I recently caught up with a longtime LA-based VC Mark Suster. Up front ventureLastly raised both early-stage and growth-stage funds a few years ago, Submission to regulatory agency, teeth In the market At this time, SEC regulations also prevented Suster from discussing it.
We talked a lot as his company made a big bet on Bird in the micromobility business. Listed soon), His view on decentralized finance, his fitness regime (we had to ask because Suster has reduced £ 60 since the beginning of last year). If you want to hear the conversation, you can: Listen here.. In the meantime, the following is an outtake of his thoughts on a wider range of industry trends, including the enthusiastic pace of trading.
Check seed stage resizing, and the time the VC currently needs to write them:
It was 10 years ago that I was able to write $ 3 million or $ 4 million or $ 5 million [check] It’s called the A-round, and the company probably raised hundreds of thousands of dollars from angels and perhaps some seed funds, and I get a lot of data on how the company is doing. Is done. I was able to talk to the customer. I was able to see customer retention. I was able to see the marginal cost structure of startups. I was able to talk to the founder’s references. It took me a while to be considerate …
If you fast forward 10 years, $ 5 million will be the seed round. Currently, there are pre-seed rounds and “day zero” companies, seed extensions and A rounds and “A prime”. There is B. .. .. In reality, I’m no different than it was ten years ago, with capital development, very early engagement with the founders, management team building, strategy setting, and pricing efforts. [figure out] Which market are you in [figure out] The order of how to launch a product and how to raise capital downstream. But the pressure on me is that I now need to make faster decisions. I need to get involved in your company early. So we take a little more risk in not being able to see our customers. You may not have a customer either.
Why his company hates today’s A and B rounds and is more inclined to growth rounds. (It just got on Former Twitter executive He led responsibility here, while connecting more than $ 50 million to several portfolio companies, including Bird. An investment platform for buying stock in rallies and collectibles. Apeel Sciences to make edible coatings for fruits. )
I do not exclude any rounds. But what I tell you is that the new round I may probably hate is to call it $ 20 to $ 30 million. What does that mean? This means that you are paying $ 50 million, $ 60 million, and $ 70 million in valuations. This means that it takes $ 5 billion, $ 10 billion, or $ 15 billion or more to actually drive fund-level returns.
The world is producing more of them. There are probably 11 pure start-ups in the United States worth more than $ 10 billion. all right. But if you want to write $ 20 million in a round A that takes that level of risk, you need a $ 700- $ 800 million, $ 1 billion fund. And I don’t want to get involved in that business. Not because I think it’s bad, but it’s another business that means different skills. .. ..
We want to be super early, like the oldest capital. You may even run the risk of wanting to leave the company. We know you Let’s say you knew you at Riot Games. I knew you on Snapchat. I knew you on Facebook. I knew you when I was working at Stripe or PayPal. We support you in the formation — Day Zero.Want to [then] Skip the expensive rounds and come later.
Whether Upfront will invest in priced rounds and convertible bonds. Investors have the right to invest at a discounted price in the next round.
I think there are many misnomers that the round itself is not priced. Almost all rounds are priced. People just think they aren’t priced.Yes [maybe the question is] Are we willing to do convertible bonds, are we willing to take safe notes, are we willing to do all this, and the answer is yes. Currently, most convertible bonds and most secure bonds do not have a fixed price, but they have an upper limit. And the upper limit is the price. What I’m always trying to tell the founders is that you have the highest price, not the lowest price. If you’re just willing to raise capital and set prices, you’ll have the maximum, and that’s better for you. But for some reason, the generation of founders is convinced that it is better not to set a price. What they really do is set a maximum, [minimum], And I’m not going to revisit that argument. People don’t understand it. [The short version is] Create a convertible bond. We do not fund anything that does not have the highest price.
How Upfront competes in a world where transactions take place in an unprecedented time frame:
If you are looking [a firm that will invest after one call] You are calling the wrong company. You don’t have much time to know if your customers like your product. You may not have a customer either. But don’t get it wrong. We spend as much time as possible to get to know the founders. You may know the five years before the founder founded the company. We may be the people who are enthusiastic about leaving Disney and setting up a company. So we really want to know the founder. Our bets are currently focused on the skills and vision of the founder, rather than the adoption of the product by the customer. That’s what really changed for us.
I always tell the founders: If someone is willing to fund you after a 30 minute meeting, it’s a really bad deal for you. If the fund has 35, 50, or even 20 investments and is wrong because it did not do due diligence, there are 19 or 30 other investments. If you make a mistake and choose an investor that is useless, unethical, unreliable, unsupportive, and does not add value, you live with it. There is no divorce clause.
“The bet we’re making now is on founder skills,” not customers or products – TechCrunch Source link “The bet we’re making now is on founder skills,” not customers or products – TechCrunch