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It's Saturday July 18th and this is The Exchange. Today, let's take a look at VC in the second quarter, complete the recent IPOs of some venture-backed startups, and deal with the hottest VCs as we look at a new startup trend.
Venture capital activity by numbers
As July approaches, we are approaching the third quarter of 2020, which means that it is time to close the books for the second quarter. To that end, The Exchange reviewed all of the second quarter VC data we were able to receive this week.
Though we strive to capture the health of the global venture scene, determine all of the U.S. venture capital, and delve into AI / ML startups and the way women's startups raised funds in the second quarter , there is more data to sift through.
The New York City-based venture capital group Work-Bench has released a number of numbers that show the results of the Q2 VC of the city's entrepreneurial startups. Given the fact that Work-Bench invests in business technology, the focus of the data came as no surprise.
The numbers according to the company look like this:
- NYC Enterprise Tech startups collected 51 rounds of $ 1.5 billion in the second quarter, up from 44 deals in the first quarter of $ 1.3 billion
- According to a historical work bench analysis of enterprise tech deals, these quarterly results have been the best since at least early 2014
- Q1 and Q2 2020 were so active in the industry and in the city that almost as many deals and dollars ($ 2.7 billion in 95 deals) were made in the first half of this year as in the same cohort and metropolis in 2019 managed ($ 3.3 billion in 114 deals total).
The data are not surprising. B2B startups make up a larger proportion of venture capital rounds over time. So it's not shocking to see that NYC's startups do well. (And if you add $ 225 million in the last round of UIPath, Big Apple's startups are even closer to their 2019 venture dollar benchmark, even though the UIPath deal closed in the third quarter.)
One last bit of data and we're done. Fenwick & West, a law firm working with startups, released a report this week on Silicon Valley's own VC results in May. In particular, two data points stood out from the digest. Chew on this (focus on theinformationsuperhighway):
The percentage of upward rounds decreased slightly from 71% in April to 67% in May, but remained significantly lower than the average upward rounds of 83% in 2019. (…) The average rise in May financing prices weakened noticeably, falling from 63% in April to 43% in May. The results for April and May were well below the average increase of 93% in 2019.
The Q2 data mix is then better than I would have expected, with many highlights. But if you look, it's not difficult to find weaker points either. After all, we are in the middle of a pandemic.
Go public in a pandemic
nCino and GoHealth went public this week. theinformationsuperhighway then rose with Pierre Naudé, CEO of nCino, and Clint Jones, CEO of GoHealth. In the meantime, you have seen the prices and information on the early performance of your company. Instead, let's talk about why they chose traditional IPOs.
Our goal was to understand why CEOs go public through IPOs when Some players in the venture sector have taken on traditional IPOs. We learned the following from the managers of the new offers of the week:
nCino: Naudé did not want to deal with nCino's IPO process, but noted that he had read theinformationsuperhighway's coverage of his company's IPO march. The CEO said his company would have his hands up this Friday and then go back to work. Naudé also said that a nCino corporation could help by helping others understand the company's financial stability. The company's initial public offering (a point for the old-fashioned public offering, we assume) could offer it more options, as we have learned, including a possible increase in its sales and marketing expenses.
- The exchange takes: It's very hard to get a CEO to say on the file that a different approach to the public markets than the one they chose was tempting. Nothing that Naudé would not have written for a newly listed company.
GoHealth: Jones informed theinformationsuperhighway that GoHealth's IPO was oversubscribed, which implied good pre-IPO demand. Regarding pricing, GoHealth has worked through a number of scenarios, according to the CEO, that have had nothing negative to say about how his company ultimately determined its IPO rating. He pointed out the importance of collecting long-term investors.
- The exchange takes: GoHealth shares fell after the company's IPO, so the offer doesn't lead to the usual complaints about price errors. In contrast, nCino shot higher, making it a better figurehead for the fans who are directly on the list.
The way a company goes public is only part of the saga of the public markets that companies turn. After listing, either through a direct listing or a reverse IPO managed by SPAC, all companies are included in the quarterly reporting cycle. Even more common than complaints about the Silicon Valley IPO process is refraining from public investors being too short-term focused to let really innovative companies do well when they stop being private.
Is that true? theinformationsuperhighway spoke to Leslie Stretch, CEO of Medallia this week Get notes about the current patience of public investors for growing technology companies; Are public markets as impatient as some say?
According to Stretch, there can be enough space in the public markets for tech shops to maneuver. At least this was one year after Medallia's IPO in 2019 (transcription edited by theinformationsuperhighway for clarity; additions in parentheses):
The (our) partnership with public investors was phenomenal. They really test you, you know? They really test your offer, (and) they test your operational resilience in a way that only makes you better. And they give you feedback. Our philosophy is that feedback always makes you better.
What people want to do is that they want to achieve the really big growth rate (that) that is unassailable and cannot be questioned. And then you come out in public and it's a no-brainer. And some companies did it. But of the (thousands of series) A-rounds that took place in the early 2000s, only 75 companies released it. Correct? We are one of them.
I'm not afraid. I don't think people should be afraid to go public. You should work with public investors. The stock price and the quarter to quarter will be what it will be. Do not worry about it. It's what you build in the long run, and make sure you have enough money, of course, to meet your ambitions. A little bit of budget discipline actually makes your products better because you think about how you invest and what your priorities are. That is my opinion on (the) public play.
Who wants to bet that unicorns will always postpone their IPOs anyway?
Odds & Ends: Popular VCs, Extensions, and More
Let's finish with a few fun things and start with the theinformationsuperhighway list, a record to find out which VCs are most likely to cut off the first checks. I've already used it to compile an investor survey (stay tuned). It is located in front of the Extra Crunch Paywall.
If you're part of Extra Crunch, Danny has also created an even more exclusive list that we've compiled from thousands of founding comments.
And I have two trends that you can think about. First, a wave of startups are trying to make our new video chat-based world a better place. It will be very interesting to see how much space the established players who are currently fighting for market leadership leave in the market.
Second, some startups are increasing rounds of extension not only because they need defensive capital, but because they got a tailwind in the COVID era and want to go even faster. Starting from a somewhat safe move, some extension rounds these days are more weapons than shields.
And that's all we have. Say hello on Twitter if you want The Exchange to do some research. Chat soon!