Every conversation I have with early stage VCs seems to lead to how crazy the market is.

And whether the frothiness will continue or stop in the next year

More >>
1) To be clear, this is in reference to a lot of mind boggling series A rounds being done recently.

AND not every company is raising these crazy rounds. But enough to make ppl talk.
2) Specifically what I’m seeing a lot are companies with limited traction - what I would call “seed traction” get huge multiple mark ups on valuation.

Series A valuations at 100x (or more) of yearly revenue!
3) These are often in great companies but effectively series A investors are paying up a lot just to get their money in.
4) On one hand, this makes my paper returns look nice and some founders can avoid either dilution or raise a lot more capital per the dilution.
5) But there are high expectations for performance when you’re now worth say $90m and have < $1m runrate.
6) Its unclear when the party stops but my advice to founders who can raise this type of round would be to set expectations with your lead. If you don’t have clear PMfit, spending a lot of cash is probably not wise. And its worthwhile to stretch the money.
7) Downturns in mkts occur when investors get nervous.

There are a LOT of seed investors right now who are getting nervous but they don’t control the series A dollars. We’ll see if this has a trickle down effect.
8) To be clear, I don’t think we are headed for a recession. But a dip in valuations at the series A is quite plausible.

And we wouldn’t need a big dip to affect a lot of companies who raised one of these As to get “stuck”.
9) My advice to companies would be to pare back on burn if you don’t have pmfit. Even if you have a lot of cash.

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Elizabeth Yin

Elizabeth Yin Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @dunkhippo33

14 Jul
Today's building in public thoughts - it takes a long time to build processes, set culture, hire, onboard, and build out a generational business.

And this is what we've thought about and have been working towards since day 1 of @HustleFundVC.

Read on >>
1) A lot of entrepreneurs ask me / cold-email me, "Have I seen their deck yet? Or can they chat with me?"

In most cases, the surprising answer is no.

Although we're only on Fund 2 of Hustle Fund, I'm actively working on the transition of this.
2) Don't worry future LPs, as a GP, I'm still involved in the final decisions!

But, it's important to work towards scaling the operations of this business so that if I get hit by a bus, I'm not needed.
Read 12 tweets
13 Jul
There are many confusing things about the definition of product-market fit. How speed factors into it is one of these confusing points.

Today's thread is a deep dive into that.

Read on >>
1) First, what is product-market fit?

I've tweeted about it here a while back:
2) @hnshah has a great compilation of other people's definitions which all get at the same thing:

Read 18 tweets
2 Jul
A # of friends who have had success w angel investing have asked me whether they should start a microfund.

There are reasons to do it & also not to but today’s thread is strictly about the economics.

Tl;dr most fund mgrs - even the best - won’t make much $$.

Read on >>
1) When most ppl say VCs are rich, they are really talking about big vcs.

In fact, many microfunds have a worse cash position than many of the startups they back!
2) Most fund mgrs get paid on a 2 and 20 model.

The 2 represents 2% - this is the budget of the fund.

So a $10m fund * 2% yields $200k in budget every yr for 10 yrs.

This budget covers salaries but also marketing, travel, etc
Read 17 tweets
29 Jun
We have over 270+ portfolio companies @HustleFundVC now of which, I'm the point of contact for.

People often ask me how do I have time to take so many meetings??

Here's my secret and an unpopular tactic...I relentlessly cut mtgs.

Here's how / why / and gains I've seen >>
1) First, the pros and cons of mtgs:

Pros:
-feel connected w/ someone

Cons:
-inefficient time use to receive ideas
-inefficient way to do actions
-introduces weird biases
2) So given this, if you need to build rapport w/ someone, then you should definitely take the mtg. In fact you should take lots of mtgs!

This could be for:
-building morale w/ a teammate / founder / etc
-building a relationship w/ someone you're trying to recruit for something
Read 18 tweets
24 Jun
Today's tweet thread will share some data that we've collected @HustleFundVC about the startup landscape that we shared at our LP mtg in April.

What did valuations look like last year? How do they differ by geo?

Thanks to @will_bricker for pulling this together!

Read on >>
1) The red line represents the median valuation that founders *asked for* when applying to Hustle Fund.

You can see that last summer during COVID, valuations that ppl were requesting took a real dive.
2) I often say that valuations are not about progress or traction but are about supply and demand. Supply of your fundraising round and demand from investors.

The companies who were applying last summer were not any "worse" than usual -- the market of investors simply dropped.
Read 13 tweets
23 Jun
Today I got to catch up with a @HustleFundVC portfolio co that got to $1m+ runrate in less than a year. 🤯

I'm so impressed with this team.

Read on to see how they did this >>
1) Some context - this is a company we incubated at the start of the pandemic. That said, < $500k in total has gone into the company.

So, this co has been incredibly lean and only raised most of that more recently.
2) T = 0. The team identified the problem and just started talking with wouldbe customers.

No product.

They started selling a service and mostly manually fulfilled it in an "agency-like way".
Read 10 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!

:(