The End of VC as We Know It
The nature of VC is evolving - to gain a competitive advantage and de-risk their investments, forward-looking and innovative firms are recognizing the trends and adapting by:
- Embracing portfolio value-add strategies and de-risking practices, from building ecosystems to sales channel development and adding diversity/inclusion initiatives
- Adjusting their geographic perspective and focus
- Recognizing valuations for early-stage (Series A) companies have exploded as the amount of capital flowing into the ecosystem has increased significantly
The top VCs are taking more and more share of the LP investment pie where 12% of VCs in the US accounted for 66% of the total raised in 2018 (Crunchbase). To remain competitive, both in attracting great investors and investments, the other 88% of
firms need to move beyond the traditional operating model focused on just writing checks, raising funds, and managing portfolio companies.
Areas where VCs can create substantial value-add (see Azafran Catalyst feature on
Page 2) include sales channel development (customers), adding mentors/advisors, board members and key management where/when necessary. Increasingly, VCs must bring deep experience to the table, including first-hand understanding of founding, operating and exiting companies. In addition, bringing a vast network of experts, partners, customers, mentors/advisors, are critical to Early Stage companies and founders.
Europe Gains Ground: As we look now away from “traditional” investment hubs, startup activity and investment in Europe is quickly catching up from its long-held “second place” status. Especially in the wake of Covid-19, investment, deal flow and location geography - once focused on just a few hotspots - is shifting with much greater speed, with Europe leading the charge.
Early Stage Growth: At the same time we recognize that since 2011, the median deal size and pre-money valuations have quadrupled in Early Stage (Series A) investing [Source SVB].