VC Minute – quick advice to help startup founders fundraise better
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Rich Maloy:
This is Rich Maloy with SpringTime Ventures, bringing you the VC Minute, quick advice to help startup founders fundraise better. Last week, we hosted a public event to present the Seed Crust Market Report. I was incredibly grateful that Peter Walker from Carta came and joined us.
This week, I want to share with you insights from that event, whether from me, or from Peter, or from my partner, Allyson. If you want to watch the recording of the event or download the market report, head to stvc.us/sc—as in seed crust. I hope you enjoy it because it was a ton of fun to do.
But first, I want to thank AVL Growth Partners. Outsourcing your finance and accounting functions is a no-brainer for startups, and you need to work with a firm that specializes in high-growth companies. Founded in 2009, AVL has fueled the success of over 1,200 early-stage companies, specializing in raising capital, M&A, financial modeling, scaling, and bringing financial transparency and a disciplined approach to the companies they work with. Head to AVLgrowth.com and explore how they can be pivotal to your growth. AVL Growth Partners. Your success. Their expertise.
Now let’s dive into that market report. By Q3 of 2022, you started to see VCs shift their strategy from a hot market strategy to a cool market strategy. I was estimating that there would be, on average across the industry, one fewer investment per month, so basically three fewer investments per quarter. And it came pretty close to that.
I was also worried about something that in our LP meeting I called the bifurcation of seed, but I like catchy titles, so my market report was titled “Hot or Not Pool Party.” Your round is either hot, or it was not. This has really persisted. There’s an element of this that makes me sad about that separation. But this is really how the market has continued, where for some founders, it feels like it’s 2021, and for everybody else, it feels like it’s 2001.
Peter Walker:
And Rich, just to double down on that, I think sometimes when we kind of tell founders this—because we say this at Carta all the time—we call it a barbell market where there are founders who seem like they’re getting everything, and more from the 2021 ZIRP days, then founders who can’t buy a meeting with the right people. And a lot of that feels unfair, and we’re here to tell you that it is. It is unfair.
People with a profile who have a couple of successful exits will get meetings, valuations, and cash that those who may have a better idea but can’t prove it with credibility will not. And it is definitely not an equal marketplace. And that feels shitty, honestly, to say, if I can cuss on this, sorry. But it’s just the way that venture works. So, it’s no fun for anybody.
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