May 9, 2023 · 26m · news
How Dire is the Startup Funding Market Today? | AngelList CEO Avlok Kohli · 20VC with Harry Stebbings
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
AngelList CEO Avlok Kohli joins Harry Stebbings to analyze data-driven insights on the severe venture capital bear market, highlighting the stark valuation gap between early and late-stage startups, the impending cash crunch for portfolio companies, and how emerging technologies like generative AI are reshaping both investor interest and fund operations.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 19.2% of the talking time here. How this is scored →
Harry as informed peer 4.8 Guest teaching 5.9 Guest disagreement 1.9 Harry pushing back 3.8
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 12:30 Avlok Rejects Acqui-Hire Narrative
Avlok directly breaks with market consensus and dismisses Harry's premise of an incoming acquisition spree, arguing public and private valuation dynamics prevent it.
Hardest push from Harry ▶ 3:07 Harry Challenges Valuation Drop NarrativeHarry refuses to accept broad market distress statements at face value, pointing out that seed valuations remain stubbornly high in real-world investing.
Biggest teaching moment ▶ 19:01 Avlok Exposes Disparate LP Commitment TrendsAvlok educates the host with proprietary data showing a 60% drop in individual LPs alongside an unexpected rebound in institutional LP venture allocations.
Harry holds his own ▶ 4:52 Harry Explains Multi-Stage Seed DynamicsHarry demonstrates superior ground-level venture insight by explaining how multi-stage funds send junior staff to write price-insensitive seed checks while partners handle fire drills.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| The Rapid Shift to a Venture Bear Market | 3 | 6 | 1 | 2 | Avlok explains AngelList's purview across 20,000 funds and outlines their proprietary chart tracking market activity and up-round rates, illustrating how venture has entered its deepest bear market. Harry offers a brief follow-up probing whether the contraction speed between peaks and troughs is faster than historical cycles. | |
| Pre-Seed and Seed Vs. Series A, B, and C Disconnect | 8 | 5 | 2 | 7 | Harry challenges the idea of market-wide valuation drops by noting that seed prices remain persistently high on the ground. Harry demonstrates deep market knowledge by explaining how multi-stage funds send price-insensitive associates to write seed checks while partners tend to troubled portfolio board seats. | |
| The Structure and Survival of Party Rounds | 4 | 6 | 1 | 3 | Avlok defines party rounds as raises where no single investor takes over 40% of the check and points out that repeated extension rounds (C+, C++) have vanished. He cites AngelList data showing a 33% drop in expected follow-on raises compared to historical averages since 2015. | |
| Startup Runways and the Looming Cash Crunch | 4 | 6 | 2 | 4 | Harry asks whether startups are facing cram-downs or simply holding enough cash reserves to avoid fundraising. Avlok shares that AngelList tracked 48 pay-to-play rounds in Q1 and explains that extended startup cash runways are hitting a brick wall in late Q2/Q3. | |
| The Fall of Tech M&A and Acquisition Realities | 6 | 6 | 6 | 5 | Avlok explicitly departs from consensus, rejecting Harry's suggestion that a wave of cheap tech acquisitions is coming due to public stock-based compensation scrutiny and private company valuation misalignments. Harry pushes back on the zero-cost acqui-hire premise by highlighting integration overhead. | |
| LP Secondary Markets and Deep Discounts | 7 | 5 | 3 | 6 | Avlok reports seeing LP secondary discounts on fund positions averaging 40% to 50% below last round marks. Harry counters using broader secondary market data, arguing that a 40-50% discount is actually relatively mild compared to wider market markdowns reaching 60-70%. | |
| Micro Funds, LP Commitment Trends, and the AI Cycle | 5 | 7 | 1 | 3 | Avlok reveals granular LP commitment trends from AngelList data, highlighting that individual commitments to venture funds plummeted 60% while institutional commitments unexpectedly rebounded, driven in part by interest in the AI technology cycle. | |
| The Fundraising Landscape for New Venture Funds | 4 | 6 | 1 | 3 | Harry queries whether the number of net new funds and fund sizes are shrinking. Avlok confirms that first-time fund sizes are compressing from $5M to $1-3M and that time to first close has stretched from 3 months to over 6-7 months. | |
| Leveraging Generative AI at AngelList | 2 | 6 | 0 | 1 | Harry prompts Avlok to share concrete operational details about how AngelList leverages AI internally. Avlok explains how LLMs now process and route 15,000 weekly deal emails and legal documents automatically, replacing manual human judgment workflows. |
Statements from this episode (20)
AngelList supports 20,000 funds and manages 13,000 portfolio startups
“For context, AngelList supports 20,000 funds and syndicates now, and we manage a portfolio of more than 13,000 startups across all of these funds and syndicates.”
AngelList data shows startup funding market experiencing largest drop ever recorded
“And so we're actually in the. The depth of the bear market, if you will, for venture right now, and that spread between where it was in the boom times and the bad times is the farthest distance it's ever been on, on everything that we track.”
Kohli: Series B deal volume and valuations are down over 50%
“I mean, you're talking about deal volume in Series B down more than 50%, valuations down more than 50% Series A is also down Series C is basically Gone, right? Like, I mean, you don't really hear of many late stage deals getting done anymore. It's very, it's r…”
Kohli: Pre-seed and seed valuations will remain buoyed without major compression
“And so what you have is you have pre-seed and seed, they're buoyed. And we don't see that changing. We actually still see that staying the same and the valuation staying the same, maybe a little bit of compression, but we're not going to see it the same rate o…”
Kohli: Capital markets are closed to startups without credible traction
“What we're seeing in our data is that only the companies that Actually have credible traction are raising now. So even if you put aside adverse selection, meaning the set of companies are raising from insiders and insiders are leading the rounds that we're def…”
Kohli: Ratio of party rounds to non-party rounds remains unchanged
“I would say that we are seeing we're seeing the percentage of party round to non-party round actually being the same, but the overall volume has contracted.”
Kohli: Startups can no longer raise continuous seed extension rounds
“So what you, what was happening in the heyday of 20, 21 and 20, 22 was that companies would just keep raising these successive rounds and we would see it like C, C plus C plus plus, right. They just keep going on and on and on and always just raising a little …”
Kohli: Lead investors are not strictly necessary to close seed rounds
“So we're not seeing that lead investors are absolutely necessary for a round to get closed, especially at the pre-seed and seed stage, right?”
Kohli: $5M seed party rounds are much harder to execute now
“So two million, you can do a party round. Five million, it's much harder to do a party round now.”
Kohli: AngelList data shows 33% drop in startups raising capital
“And when you just take a look at that sample size of companies from today, sample size of companies in historical average, we're actually seeing a 33% drop in companies in terms of how many companies we expect would have raised by now, right? And so that's a p…”
Kohli: Venture market freeze will take another few quarters to resolve
“We still think we're in the thick of it and we think it's gonna take another few quarters before everything just works itself out.”
Kohli: Distressed startup financings will surge in Q2 through Q4 2023
“And so what's happening is the cash out date was, has been pushed out for a lot of companies. And so our view is that these will start ticking up in Q two and then definitely Q three, Q four, because these startups, they have a brick wall, right?”
Kohli: A tech startup M&A acquisition spree will not happen
“The appetite to Just do rapid set of acquisitions in this market. I don't think it's going to happen. And then in the private markets the key question that's going to come up is what price do you believe? Right? Meaning if you're a private company and you've r…”
Kohli: LP Appetite to Sell Venture Fund Positions Has Increased Significantly
“When it comes to LPs within funds, we've definitely seen an increase in appetite to sell positions. And also sometimes sell positions and name brand, you know, name brand companies that are actually just great companies.”
Kohli: Secondary Deals for LP Fund Positions Commonly Clear at 40-50% Discounts
“So one LP will purchase another LP's position and the range of discount that we're seeing actually is anywhere from. But what's more common Is actually 40% or 50% from last round mark. And so you're talking about a pretty significant discount to last round val…”
Kohli: LP commitments to AngelList rolling funds are down only 20%
“Within rolling funds which is one of the products that we have both individuals, institutions, commitments aren't actually down by much. It's close to only 20%, which is very, very very interesting.”
Kohli: Individual LP commitments to venture funds fell 60% year-over-year
“When you compare it to venture funds the, and venture funds are the traditional structure and we have a pretty large venture fund business. Individuals are actually down 60% from like when we compare it to about a year ago.”
Kohli: Large language models automated a good portion of AngelList operations
“And a lot of the large language models and their advancements there have had a major impact on AngelList, just our own internal operations, right? It's been huge. And we've been tinkering on it for many months now, and it's actually automated a good portion of…”
Time for venture funds to reach first close doubled to 6-7 months.
“We've definitely seen the time to first close has increased. It was three months in the boom times, and now it is six plus months. And when I say six plus months what I'm referring to is the timeline went from six and right now it's trending towards seven.”
Kohli: First-time VC fund sizes shrunk from $5M to $1M-$3M
“Yes, there is a reduction in fund size for, I would say the much smaller funds, right? In terms of if you could raise a five million dollar fund as your first fund, you're not going to raise that anymore. It's going to be closer to a 1,000,002 million or three…”