. , this was operators that had formally been at startups. This is people that were kind of not even associated with the startup ecosystem as a whole, just kind of getting excited about this newfangled thing.
And in 2023, we’ve seen the number of angels really retreat. But it’s still higher than it was in 2020.
That tells me that there were a lot of people who maybe did 1, 2, 5 angel investments over the past three years, and just because money is maybe a little tighter now, or inflation or whatever it is, they’ve decided not to invest in that part of their portfolio any longer.
But the professional angel class people who are writing 10, 20, 30 checks a year, They’re still writing checks.
Angel investing, while it’s not where it was at the peak it’s definitely, I’d say found a floor higher than in 2020. And I really expect that floor to remain. At least out here in San Francisco, you throw a rock and you find an operator who also wants to be an investor.
We can end on a note of optimism here. This is a fantastic time to start a company. It may be a slightly more difficult time to grow one. But in terms of the level of access, education and capital available to early, early stage entrepreneurs, it literally has never been better in the history of vc.
All sorts of different kinds of fundraising are available to you from convertibles and safes. A lot of startups are being started right now by people who were actually laid off from big tech and are using this time to sort of explore new ideas that are interesting
. Advancements in automation and AI maybe make it easier to start something with one or two people that may have taken five or six people earlier on. So you can get ideas off the ground. You can use no code tools to. Code these MVPs and just get out to the market in much, much more quick fashion than, than used to be possible.
We think it’s a wonderful time to start a company. And if you’re a founder who’s already started one, we’re rooting for you at Carta for sure.
Thank you, Peter for coming on the show and sharing your insights with us. What did you think of Peter’s insights? What was the most helpful for you?
Do you share his note of optimism? That it’s never been a better time to start a company? I tend to agree with him that it may be difficult to grow but if growing was easy, then everybody would be doing it.
What do you think? If you’re on Substack, join the conversation over there; leave a comment with what you think. If you’re not on Substack, subscribe to our newsletter, head to VCminute.co and drop your email in the box at the top of the page.
Thanks everybody. Time is our most precious asset. Thank you for spending some of it with us. Have a great weekend.
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