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How’s Venture Capital Changing in 2023

VC Cafe

Taking stock of the venture capital market in 2023, it’s clear to see that we’re in a transition point. Prices went up from round to round, and startups were encouraged to grow, grow, grow, and not to worry about profitability. billion in new funds in the fourth quarter. Support emerging managers.

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What Do Industry Insiders Think Will Happen in VC in 2016?

Both Sides of the Table

” There are a lot of data points that one can observer to get a sense of the venture capital markets – both LP fundings into venture and VC financings of startups. We surveyed 73 LP firms to get their views on the market. Most flat rounds. More down rounds. More structured rounds.

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Insiders

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Changes in the Venture Capital Funding Environment

Both Sides of the Table

There was an explosion in number of startups both because it was cheap and there was tons of available capital. Non VC Growth Rounds. The market eventually slowed down. If a company raised a big B and/or C round and needs more money the late stage guys have the bucks and that early-stage guys often don’t. Choose wisely.

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The Collapse of the VC Ecosystem & What It Will Look Like Post.

Altgate

Their portfolio firms will be able to cut back on headcount and other spending and additional capital from investors will allow the companies to survive for the 2-5 years it will take the market to begin to recover. Later stage funds will end up owning more of their portfolio companies via down rounds and ultimately should see ok returns.

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On the Road to Recap:

abovethecrowd.com

In Silicon Valley boardrooms, where “growth at all costs” had been the mantra for many years, people began to imagine a world where the cost of capital could rise dramatically, and profits could come back in vogue. Their own ego is also a factor – will a down round signal weakness? Competition also has access to capital.

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Some Thoughts and Models Around Ownership Targets

This is going to be BIG.

It doesn’t take into consideration options, down rounds, or recaps. It’s just a model of the share price of a company going up and to the right smoothly until it exits for $300mm, and the outcomes for the shares purchased in each round of financing. Here’s a very plain vanilla model.

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To Follow On or Not to Follow On

This is going to be BIG.

There are a lot of people that artificially group together performance metrics for venture, and try to extrapolate successful stratagies from it. I know, because those people all used to pitch me as an institutional LP back in the day. If you're doing seed deals, how often does a down round in a seed deal even happen?