Hopefully everyone had a great Thanksgiving and is working to finish 2023 strong - phew this year blew by! I've also been head's down in the 'day job' (Spiffy) but thought I'd come up for air one last time before the end of the year to share some things. One of them is Grinchy, so I'll do that first then end with better news.
This episode has three segments:
o Venture funding environment getting tougher
o Two good pieces of content (videos)
**********Venture funding environment getting tougher******************
I hate do be 'that guy' (also yells at kids playing in their yard), but logging > 25yrs at this startup gig, this is the toughest funding environment I've seen since 08/09. The data seems to indicate nation-wide the worst was Q2/Q3 and we're coming out of it. Here in the Triangle at the growth stage where I swim at Spiffy and the earlier stages (pre/seed/A) we're seeing almost a full 'pause' right now. It seems to be now happening one level 'up' at the LP level. (As I was writing this a well-known fund called OpenView has folded - the best guess is an LP yanked the cord. What's happening is these LPs have a target asset mix and with public markets down, they are way over-indexed in private companies (venture/growth and PE). They are then telling these funds - please don't do capital calls and also don't start a new fund right now. The down-stream effect is a lock-up.
The implication of this is there can be a music chairs effect - your current investors have some dry powder and the portfolio company that gets it first, 'wins'. In other words, if you need capital in 6 and ideally 12+ months, look at bridging with insiders sooner rather than later. Easier said than done, but in my experience we're not probably through the end or middle of this yet, so best to plan/execute for the worst and hope for the best.
A couple of datapoints, content on this topic:
o AngelList (where we host the fund) did a great quarterly update that lives here (46min videl). The most relevant TL;DR from this one is their data indicates that A/B/C prices are coming way down, but have yet to be felt in seed/pre-seed but that seems logical to be next. There's much more data and nuance, worth a watch. The Ramp data is interesting to see what other startups spend $ on and trends.
o Here's a Carta chart that answers the question: where should I price my SAFE (hint: all over the place!)
**********Two great pieces of content******************
Enough of that Scrooge talk! I have a high bar on content and one of the reasons I haven't seen anything lately is I haven't seen anything that really grabbed me, but I now have two videos I hadn't seen before I can reco:
o Vinod Khosla on how to pitch: I've met with many of you on pitch coaching and I always gravitate to 'be a story teller' - I didn't realize it from the 'pitcher' side of the table, but investors see a LOT of pitches and one of the keys is being different - stories are personal 1:1 and thus different. Thus it checks two boxes. Here's Vinod's take, he's seen 1x10^6 X more pitches than I have.
o Moving from pitching to management techniques, this Keith Rabois guy is one of those folks that can rub you the wrong way, but here he has an interesting take on management. I prefer the framing that Amazon has on this called two-pizza teams - basically a small team + leader with ownership always wins over a classic functional org - we've oriented Spiffy this way (ChannelAdvisor was not) and I'm a convert. This one's for a little bit later stage -call it 30-50 people phase to start, but good to have on your radar.