What the *(&%#*(@&%(* is going on in the market???
This is my take, but I'm often wrong, but you get what you pay for. :)
Read on >>
1) First some context - last March, public stock prices plunged as we braced for the pandemic in the US.
Personally, I thought it was going to continue plunging, but it stopped & ended up rising to almost pre-COVID levels for sectors that had been HIT HARD (travel etc)
2) And for companies that THRIVED in the pandemic (Zoom, Shopify, et al), they had an enormous run in 2020!
Meanwhile, the private markets had a slightly different trajectory. In the spring & early summer of 2020, VCs basically halted investing.
3) Most VCs I spoke w/ at that time had paused for a lot of reasons:
-too many personal issues were higher priority
-didn't know how to get comfortable w/ teams via Zoom
-worried about macro-conditions & wanted to save capital for their current portfolio
4) But by Q3 and Q4, VCs were on a tear again! They had figured things out during the pandemic incl how to make decisions via zoom. And tech, as a sector, was actually booming and thriving during the pandemic.
5) In addition, VCs have investing mandates. They have a certain amount they NEED to deploy into startups across 3 years.
To sit out for 15%-20% of that time is a LONG time to be paused.
6) So we started to see tons of deals happen in the late fall and winter of 2020. I've never seen so many investors so busy during the winter holidays / end of year before!
And it's a mad rush now as well! VCs must deploy all this capital they raised.
7) To the pt where I've never seen deals get done in "Silicon Valley" *this quickly*. I'm seeing companies get raises done in days if not sometimes in 48 hours.
To be clear, this is not the case w MOST cos, but for the ones who are getting financing, it's happening faster.
8) Where is this money coming from?
-Certainly from VC funds who NEED to "catch up" and deploy
-from angels who have made money w/ the rise in tech stocks & new IPOs
9) Some futuristic predictions: this boom will continue through at least the end of the yr. Why?
-More stimulus $$ on its way (& ppl seem to put this into the stock mkt ala GME which mints more angels)
-there was already a LOT of $$ on the sidelines from the last few yrs
...
10) cont...
-startups are hip and exits are bigger than ever -- everyone wants; this creates more angels
-the inet gen is old enough to have $$ & understands startups
-concerns about inflation! ppl want to move into high yielding assets to "keep up" (fred.stlouisfed.org/series/M1SL)
11) cont...
-new tools / platforms make it easier for retail investors to invest in private mkts (Angellist, EquityZen, Republic, et al)
-as we pull out of the pandemic, more optimism will fuel the mkt and economy as a whole
12) It has NEVER been a better time for founders *globally* to raise money -- EVER!
13) Words of caution:
-Not all founders are on this bubble train. This is bifurcated still - depends a lot on geo, demographics of founders, sectors
-Too much frothiness is BAD - founders will have to 2x+ valuations by next round - make sure you can do this!
14) I told one of our largest LPs this this wk:
When you see your portfolio founders receiving inbound term sheets from VCs who don't know anything about the business (incl revenue metrics), that is a BAD SIGN.
This will not end well.
15) However, I don't think the party will stop this year. But at some point, the party will stop (maybe 2-3 yrs from now), and we'll see what happens.
Of course, what do I know? Ppl have been talking about stopping the party for years now, and it just keeps going. 🥳🎉
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1) Yesterday I had a call w/ a portfolio founder - he was going through really tough times. He was running out of cash & had to let go of a lot of his employees. The pandemic has not been easy for him. His mental health is in a rough spot
2) Today I saw the latest markup on a company I backed in 2015. 76x net paper markup! I could not be happier for that founder & company & was thinking about the two situations.
They're actually more alike than you might think.
3) My past portfolio co, like so many, couldn't raise any money. Didn't have fast growth for 4+ yrs. Had a couple of restarts. Insane scrappiness. Tearful conversations even.
In fact, they retain a lot of equity, BECAUSE no one would back them for so long.
Today's thread builds off a question I've been hearing a lot about in the last 24 hours.
As a founder, what do you do if investors tell you they're committed to investing if there is a lead?
1) First off, let me tell you how EXCITED I was when I was told this when I was raising for my past startup. I thought that it was so great that I was getting commits.
And I would often respond, "Ok! I'll come back when I have a lead!" This was a big mistake.
2) It turns out most of the time when investors tell you they are committed to investing if there's a lead, it's not a lie, but it's also not a real commitment.
It's the easiest way to tell a founder no without actually doing so.
In today's tweet thread, I want to tell you a bit about my journey and why I'm such a stickler for customer acquisition. That seems to be the only drum that I'm beating, but it is SO SO SO important.
Read on >>
1) In late 2008, I quit my cushy job at Google to start a company. At the time, I think I was more enamored w/ the idea of starting a business rather than having a specific problem to solve.
But we all remember that time - it was a TOUGH time. No one would fund me.
2) And for those who did get funding, I remember valuations in kickass businesses in Silicon Valley being around $2m post-money. Seems laughable now. But ppl felt so grateful to get those offers.
There's this adage that's floated around for YEARS that you should try to find investors who have invested in companies similar to yours.
But, I think the advice, should be nearly OPPOSITE.
Read on >>
1) First some context. Years ago, when I was pitching my ad startup LaunchBit, I was advised that I should try to find investors who invested in ads.
So I researched all these VCs who had ad companies in their portfolio.
2) The common response from all of them was that they were not likely to invest in more ad companies. They were either over-indexed on ads. (i.e. had too many ad companies) Or they didn't want direct competition amongst their portfolio companies.