INSUBCONTINENT EXCLUSIVE:
In today market, it hard to make sense of what what
Deals have grown incestuous for the first time, with outfits like GV investing alongside Uber last week — just months after its parent
company, Alphabet, was at Uber throat
A $10 million-plus round of seed funding is no longer a joke
Venture firms continue to raise record-breaking amounts of money, despite what feels like creeping uncertainty about how much longer this
go-go market can continue.
Unsurprisingly, there been some talk lately about deal flow and the possibility that some of the most
well-regarded early-stage investors in the industry have quietly applied the brakes
Yet new analysis out of Wing, the 7.5-year-old, Silicon Valley venture firm co-founded by veteran VCs Peter Wagner and Gaurav Garg, draws a
conclusion that might surprise nervous industry watchers
After tracking the investment activity of what Wing considers to be the 21 leading venture firms, it discovered that a pullback already
In fact, Wagner, who oversaw the analysis, tells us there been so sign of a slowdown since then.
We caught up with Wagner last week to learn
more about Wing findings — and what might be causing some confusion in the industry right now.
TC: First, why do this kind of study right
now
PW: There been a lot of analysts and reporters and LPs and VCs asking us about our investment pace really, and I think it owes to talk
of Benchmark and Union Square Ventures slowing down, so we thought we&d look at some parameters and see what going on.
TC: Why not just
refer to industry-wide statistics It seems like there are plenty of these.
PW: They&re kind of swamped with the data of less discriminating
You really want to focus on the signal, which is why we track what the 21 leading venture firms are doing, and in that analysis, we found no
We found instead that there was a peak of activity in 2013 and 2014, a pullback in 2016, and an uptick since.
And we cut it different
We removed international deals in China and India, because they have their own rhythm and can get frothy
We moved seed deals, given there been some major schizophrenia among venture firms who waded into seed deals, then pulled out
Even still, 2017 saw an increase in deals over 2016, which was the lowest year in terms of deal activity since 2010.
TC: These were
first-time investments
PW: Yes, and the reason is that follow-on rounds are dictated more by the operational needs of companies
Some could be running out of cash, for example, so it non-discretionary
If you want to look at sentiment, you have to look at first-time investments in isolation.
TC: Do you have 2018 data
PW: We have partial
data, of course, and we&ve annualized it to &predict& that 2018 numbers will be close to 2017
That is, if you buy the idea of projecting out, which I don&t really
Also, because you&re looking at a smaller batch of numbers, you&re on thin ice statistically
But for now, at least, we&re seeing a level of activity that was higher than 2016.
TC: You can see why things might be ticking along now:
the tech IPO market, SoftBank massive Vision Fund, big tech companies getting bigger, which keeps the wheels turning
What happened in 2016 Uncertainly about the U.S
presidential election Bill Gurley warnings that a reckoning was coming
PW: I really don&t know that it was down so much versus that prior
It was a more a reversion to the mean
The 2016 number still represents a pretty decent and sustainable pace for this industry.
TC: Based on your findings, would you guess a
downturn is closer than further away It seems inevitable, but I&ve thought this for the last three years.
PW: It a known unknown
We know there will be a change but we don&t know when or how deep it will be.
TC: Could things have possibly changed, given that everything
is impacted by tech, that software is, in fact, eating the world That obviously the bull case.
PW: It pretty darn mainstream, whether via
digital transformation or just the massive disruption of massive industries buy digitally native competitors
