Billions of dollars have gone into start-up investments this decade, but the era seems to end with the coronavirus pandemic. Connie Loizos reports this week on theinformationsuperhighway that limited partners say no to younger venture companies that are not yet on the rise as they reduce weaker existing companies in their portfolios.
Other companies with direct links to public markets lose even more access to working capital. Connie believes that we will soon see term sheets drawn with force majeure clauses (and we actually heard some rumors). In another sign of pressure in the finance ecosystem, Danny Crichton hears that some investors are preparing to layoffs in their own companies.
As the effects of the pandemic are only just beginning to be felt in global economies, everyone is preparing for difficult times. So if you're a startup with new funding in the bank, Danny suggests that now is a particularly good time to make an excellent funding announcement.
At Extra Crunch, we took a closer look at the challenges for startups and investors and how they can adapt. "I was expecting a 20-30% drop in valuation, but I would increase that value to 50-60% in the earliest stages based on the feedback I've heard," said Danny in his latest pandemic fundraising update -Trends.
Alex Wilhelm interviewed a growing investor who believes the fourth quarter may be the earliest that larger startups can raise – and probably not immediately from new investors. Everyone tries to support existing portfolios.
But what really changes when you look at startups' timescales? Here's a steady view of longtime VC Mike Volpi in an interview with Connie this week:
"(The venture business is very long-term. The average holding period of our portfolio companies is probably eight years. If you think of an investment that we made in the last year, it will be the case in seven years it will look really different. So these moments of fluctuation for us as VCs shouldn't affect our thinking too much. They are uncomfortable. You have to think about how to deal with them. But from an investment perspective, we shouldn't really allow it to the extent that we think about it becomes too much. "
The big unicorn stand?
Alex had written a popular series about companies on the way to going public. Now the window of hundreds of unicorns seems to have closed for months, if not longer. "For example, Procore and Accolade submitted publicly to make their debut, but they still have to set the price and pull the trigger for their offer," he writes this week about Extra Crunch. "Asana, DoorDash, and Postmates have all submitted privately to go public, but given the insane reevaluation of their comps in public markets, no public filings appear to be in sight." He then breaks out of Airbnb's special situation as a travel unicorn in a time of frozen borders.
Y Combinator's first remote first demo day
While the entire event was online, we treated it as usual in a series of articles that split the entire class by category:
Healthcare, biotechnology, fintech and nonprofits
Hardware, robot, AI and developer tools
While the famous seed stage venture company has emphasized the physical location to help its founders connect and learn, it is now considering making the next class completely remote.
In this final discussion you will find our relaxed view of the company. We have compiled our list of 20 favorites for Extra Crunch, including the reasons why. Subscribers can also listen to Natasha Mascarenhas' equity interview with CEO Michael Seibel.
Where top VCs invest in remote events
Suddenly everyone has to find new solutions for remote events. But what does it look like? Arman Tabatabai asked five investors with extra crunch bets what they thought would happen next. Respondents include:
theinformationsuperhighway can help you stay connected
I swear the entire newsletter has not only prepared for this moment, but we are also working on our plans for Disrupt and other conferences this year. For starters, we have a discounted pass for the livestream and the recorded videos of the main stage. More details here!
We are also experimenting with lighter methods that start-ups can stay up-to-date from anywhere with extra crunch. Danny started a weekly conference call with investors and other specialists. Check out this week's recording with General Catalyst's Niko Bonatsos. Stay up to date next Tuesday for a live call with immigration rights columnist Sophie Alcorn.
In the course of the week
Wondering if venture capital is open to business? Investors say yes to a new initiative
Startups are rethinking what it means to be high-touch during a pandemic
Beware of "ZoomBombing:" screen sharing for video calls
PSA: Yes, you can attend a zoom meeting in the browser
Dear Sophie, how do I get visas for my team to work from home?
Manage remote teams with a transparent culture
Founders who share knowledge can strengthen the confidence of the industry on a large scale
Can Apple Keep the AR Industry Alive?
"The episode this week was proof that we had to do something because we had to cancel some trips, juggle a few guests, and start as a podcast that guests dial in without losing our step." This week Danny, Natasha and Alex came to Manan Mehta from Unshackled VC. Aside from a hiccup or two, it was fairly okay for Equity to continue to score as often as it makes sense, even though we're not currently in our own studio. "
Hear the rest here.