From ~$60 million to $5.55 billion in 22 months. Should the seed VC sell?
The venture market has gone all topsy-turvy in the past 2 years and certain investors are sitting on massive (paper) capital accumulations. Traditional VC says hold forever (well, at least until IPO) but is that always the right call?
No. I think more VCs should be open to selling along the way.
𝗘𝘀𝗽𝗲𝗰𝗶𝗮𝗹𝗹𝘆 𝗻𝗼𝗻-𝗹𝗲𝗮𝗱𝘀 𝗮𝗻𝗱 𝘀𝗺𝗮𝗹𝗹𝗲𝗿 𝗳𝘂𝗻𝗱𝘀.
(Congrats to Legora btw, kickass fundraise)
Here's my thinking:
Startups are staying private much longer.
This naturally depresses IRR (since it accounts for the time-value of money) and requires larger eventual exits to compensate.
AI companies are the beneficiaries of this new hype wave. Many of them will go one to more than justify the run-ups...but 𝗺𝗮𝗻𝘆 𝗼𝗳 𝘁𝗵𝗲𝗺 𝘄𝗶𝗹𝗹 𝗮𝗹𝘀𝗼 𝗳𝗹𝗼𝗽 𝗮𝗳𝘁𝗲𝗿 𝗿𝗮𝗶𝘀𝗶𝗻𝗴 𝗶𝗺𝗺𝗲𝗻𝘀𝗲 𝗰𝗮𝗽𝗶𝘁𝗮𝗹.
Growth has been supercharged but there remains a latent uneasiness about the durability of the revenue driving said growth. The legal space is a particularly sensitive one, but this dynamic applies across nearly every part of venture
A 92.5x in valuation in 22 months is outrageous. Taking a portion of that increase off the table is rational in the face of such a tremendous rise.
In the end, the difference between a 6x fund and an 8x fund may be your risk appetite. But your LPs are gunna come in for Fund II either way if I'm being honest!
No exact right answer but...not all high flyers will remain so 🙏
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