What is really happening with VCs right now?
Here's my take partly based on conversations and partly based on my own life:
1) Everything has changed. AND things are business as usual. How can both be true?
Read on...
Here's my take partly based on conversations and partly based on my own life:
1) Everything has changed. AND things are business as usual. How can both be true?
Read on...
2) Before we answer that, let's first get the lay of the land. Just like how you want to understand your customer's day-in-a-life experience, it's key to paint a picture of an investor's life now. I'll use mine as a bit of a proxy.
3) For me, my day starts before 7am when my young kids wake up. Then it's getting them off to "school". Requires hand-holding since they are little. Keep in mind, I'm not even doing anything fancy. Case in pt: the 2nd one - I just put him in front of the tv / ipad all day.
4) In between answering all their qs, I am on short calls and answering emails. Modular work but stuff I would need to do normally. At 2pm, I switch off with my husband.
5) Why so many calls and emails? There's more than usual. Portfolio companies. Other investors. Everyone wants to trade notes on what is going on and how can we all survive / do better cash management. Volume on all of this is UP for sure.
6) 2pm onwards I do focused work & more calls until dinner and then after dinner, continue until midnight. Rinse and repeat. There's just a LOT more calls these days.
7) For example: the SBA loans are opening up on Fri - this is a topic we've pinged a LOT of ppl on. We did an impromptu webinar on this for our portfolio cos today. @will_bricker on our team did a LOT of research on this. See his work here: github.com/wbricker29/HF-…
8) I bring this up as an example, because in this current environment, there are constantly new topics that come up that we need to research and chat w/ ppl about every day, every week -- things that normally don't show up in regular life.
9) So when VCs say they are looking at new deals or they are not looking at new deals, it's all a bit frazzled right now. No one really has bandwidth to focus on anything (for better or worse). It's all chaotic.
10) So take us @HustleFundVC we ARE actively looking at new deals. And we are STILL at the same new investing pace as before (1 new co per week). BUT there's also just SO MUCH MORE on our plates than usual with current portfolio companies and changes in the landscape.
11) So what gives? Well...sleep. Btwn home life being more time consuming and work being more time consuming, basically you give up sleep. Not every VC wants to do that. Many will not. So those VCs are not actively investing even if for just logistical reasons.
12) And then there are other reasons yet. Some investors are trying to time the market. Take advantage of lower valuations and less investor demand. The thinking here is that if enough time goes on in this state, there will be bargains to be had. I'm of 2 minds here:
13) A) Yes, I do think valuations will go down. They haven't really gone down yet. But they will. Give the market a few months. Angels and microfunds are still quite active. Sand Hill VCs -- more or less at a halt. B) But, I also don't believe in trying to time the market.
14) So we do deals as we see them if we think they are good. As a small fund, we are valuation sensitive in *any* market, but we are long term investors and take the long view on the value of companies.
16) And if you are building a physical product, this might just be a deal breaker. Many investors want to meet in person and interact with what you are building. That's just tough given the lockdown situation.
17) So tl;dr - everything is slower and more chaotic because of work and personal life take more time. More time is needed for *everything*. Need lots of patience. Smaller investors are still fairly active. Larger funds are not really. Valuations haven't really dipped.
