The Ledger
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Cillufo: Early-stage valuations will drop but avoid the late-stage crash
“And I do think as the later stage comes down, probably eventually that'll flow in, but I don't think there'll be the same level of crash at the early stage that there is later.”
Cillufo: Early-stage value investing risks severe adverse selection
“Truly being a, quote, value investor at the early stage, that has a serious risk of some adverse selection problems”
Cillufo: QED passed on Nubank and Loft seed rounds over high valuations
“We turned down both NewBank and Loft at their seed stage, right? So in both cases, we knew the CEO long before they had the idea for the company... And in both cases, they had what at the time looked like offer sheets with really high valuations. We looked at …”
Cillufo: VCs cannot rely on operator skills to fix incomplete founder teams
“One of the terms we use is operators masquerading as investors. A lot of us have experience either at Capital One or at startups or other places operating businesses. And I do think at times we've fallen in love with an idea. We may not have been totally sold …”
Cillufo: Venture firms that move slowly suffer from adverse selection
“Speed has become a weapon in the market. Back to the discussion of positive selection. If you're not moving quickly, you're going to get adversely selected.”
Cillufo: Growth companies should plan to avoid fundraising for 12–18 months
“Related to the growth stage companies, I think very similar conversations are happening across geographies, across business types, and it's almost all of the flavor of, look, you shouldn't be planning on needing to raise money in the next 12 to 18 months.”
Cillufo: QED's biggest investment misses resulted from balking at high valuations
“Our biggest misses have been on this question of valuation. Love the team, love the business, love the opportunity, have a great relationship, feel like this is going to work, and then we just sort of balk at the price.”
Cillufo: Emerging market startups must solve huge end-to-end problems to succeed
“We've seen so many businesses, particularly in emerging markets, that if they don't challenge very huge problems, you're just not going to get anywhere.”
Cillufo: Brazil has the most profitable banking industry in the world
“Brazil's an extreme on that, where it tends to have the most profitable banking industry in the entire world.”
Cillufo: Retrofitting unit economics into a startup later is extremely difficult
“And it is one of the things I've learned now working with the 150 companies in our portfolio. It's really not easy. And if you don't do it from the start, it's much harder to add later.”
Cillufo: QED favors upfront monetization but navigates deferred models better now
“Admittedly, it's a little easier sometimes for QED to invest in businesses where monetization is built in upfront. That's not always the case. And I think over the years, we've learned how to be much better at partnering with so-called act two businesses where…”
Cillufo: Predictive models built during boom times fail in economic downturns
“No matter how good your modeling technology is, it's only so good as the inputs. And the inputs are only so good as the environment in which they're created. If you're building a business in boom times, and then you hit challenging times, all of your assumptio…”
Cillufo: The startup and VC environment is heading into a downturn
“Hard to say for sure, but it sure looks like we're heading into an environment that doesn't look quite as rosy.”
Cillufo: Multiple QED investments doubled in size between term sheet and close
“The number of companies that we've invested in the last couple years that have literally doubled between when we submitted a term sheet and when we closed the deal, it's stunning.”
Cillufo: QED urged portfolio founders to take preemptive hot-market money
“By and large, our advice over the past several months is take the money because the market is so hot. You never know if that market's going to continue. You never know if you're going to be able to tap that again. I think we've been pretty aggressive over the …”
Cillufo: Valuation changes will spark increased bank acquisitions of fintech startups
“The banks so far have held up generally much better than the fintechs in the public markets, and so valuation environment might become more conducive to some more sort of fintech to bank type M&A. We've started to see some of it. I think there's probably more …”
Cillufo: Most fintech businesses are default local and need regional adaptation
“I think most fintech businesses are default local, and that unless you sort of go through heroic efforts, they're probably not going to work in the next country unless you really adapt.”
Cillufo: Single-lead investment rounds have largely replaced shared venture rounds
“Venture firms used to share rounds. I think it's much more common for one of them to lead than the next one to do the next round.”
Cillufo: QED's consensus orientation has sometimes slowed down its deal execution
“Because of this consensus orientation and this desire to get so much input, I think at times we haven't been as fast as we've needed to be.”
Cillufo: Capital One was one of the original fintech companies
“No one called it a fintech at that point in time, but I think there's good case that Capital One was one of the original fintechs and had a wonderful run.”
Cillufo: Later-stage startups raised massive war chests in early 2022
“So many of the later stage companies, both in our portfolio and around the world, have raised a ton of money over the last three to six months. And so many businesses are sitting on very impressive war chests that they were assuming they would use to grow real…”