I wrote a version of this post just a few months back, but since then, the venture markets in many ways have deteriorated further.  Cloud stocks are back to where they were 3 years ago, but that’s with tremendous revenue growth since then.  Valuations are down a stunning 75% from their peak last year.  It took a quarter or two to sink in in venture, but now the effects are clear:

  • Much of the growth market (Series B and later) has simply stopped investing, period.  They are still looking for an outlier deal, something growing at such insane rates it clearly will be worth $10B+ even in today’s world, but other than that, growth is mostly on hold.
  • The Series A market is still somewhat alive, but there is little appetite for high burn rates and “next round risk”.  Series A rounds are much harder to close, not just because valuations are down, but even more, because there’s no Series B backstop coming.  The money may have to last … forever.
  • The Seed market in Venture is active, mainly because it can go long.  But only up to a point.  Seed investors have such long time horizons that they expect up and down markets.  But … they still need the Series A, B, and C markets to carry the ball down the field.  With those markets much tighter, and even frozen, it puts a lot of pressure on.  Seed investors are looking for folks that are more capital efficient.  And inherently expecting more of them to fail due to lack of next-round capital.

And perhaps most importantly

  • Folks that raised significant money in the past 2 years may no longer be fundable — ever.  If you last raised at $100m, $200m+ valuation, you simply may never grow into that valuation if your growth has slowed, as it has for many,

As Jessica Baratos of Salesforce Ventures’s Jessica Bartos noted, it’s now been an 18 month downturn really in SaaS investing:

The bottom line is this, and I think it’s the one message most founders haven’t heard yet.  Today, you just have to assume the next round isn’t coming.  At least until you are 90%+ sure you’ve got a real VC that wants to lead the next round, for sure.

That’s the way it used to be.  I remember when my Series Seed investor told me this back in the day, and it sunk in.  “Assume there’s no more money coming.”

This generally means your capital will have to stretch twice as long as you’d planned.  It can often be a big bummer.

But right now, it’s just prudent to assume the next round isn’t coming.  It almost certainly isn’t, for now, at Series B or later.  That makes Series A much harder.  And so on.




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