Venture Trends Newsletter, Issue #14
I read daily and this newsletter gathers together this week’s most interesting content I saw related to the venture capital and startup ecosystem. I hope you find it useful as well as being a time saver.
This week’s free issue includes content from NFX Ventures, Jean-Louis Gassée, Fred Destin, Holly Quinn, Maren Bannon, Bill Gurley, Ophelia Brown, Rob Go, Episode 1 Ventures, Techcrunch, Harvard Business Review, New York Times, The Information, WIRED, Paul Graham, CrunchBase News, The Block and many more. Topics are the ones that dominated the week.
- The return of the Barbarians – VC term sheets
- What about the next round of financing?
- Great ideas born now….
- YC to stop automatic follow ons
- Libra is shrunk, AZ16 raises $450m for Crypto/Blockchain
- NFX innovates with “The Brief”. Investing $20m in weeks, guaranteed.
- No bailout for startups, it would be ethically wrong.
I email the newsletter each weekend. There is little or no commentary included, it is the things I found compelling or interesting.
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This report shows a slow pre-pandemic start to 2020 VC deals
In the Greater Philadelphia area , the first quarter of 2020 saw $193 million invested into 12 companies, according to a recent PricewaterhouseCoopers (PwC)/CB Insights MoneyTree report — a 36% drop in dollars spent compared to Q1 of 2019, and a drop in number of deals by about half.It’s hard to conclude much of anything from 2020’s first quarter numbers for venture capital deals in the region, as the majority of Q1 took place before the COVID-19 pandemic hit the state and shut it down.
Almost every VC *publicly* says they’re investing.
But now early stage VCs not only have to ask themselves, will the company work?
But also, will someone be there to fund the next round? And how would it be priced in 12 months?
This uncertainty is causing decisions to down.
— Maren Bannon (@Maren_Bannon) April 17, 2020
Why Now Might Be The Best Time For Great Startup Ideas
“Actually we think its perfect timing because in times of crises, in times of dislocation, that’s when some great ideas are born,” says Ophelia Brown, whose Blossom Capital venture capital firm has just launched a new angel program called Cultivate.”For any new business that started out in the past six to 12 months, the spread of coronavirus and its impact is highly unlikely to have been a part of any startup’s risk analysis or disaster recovery plans,” says Oly Bell, co-founder of edtech startup Xcademy.
This is a good primer of some of the more aggressive terms that may be coming for founders raising in a weak market https://t.co/MhgBxEmKLM
— Rob Go (@robgo) April 17, 2020
Leaders, Do You Have a Clear Vision for the Post-Crisis Future?
And to do that right, you need to have a longer-term vision of what you aspire to become in five or even 10 years — a north star that will focus and help shape your thinking about the short and the mid-term.Working backwards, lay out a path from your long-term aspiration to the mid-term (your post-crisis focal point), and from there to today.
Should VCs invest in young or old founders? Using hard data, we find out.
There will no doubt be companies and founders missing from my data, although I don’t believe these omissions have any significant impact on the results.VCs throw money after young founders, who do, with buckets of capital, manage to build big businesses.
Stepping into a Leadership Role? Be Ready to Tell Your Story.
Another warrior who was a nurse said her biggest concern was whether the new leader “really knows how to do my job.One warrior technical professional for a large high-tech firm, for instance, said that what he wanted to know from a new leader was “… have they actually done the job, or do they just think they know what the job requires.
The Fundraising Founder: Understanding the Steps from Ideation to IPO
Many people don’t realize that only 1 percent of funding for startups comes from venture capital firms, and that 24 percent of startups find funding from friends or family and more than 80 percent are self-funded.This shouldn’t deter any businesses from seeking venture capital money, but these are truths that are often overlooked when seeking funding and why so many turn to family and friends or self-funding.
Changing policy, Y Combinator cuts its pro rata stake and makes investments case-by-case
In a message posted to its internal communications channel earlier this week, the massive startup accelerator Y Combinator said it will change the terms of its own PPP (the YC pro rata investment program) and investing in companies raising seed and Series A rounds on a case-by-case basis.The reason for the change is that the number of companies in its portfolio has gotten too large for it to invest and some of the limited partners who back the accelerator’s operations are balking at making commitments to the pro rata investment program.
Facebook-Backed Libra Cryptocurrency Project Is Scaled Back
Matthew Davie, the chief strategy officer at the microlender Kiva, and one of five board members of the Libra Association, said the coronavirus lockdowns had underscored the need for a more functional digital payment system like Libra that allows people to pay for things even when they are stuck at home.The Libra Association said it had begun the process of getting regulatory approval for the payment network from the Swiss Financial Markets Supervisory Authority.
Opendoor Lays Off About 600 Employees
Home-buying startup Opendoor laid off more than 600 employees Wednesday, one of the deepest cuts from a private tech firm since the coronavirus outbreak sent the economy into a tailspin.
Attentive raises another $40M for mobile messaging, will invest in helping customers respond to COVID-19
Sequoia Capital Global Equities and Coatue are the new investors in the Series C.Apparently, the number of new customer sign-ups is only increasing, with Attentive now working with more than 1,000 businesses.
Venture-Backed Startups Debate the Ethics of Taking US Loans
“We’d heard from a number of people that it was, in their words, ‘free money.’ And it is most certainly not,” says Seth Levine, founding partner of the Foundry Group, a Colorado-based venture firm that has invested in Rover, Molekule, and other early-stage tech startups.Like Levine at Foundry Group, Wenger says Union Square has urged some portfolio companies not to apply for aid.
Anna Pinol, chief marketing officer and one of four co-founders at Jupiter, a grocery delivery startup, says business has been booming – but the company is thinking ahead in case a planned raise in six months’ time isn’t possible.The start-ups and venture capital investors that make up the US tech hub around San Francisco recovered from the dotcom crash and pressed on through the financial crisis.
VC market set to shift towards investors for the first time in years as coronavirus mutes company valuations
VC market set to shift towards investors for the first time in years as coronavirus mutes company valuationsThe venture capital industry is bracing itself for a prime investing opportunity as the ongoing coronavirus crisis look
VC activity goes upside down as seed deals fall and mega-rounds rise
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between. Earlier today, PwC and CB Insights dropped a sheaf of data concerning the global and domestic Q1 venture capital market, something we’ll be yanking data points from here and there for a few days.
Mere rate of shipping new features is a surprisingly accurate predictor of startup success.
In this domain, at least, slowness is way more likely to be due to inability than prudence. The startups that do things slowly don’t do them any better. Just slower.
— Paul Graham (@paulg) April 14, 2020
NFX Speeds Up Seed Funding With New Nine-Day Process
We spoke with both NFX founders Pete Flint and James Currier , who have been honing their model over the last two years and planning to launch a more streamlined process; this seemed the right time to announce their initiative.NFX , a well-known Silicon Valley seed fund, is looking to change that time line for founders.
Lightspeed Boosts Three Funds With $4B
The multistage venture capital firm focuses on innovations and trends in the enterprise and consumer sectors, and has made nearly 800 investments and helped more than 400 companies since its inception in 2000, according to Crunchbase data.Lightspeed Venture Partners secured more than $4 billion across three of its funds in order to support early- and growth-stage entrepreneurs around the world.
The global economy is expected to shrink by 3% this year
Growth will bounce back once the pandemic passes: the fund expects rich countries to grow by 4.5%, and poorer ones by 6.6%, in 2021.Output in advanced economies is expected to shrink by 6.1% in 2020; in poorer countries it is forecast to fall by 1%.
Sixty-two venture capital funds raise $21B dollars last quarter
62 U.S. venture capital firms raised approximately 21 billion dollars in the beginning of this year, according to PitchBook and the National Venture Capital Association. Yahoo Finance’s Melody Hahm breaks down how venture capital funds are faring in the midst of the coronavirus.
VC Funding Rebounds In China As COVID-19 Lockdown Ends
Venture capital funding is starting to bounce back in China after the coronavirus triggered a slowdown in what was already a stagnant climate for startups, according to a report in the Financial Times on Monday (April 13).Data from the Asian Venture Capital Journal showed increased funding activity in March, with investors seeking discounted deals among Chinese startups .
Andreessen Horowitz is reportedly raising as much as $450M for new crypto fund
The Financial Times reported Tuesday that Silicon Valley investment powerhouse Andreessen Horowitz (a16z) is seeking to raise $450 million for a second crypto-focused fund. Citing “two people briefed on the matter,” the FT said that the a16z “could finalise the new fund in about a week but has not yet placed a hard cap on its size, one of the people said.”
The 5 reasons why ‘traditional’ tech VCs aren’t backing crypto-networks
Since crypto is like no other market I’ve seen before, investors are having trouble crafting a thesis that aligns with their understanding of what makes a good or bad investment decision.The first step in crafting a macro-thesis demands investors to see the ‘grand vision’ crypto proposes, so that any investment decision they make in the near-term will be — in their eyes — future proof, by aligning with their long-term outlook.
Let’s be candid. If you believe in business & capitalism, then there are zero circumstances where the government should bail out equity holders. $GM and $GS were mistakes. If the gov’t is the lender of last resort, they should own all of the equity. I invest in equity as my job.
— Bill Gurley (@bgurley) April 13, 2020
I invest in equity as a living, and I beg you – wipe the equity. The world otherwise is way worst off. https://t.co/UMShEgxlx3
— Bill Gurley (@bgurley) April 13, 2020
10 Post-Coronavirus Trends for Life After Quarantine
With the rising cost of urban housing and the limited space for kids, I think you’re going to see a serious migration of families, especially those with jobs that could work from home at least partially, into the burbs.While some people report actually missing their commute—and the act of seeing new strangers every day—it wouldn’t be surprising to me if everyone who formally worked in an office does at least a day or two out of the house going forward.
Accelerating Working Capital
Sandy goes on to calculate that the world’s “150 million small and mid-sized businesses, employing 60% of the world’s working population and generating nearly 50% of the world’s GDP, are owed more than $16 trillion by their customers, half of which are large companies.”The greatest financial relief we can give small and mid-sized businesses in this economic crisis is faster payment of their outstanding invoices — liquidity.
Ten Reasons Every Company Should Be Raising Capital Online Right Now
Through the new JOBS Act you can raise money on an online portal and allow any investor to participate in your offering.Through online portals, your entire team can help raise capital.
FortuneAmazon adding another 75,000 jobs
The Softbank Clause
Barron’s is out with a front page story about the problems at Softbank .Twenty years ago Masa made $140 billion from his $20 million investment in Alibaba (golf clap).
Early stage prices will drop as Series A crunch happens over next 3-6 months.
Teams who raised seeds at bloated prices will raise flat/down round Series As if lucky.
Many will go out of business.
The “failed Series A” stories haven’t been told yet. When that happens watch out.
— Jeff Morris Jr. (@jmj) April 11, 2020
A q I often get asked is “What verticals do you like?” The truth is there are some ideas in our sweet spot in lots of verticals & many that are not. One axis I care a lot about as a small fund is capital leverage. Most new entrepreneurs should care about this too.
Let’s dig in:
— Elizabeth Yin (@dunkhippo33) April 12, 2020
Bailing Out Innocents And Sinners
As a result, we — or the people who are supposed to work for us — are going to pour our money into the car industry because it’s too useful to fail. John Smith gets his $1,200 government check, goes to his neighborhood ATM, feeds the paper rectangle into the machine.
Where social startups will get funding in the future
While consumer tech has matured as a startup category in recent years, many investors continue to be bullish on specific trends like online gaming, voice, and the unbundling of platforms in favor of focused social networks.Instead, as Connie Loizos covered for us on TechCrunch , he said he didn’t have time to talk to more founders because he was so busy helping existing portfolio companies.
Bitcoin Supporter Palihapitiya Doubles Down in Viral Tweet: No Bailouts, Let Hedge Funds ‘Get Wiped Out’
The U.S. shouldn’t bail out billionaires and hedge funds during the coronavirus pandemic, Social Capital CEO Chamath Palihapitiya says.The former Facebook executive and Bitcoin investor , who has a net worth of roughly $1 billion and has referred to the leading cryptocurrency as ‘ schmuck insurance ‘, argues that the US government should support individual Americans directly by giving them larger payments instead of funneling massive emergency funds and stimulus packages to rescue the wealthy.
Uber, Didi, and Grab Are Causing Big Problems for SoftBank’s Vision Fund – Barron’s
SoftBank is likely to write down the carrying value of each of its ride-sharing investments when it reports March quarterly results, expected in May. The Vision Fund has already written down $1.4 billion in its transportation portfolio to date.A Vision Fund spokesman says the large capital outlays have given its portfolio companies the cash they need to survive difficult times with minimal need for debt.
Startup funding during the crisis: What’s really going on?
Of course companies whose volumes have dropped off any kind of reasonable growth graph are going to be harder cases to make, but I’d argue that if your business model and the proposition that you have were long-term sustainable, and this is a blip in the curve merely, and it is a sustainable business model, I don’t see a reason why you wouldn’t look at something that’s disrupting fundamentally inefficient, usually high-margin industries.No sectors are ‘off-limits’ — investors are still investing for the long-term — but they’ll be paying close attention to what growth looks like and where it comes from over the next few months.