High valuations will trigger a major surge in total startup failures
Ryan Denehy · 20VC Unscripted: Pricing is Crazy, Pre-Emptive Rounds are Normal, Pricing at 200x Revenue Multiple is Common, There is More Cash Than Ever. What Happens Next; Market Analysis with Ryan Denehy, Founder and CEO @ Electric · Nov 4, 2021 · at 20:31
Ryan Denehy, CEO of Electric, forecasts an impending wave of startup shut-downs as corporate acquisition options dry up for overpriced companies.
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“Yeah, so based on that, like, honestly, I think you're going to see a lot more zero.”
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Denehy: Excessive startup valuations will trap tech companies
“Lower valuations. Just think a lot of companies are getting themselves into situations that are going to be very hard to get out of. So I think hip checking the valuations probably wouldn't hurt.”
Only a very small percentage of VCs add value beyond capital
“A very small percentage do. Don't believe most add any value beyond capital, but I'm partial because I think my investors do a stellar job of that.”
Traditional VCs are skipping due diligence to win competitive deals
“Term sheet in two days. No diligence, right? Just like, maybe send us a board deck. And there used to be a small number of well-known growth stage fund who would do that, but increasingly what's happening is a lot of more sort of traditional VCs, I think, are …”
Raising larger rounds never allows startups to skip future fundraising rounds
“No one ever skips around. You spend the money and you're back out in market on the exact same schedule you were if you raised Half as much money.”
Startups with $15M ARR valued at $1.2B will struggle recruiting executives
“Like, hey, if you're a 15 millionaire or a business valued at 1.2 billion, I think you're going to have a challenging time recruiting the caliber of senior leadership that you want.”
Preemptive round markups rarely reflect actual commercial progress
“When you think about these like preemptive rounds where it's like, oh, some company raises at five hundred million in January, and then in March, they raise at a billion. It's like, it's unlikely in most of those cases that you actually engage in any commercia…”