As part of ourongoing coverage of VC performance in the first half of 2023, TechCrunch+ surveyed 15 investors about their investment cadence and their plans for the second half of the year.
As expected, it appears a good mix of investors wrote checks at the rate they’d aimed for, while others fell a bit short. However, there is a sense that a slower investment cadence is going to become the new norm. Rajeev Dham, partner at Sapphire Ventures, and Mark Grace, investor at M13, both noted that the rapid investment cadence of the pandemic years has passed, and the adjustment period has been a bumpy ride for some.
However, those who operated at a slower cadence seem to be favoring a more cautious approach. Gen Tsuchikawa, CEO of Sony Ventures, said, “We have always been selective in our investments, and we are keeping the cadence of those investments flexible for now.”
Dham also advocates prudence for the coming period. “Once we understand what the new operating cadence is of businesses and then apply the appropriate price, which we now all know what it is (what it has always been!), then we can act accordingly. The other massive shoe to drop is further retreat from the most active investors in the 2018–2021 era. The more they retreat, the more likely there is to be less capital in the system chasing startups, which also level sets on price.”
Grace has his eyes firmly set on the full-half of the glass: “I think dealmaking cadence will continue to rebound. You need to be an optimist in this industry!”
Logan Allin, managing partner and founder of Fin Capital, stated that his firm was the most active fintech investor across the globe in Q1 thanks to its focus on early-stage startups founded by repeat founders.
He gave us some insight into his firm’s confidence: “This accelerated rate of new company formation is a function of (a) Management teams turning over the reins to professional management to take the company public or exit via M&A or buyout, and (b) seasoned entrepreneurs with underwater options that are not worth sticking around for to vest further.”
Read on to learn more about the investing climate of the past six months, and how these investors aim to tackle the next few months.
Did your investing cadence meet your expectations? Did you exceed your targets or undershoot them?
The back half of 2022 was dead. Things suddenly picked up in late February, and we felt it across the board. We made investments in Anthropic and Typeface and have continued at a fairly rapid pace since then. In Q2, we made several commitments, including two life sciences companies, one digital health, one hard tech company and a few SaaS companies. So, the end of Q1 picked up and Q2 really accelerated. We even had a term sheet in on a company and we won the deal, but it got acquired.
Is your firm planning on accelerating its dealmaking cadence in the back half of 2023? Why or why not?
Q2 was already busy and active for us, but mainly at the early stage. We have three funds: an incubation fund (Menlo Labs), which has been steady state; our Venture Fund, which picked up significantly in Q2; and our Inflection Fund (defined as early growth in companies with $3 million to $10 million ARR), which was still slow in Q2.
We expect Labs and the Venture Fund to remain just as busy as they have been from a pacing standpoint, but [we] expect the Inflection Fund will accelerate significantly in the back half of the year. About 80% of the companies in our sweet spot haven’t raised in two-plus years, and many will need to come back to market in 2H 2023. We’re excited about that segment of the market, where there is early but predictable scale and where valuations have settled substantially.
There will be many flat and down rounds, and there should be no stigma around that. The multiples VCs will use to value companies will be different, but that doesn’t change whether a business is good or not. So we’ll all get past valuation and focus on building great companies.
Sheila Gulati, managing director, Tola Capital
Did your investing cadence meet your expectations? Did you exceed your targets or undershoot them?
Our current focus is AI, primarily in the areas of domain-specific foundation models, AI/ML tooling, AI SaaS applications, AI compliance and governance, and AI security tools.
We have closed deals in these spaces in 2023, but the frenzy around AI has definitely meant a lot of capital has rushed into this market. The result has been that we have backed off certain deals based on valuation, and we expect this to continue in the AI world. It has meant fewer deals overall.
Is your firm planning on accelerating its dealmaking cadence in the back half of 2023? Why or why not?
We’re focused on doing the right deals. Generational companies will emerge from this transformative period defined by AI, but there will be many losers, too.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
