So folks in venture are back to business.  2022 was a year of dealing with the fallout of fallen unicorns, terrible deals, and slashed valuations.  It was tough in venture for many, but it is behind us.

And as a result, venture is back to work.   The seed markets remain vibrant, and later-stage investors are looking at more deals.  We did a great Workshop Wednesday with Iconiq Growth, where they said after an all-time low of growth invest in 2021, they’ve already done a few good growth deals this year:

But … but … here’s the thing.  A reality has set in.  It’s Year 2 of the Venture Downturn in SaaS.  That’s OK, everyone has adjusted.  But it also means optimism has seeped out of the market.  Optimism that unicorns and, more importantly, routing 10x ARR multiples are coming back anytime soon.

And what’s happened is optimism after the seed stage, so crucial in many ways, has given way to pragmatism.  Outside of a few crazy outliers, no one really wants to believe in the Series A or later stages that a start-up can grow into an outsized valuation.  No one wants to pay up anymore.  And if there are any concerns at all on a deal … Series A and later VCs are now mostly Default No.  In the go-go times of 2021, everyone was Default Yes if there was something good in a SaaS deal.

To be more specific, I’m now seeing SaaS startups with strong growth not get a Series A or B term sheet.  Folks doubling or even tripling at that stage.  Why?  It’s just if there’s anything not to like, it’s often now a “No”.

One VC told me they recently passed on a hot startup solely because the closest comp was PagerDuty, one of the great SaaS companies out there.  Why did they pass?  “Well, if PagerDuty is only worth $2 Billion, I can’t see this one hitting a billion even best case.”

It’s a fair point, if nothing changes.  Very few can exceed the huge success of a PagerDuty or many other SaaS leaders.

It’s just, now that we are in the second year of a VC downturn, no one wants to believe.  Or at least, not very many.

It’s back to brass tacks.  And that means the next round is almost always going to be harder.

(tough year image from here)

Related Posts

Pin It on Pinterest

Share This