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#188 VC Headlines of The Week (So Far)
Doug Dyer
October 15, 2024
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VC Headlines of The Week (So Far)
Hello everyone! We’re trying something new this week - sharing some of our top headlines and takes on what they mean for VC. We hope you find them helpful - enjoy!
Venture capital deal activity is slowing down (Axios): “U.S. venture capitalists invested $37.5 billion via 2,794 deals during Q3 2024. The deal number is 34% lower than in the prior quarter, and 17% below the year earlier period.” Is this just the late summer slowdown or something more?
Masayoshi Son is back in Silicon Valley—and late to the AI race (Economist): “At the height of the dotcom bubble in early 2000 the Japanese technology mogul was briefly the world’s richest person, before losing $77bn in paper wealth, more than anyone before.”
Big funds, small funds, and the changing tide (Jordan Snel): “The summary of most takes is that a lot of folk, big and small, rode low-interest-rate-driven beta to some good TVPI in 2021 and raised a lot of money. These folk are in trouble because the marks of their companies are inflated (the founders raised a lot of money too), and now LPs are reckoning with lower than expected DPI and their own over-eagerness. So they pull back, play it safer and invest in [BigNameFund]. I don’t think this is the best response.”
VC Math Explained To Founders: The High-Stakes Game Of Startup Funding (Forbes): How do they get a 3x portfolio return? Not by investing in 30 startups that all return 3x unfortunately, because of something called the power law. The power law is basically VC-speak for "go big or go home." It means that in a typical VC portfolio, a tiny handful of investments will return the entire fund (and then some). We're talking unicorns, people! Here's how it breaks down:
Most investments (like, 70-80%) will fail or return less than the original investment. Ouch.
A bunch (10-20%) will return 1-5x. Not bad, but not earth-shattering.
A select few (maybe 5-10 %) will return 5-20x. Now we're talking!
And then there's the holy grail: 1-2% that return 50x or more. These are the ones VCs dream about.
So, which startups are VC-fundable?
Here's a quick checklist:
Huge market potential (we're talking billions)
Scalable business model (software is the darling here)
Strong team with relevant experience
Clear unique and innovative advantage
Early traction that hints at explosive growth
VCs Can't Get Enough of AI for Lawyers (Newcomer): “First AI came for software developers. Now, it’s coming for lawyers. AI purveyors have long considered legal work a big opportunity, given the high cost and repetitive nature of so much of it, and Crunchbase reports that VC investment in the sector is set to reach new highs this year.”
That’s all for today folks! Thanks for your support and spreading the word!
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