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

20VC: WTF Is Going On In Venture Capital; Seed Round Pricing Will Remain High, Series B & C Has Gone Completely, Downrounds Are Coming | Why Defensibility is BS on Day 1, Why Market is More Important Than Founder & Why Being First To Market Doesn't Matter

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Apr 24, 2023

In this engaging discussion, Avlok Kohli, the CEO of AngelList and a seasoned entrepreneur with a successful track record, delves into the shifting dynamics of venture capital. He shares insights on why seed round pricing remains high and anticipates down rounds for later stages. Avlok challenges the notion of market timing and defensibility, asserting the paramount importance of product-market fit. He also critiques struggling sectors like last-mile delivery amidst the current downturn and discusses how institutions are adapting to the changing funding landscape.

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INSIGHT

Down Rounds and Pay-to-Play

Down rounds and pay-to-play deals are increasing slightly, but many startups still have cash.
These deals will likely increase in Q2-Q4 as startups exhaust their runway.

INSIGHT

Acquisition Spree Unlikely

A rapid acquisition spree is unlikely due to pressures on public companies and valuation challenges in private markets.
Acquisitions generally decreased, according to AngelList's data.

INSIGHT

Fund Secondary Positions

There's an increased appetite for selling fund positions due to altered investment ratios or liquidity crunches.
Discounts of 40-50% from the last round valuation are common clearing prices for these deals.

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Avlok Kohli is the CEO @ AngelList. Under his leadership, Avlok has taken AngelList from an SPV provider to a company that is becoming the software platform for the entire industry. Today, AngelList supports over $15BN in assets and 40% of US unicorns have had a GP invest in them through AngelList. Prior to becoming CEO @ AngelList, Avlok founded 3 companies, all of which were acquired including by the likes of Square and eBay.

In Today's Episode with Avlok Kohli We Discuss:

1. From 3x Founder to Scaling AngelList to $15BN in AUM:

How did Naval convince Avlok to join AngelList and be CEO?
Does Avlok believe in startups having defensibility in the early days?
How important does Avlok believe it is for companies to be "first to market"?
Why does Avlok believe all the last-mile grocery delivery companies will go bust in the downturn?

2. What is Going On in Venture: New Funds, LPs, Secondaries:

Are we seeing the amount of net new funds reduce in the downturn?
Are we seeing the size of new funds being raised, being smaller?
Is the time to first close increasing in time?
Does AVlok agree that the fund segment hit hardest by the downturn is micro fund managers?
Which LP class has pulled back from fund investing most significantly?
Why does Avlok believe institutions have returned to fund investing more than ever right now?
Are we seeing an increase in fund secondary positions?

3. What is Going on in Startups: Rounds, Valuations, Party Rounds

Are we seeing the number of startups able to close their round reduce?
Are we seeing the size of startup funding rounds reduce? How does this depend on the stage?
What are we seeing for startup valuations? Why is seed as high as ever? What is the most hit?
How is the composition of funding rounds changing? More or fewer party rounds?
When does Avlok believe we will see down rounds and pay-to-play, really come into effect?

4. The Business of AngelList and its Future:

What are the margins on AngelList products today?
What is the best margin AngelList product? What is the worst?
What product did AngelList do that in hindsight, Avlok wishes they had not done?
Why did AngelList back out of Europe? Was it a mistake?
How does Avlok think about AngelList's fierce competition with Carta today?