🗒️ The role of board members during a market downturn
Fortune: “RIP Good Times,” Sequoia Capital famously declared in the wake of the 2008 financial crisis, splashing the words in gothic red over a pixelated JPEG of a headstone. The $85 billion venture capital fund was on the money; the U.S. economy lay in ruin soon after.
So it was cause for some concern when in May this year, amid rising inflation, high interest rates, and plummeting asset prices, the firm issued a new stark prognosis. “Cheap capital is not coming to the rescue,” it cautioned. “Wishful thinking is a waste of time.”
The megafund’s latest warning has proved just as prescient. Since May, economic chaos in the U.S. and beyond has heralded a new era of careful conservatism in the Valley. Deals are down, money is tight, and risk aversion is the order of the day.
It’s “a lot harder to fundraise right now,” says San Francisco–based real estate startup founder Shri Ganeshram, whose company plans to subsist on the $11.3 million it raised last winter. In this economy, “we would be happy to move forward with a flat round,” he adds.
Indeed, one effect of all this is that venture capital funds have actually entrenched their power over the startups that have to live off these high-risk funding rounds. In this period of venture capital austerity, startups that must raise cash are forced to accept money with many more strings attached: greater board power for investors, lower valuations, and term sheets that let venture capitalists cash out earlier and with more money.
🗒️ This Popular Way to Pick Winners Can Make You Miss the Biggest Opportunities
Inc: When Megan Glover heard about the water crisis in Flint, Michigan, in 2016, she couldn't stop thinking about it. Megan wasn't a water expert, and her home in Zionsville, a suburb of Indianapolis, was far enough away that the contamination posed no immediate danger to her. But as a conc​erned mother of two, she wondered if there were a way for ordinary people to test their water--and she found that the answer was no. Not without great expense.
Megan was a marketing professional who had worked with many startups in the Indianapolis area. She was lucky because the startup scene in the city was thriving, thanks in part to a company called ExactTarget. ExactTarget had been purchased by Salesforce for $2.5 billion in 2013, but rather than move the operation to San Francisco, Salesforce decided to leave the company in Indianapolis. ExactTarget's founders, in turn, had decided to double down on the city.
🗒️ Thinkers50: The Road Ahead for Venture Capital
Insead Knowledge: In this Thinkers50 webinar, Claudia Zeisberger provides insights into the state of the venture world in today’s climate of unprecedented uncertainty.
The world of venture capital is weathering a period of global instability. How can we understand the risk and explore the opportunities of this new reality? INSEAD Senior Affiliate Professor of Entrepreneurship and Family Enterprise, Claudia Zeisberger, shared her expert opinion in a recent Thinkers50 webinar.
“From about March this year, the amount of venture capital deployed has dropped,” explained Zeisberger. “VCs are taking the foot off the gas compared to the last two years when the speed of venture investing was fast and furious.” Indeed, global venture funding fell by 23 percent to US$108.5 billion in the second quarter of the year – the second-largest drop in a decade.
However, Zeisberger pointed out that while venture funds are deploying their money a little slower, they cannot stay on the side lines forever. “I would expect by latest early next year, we will see the VCs come back with a vengeance to deploy the money that they have raised in the last couple of years,” she said.
🗒️ New Report Shows Drop in Investments to Women & Founders of Color from LA Venture Firms
PRNewswire: New data out today from AnnenbergTech's PledgeLA initiative shows that LA-based venture capital firms made fewer investments in 2021 to companies led by women and founders of color when compared with the previous year, with the steepest drop in investments impacting women and women of color. From an analysis of more than 6,300 investment transactions made last year to over 4,400 companies by 67 LA-based venture firms, the following insights emerged:
PledgeLA is a coalition of more than 200 LA venture capital firms and tech companies working to increase equity, community engagement, and accountability among LA companies.
PledgeLA is a coalition of more than 200 LA venture capital firms and tech companies working to increase equity, community engagement, and accountability among LA companies.
Funding to women founders decreased from 19% of investments in 2020 to just 15% In 2021. Among these, just 9.5% of companies receiving funding had women-only founding teams.
Funding to Black Founders decreased from 12% of all investments in 2020 to just 5% in 2021.
