Tag Archives: All In

From $10 Billion to Zero — Late Stage Ice Age

“…if you’re a Series C stage startup, you’re a late stage startup, with let’s call it a pre-AI model, the spigot is just turned off completely.”

David Sacks

The year was 2021, and late stage startups never had it so good.

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Tiger Global was ripping $100 million checks into everything in sight. Not wanting to be left behind, other big hedge funds dumped cash out of helicopters, buying everything in sight.

The bet: that buying into a startup that would IPO soon was a sure thing.

The price would go up in those last few years in the private markets. The hedge fund would take home princely gains, and all would be right with the world.

Cue that record scratch sound effect…

“The game done changed.”
“The game the same. Just got more fierce.”

The Wire

Funding for late stage startups no longer exists. Period.

Think I’m exaggerating? Look at this chart from Crunchbase:

Series C funding has dropped from $10 billion to effectively zero in April. OpenAI might be the only company that can actually raise.

Many of the biggest late stage investors are no longer investing. Period.

I haven’t seen Tiger in a late stage deal in a long time. Same goes for the other big funds.

In general, I see almost no late stage deals. What few I do see, may fail.

I hear that even if Tiger invested a fortune in your company, you cannot get them on the phone. Whoever led the investment may be gone.

I cannot verify that, and it may not be true, so take it with a grain of salt.

When I do see the big hedge funds in a deal today (rare), it’s always early stage. I think they’ll make the same mistakes there too.

But what about all that dry powder?

VC funds are sitting on billions they have raised but not deployed. Surely startups can grab a little of that, right?

Not so fast.

“This idea that there’s tons of dry powder sitting out there, I think is a myth. Or maybe it’s there but there’s no willingness to deploy it.”

David Sacks

The Limited Partners who put money into the VC fund may be telling it to pull back. Or maybe they’re not even meeting their commitments at all.

Get to breakeven and live to fight (and raise) another day. That’s the best choice for late stage companies today — and most early stage companies too!

You cannot count on fundraising right now. If you do count on it, you could quickly cease to exist.

For late stage companies making tens or hundreds of millions in revenue, getting to breakeven should be no problem. But many refuse to do it.

“What steps were taken to cut costs before you just went to the investors to pony up more money?

David Sacks

That’s the question every investor is asking!

I don’t do late stage. But when one of my companies isn’t meeting targets and is running out of money, I want to know what they did to cut burn.

If they didn’t do enough, I question the founder’s leadership. And I close the checkbook.

“Management has told you they’re incapable of running this business, this concern, in a thoughtful way.”

Jason Calacanis

Or in other words, this company is going to be a 0 anyway. No sense putting more money in.

Sound harsh? Yeah, it is.

So’s business, sometimes.

What do you think of today’s funding market? Leave a comment and let us know!

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