The Ledger
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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 predicts all 15-minute delivery startups will go bust
“A hundred percent. Because the cost of capital goes up. And when the cost of capital goes up, you can't invest into launching new cities. And you can't invest into what typically ends up being the J curve of this type of a business where you end up losing mone…”
AngelList data shows more check-writers leads to more founders and innovation
“Is that when you have more VCs in the ecosystem, you actually do get more innovation, which I know is against what most VCs think, but we're actually seeing it play out in our data that when you have more people writing checks, you actually end up getting more…”
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: 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: 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: Seed valuations will hold up better than late stage
“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 at the same rate of series A, series B and onwards, …”
Startups can no longer raise successive leadless seed 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. It just keep going on and on and on and always just raising a little bi…”
Kohli: Pay-to-play startup rounds will accelerate through late 2023
“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: Market conditions do not support a rapid startup acquisition spree
“So I don't think the conditions are there for a rapid acquisition spree. Unless these are, like, rock bottom prices, and it's just like, you know, just, I mean, literally, you're getting an amazing deal, but I don't think that's gonna be good for employees or …”
Secondary VC fund positions are commonly selling 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…”
Assure collapsed after spending 6 to 10 years of prepaid SPV fees
“We saw Assure, which was an SPV provider effectively blow up completely. And they blew up in a spectacular fashion. They basically had took money in from all the SPVs that they were supposed to manage over six years or 10 years. And when they blew up, they're …”
Software market expansion to $10B outcomes justifies higher early-stage entry valuations
“Software markets are much larger than anyone thought. The billion dollar companies are now ten billion dollar companies. And so what that means is the entry valuations can actually be much higher than before.”
AngelList expects to host a billion-dollar rolling fund very soon
“And we're actually seeing some rolling funds scale extremely quickly. And we do expect us to have the Equivalent of a billion dollar fund very, very soon under a rolling fund structure.”
The next cohort of top founders will raise entirely from rolling funds
“That the next cohort of great founders are raising their entire pre-seed and seed round from rolling funds.”
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: 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: 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: 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: 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: 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…”
Venture market activity spread reaches largest distance in AngelList tracking history
“And so we're actually in 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.”
Venture market contraction between 2022 and 2023 is fastest on record
“It's incredibly fast and it's actually incredible. That, that distance is also incredibly large. So typically, when you have these dots that collect and it's reported every quarter, they're all kind of collect, you know, pretty close to each other, right? It's…”
AngelList data: Series B deal volume and valuations fell over 50%
“Deal volume in Series B down more than 50%. Valuations down more than 50%.”
AngelList data reveals a 33% drop in expected follow-on funding rounds
“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?”
AngelList tracked 48 pay-to-play venture rounds in Q1 2023
“So in Q one so far, we've seen 48. These would be these would be the pay to plays.”
Individual LP commitments to venture funds plummeted 60% year-over-year
“Individuals are actually down 60% from like when we compare it to about a year ago.”
Institutional LP venture fund commitments have fully recovered on AngelList
“Institutions this is actually incredibly interesting, went down and then has in recent in recent weeks, spun right back up and has recovered in our data.”
Venture fund time to first close has 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.”
First-time venture fund sizes are shrinking 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…”
Cash App hedged Square when over half its revenue was exposed
“Half of their entire business, actually arguably more, was directly linked to small businesses being affected, but then the way Hashapp came about and became such a great hedge on the rest of the business, it's just been fascinating to watch.”
Some established VCs intentionally forego fund reserves to use SPVs instead
“We have some fund managers, some established fund managers, actually, who don't have reserve strategy on purpose. They actually, exactly, they want to focus on just the first checks, and then for pro rata, they can go ahead and have a opportunity fund, or they…”
Rolling funds and solo capitalists will squeeze traditional seed firms upwards
“Anyone that used to play at seed, but really is a series A firm is going to get squeezed upwards because what's happening now, rolling funds is actually taking the entire early stage market and solo capitalists is taking the entire early stage market with pre-…”
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: $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: 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: 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: 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: Party round ratio remains unchanged despite shrinking overall deal volume
“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.”
Party rounds remain viable for $2M raises, but fail at $5M
“So two million, you can do a party round five million, it's much harder to do a party round now.”
Kohli: AngelList rolling fund LP commitments dropped only 20% year-over-year
“Both individuals, institutions, commitments aren't actually down by much. It's close to only 20%”
Kohli: AngelList now serves $50M–$200M funds after previously rejecting them
“And so today we're regularly taking on 50, a 102 hundred million dollar funds. Whereas two years ago, we were saying no to all of them, right?”