The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: The Memo: The State of the VC Market: Why Seed Funds Can't Invest in "Hot Startups" Anymore, Why Series A & B is Terrible, Why the IPO Market Will Explode in 2024 & Why VC DD is BS & Every VC Has More Fraud in their Portfolio with Jason Lemkin

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Aug 9, 2023

Jason Lemkin, Founder of SaaStr, shares his insights on the current state of venture capital, highlighting that seed rounds are more active than ever despite challenges. He questions the viability of Series A and B investments, suggesting they may be 'dead zones.' Lemkin emphasizes how founders with strong ARR have advantages, while stressing the importance of addressing product-market fit. He also forecasts a booming IPO market in 2024, urging a positive perspective on growth in venture capital.

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INSIGHT

Seed Market Vibrancy

The seed stage is vibrant, fueled by wealthy tech individuals and operators.
This increased supply of capital allows for more splintered rounds.

ADVICE

Embrace Splintered Rounds

Founders should accept splintered seed rounds from angel investors if available.
This avoids delays and allows for quicker progress, especially for outsiders.

INSIGHT

Seed Investor Challenges

Seed investors struggle to participate in "hot" rounds due to high valuations.
Focusing on outsiders or less competitive deals offers better entry points.

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Jason Lemkin is the Founder @ SaaStr one of the best-performing early-stage venture funds focused on SaaS. In the past, Jason has led investments in Algolia, Pipedrive, Salesloft, TalkDesk, and RevenueCat to name a few. Prior to SaaStr, Jason was an entrepreneur, selling EchoSign to Adobe for $100M where it is now a $250M ARR product.

In Today's Episode with Jason Lemkin We Discuss:

1. WTF is Happening At Seed Right Now:

Why does Jason believe seed is more active than ever?
Is the pricing of seed rounds impacted since the downturn?
Why does Jason believe it is not only not the end of party rounds but just the beginning of them?
Why does Jason believe you cannot fail if you have $1M in ARR and an amazing founder?
Why does Jason believe that seed investors cannot participate in "hot seed rounds" anymore?

2. Is Series A a Dead Zone:

How does Jason analyze the Series A and B environment today?
What has changed in what investors expect and want to see in potential Series A and B investments?
What happens to the many companies who raised pre-emptive Series As and have 10 years of runway but no product-market fit?
Why does Jason believe founders should offer to give the money back when it is not working?
What happens to the Series A and B market in the next 18 months? When does it come back?

3. Growth: People are Too Negative!

Why does Jason believe that growth is more active than many are giving credit for?
What are the ARR benchmarks required to get a good growth round term sheet today?
Why does Jason believe that VC DD is a load of BS?
Why does Jason believe that every VC has fraud in their portfolio? Will they come out?

4. Ring That Bell: IPOs and M&A:

Why does Jason believe 2024 will be an amazing year for IPOs?
Why does much of the IPO market rely on Stripe and Databricks?
What is needed for an amazing 2024 IPO market?
How does Jason evaluate the M&A market in 2024? Will regulation get in the way?

5. Jason Lemkin: AMA:

Why does Jason Lemkin believe this generation of workers will never work hard again?
What is the only way for seed funds to make money investing in serial entrepreneurs?
What does Jason know now that he wishes he had known when he started investing?