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How to Navigate the Ever-Changing World of Early Stage VC: Otter Voice Meeting Notes

How to Navigate the Ever-Changing World of Early Stage VC

Yashad Kulkarni39min

Speaker 1

00:06

everyone, thanks for tuning in. I am Greg compare one of the editors here at TechCrunch. And I'm super stoked to be joined right now by Abdullah Kohli of Angeles ventures of luck. Thank you for joining us.

Unknown Speaker

00:17

Thank you for having me excited for us.

Speaker 1

00:19

I know that folks are tuned in hear from you. So I'm gonna get out of your way here. The one thing that I've got to say to everyone that's tuned in is to remember to submit your questions through hopping, the earlier you get them in, the better. The entire point of this event is to learn and to have your questions answered. So please keep the questions coming. And we'll get to as many of them as we can. Cool, so take it away. Thank you.

Speaker 2

00:42

So I'm just going to go through a presentation as a backdrop for the questions are going to be coming up, just want to provide a little bit of color on what's going on in InVenture today. So in terms of who I am, I'm the CEO of Angeles venture. And you can think of Angeles venture as a financial platform. That is supporting funders, these are GPS, and LPs, basically, the actors around venture funds. And then funders, these are, of course, our founders. These are, of course, people who start companies. And you can really think of us as a platform. So we have a very broad view on what's going on in venture today. And so, here's our data set. We're now managing the portfolio of 8400. startups, we're seeing around 51% of all the top tier tech deals, and we're managing more than 5500, syndicates and fun. So again, just sharing this as backdrop into some of the data I'm about to go into next. Before we get into that, just want to define some of the terms I'm going to be using today. Since I know when I was a founder, I didn't really understand what LP was. So just wanted to share this. For folks who don't know, when we talk about fundraising and money going into startups, it typically comes from a fund or another word Venture Fund. The venture fund themselves also raised from investors and their investors are called LPs, short for limited partners, that's usually just the the quick term for them. So you have LPs that are investing into funds. And then the funds are investing into startups. And that's actually how the money flows. And these LPs can be, can range all the way from pension funds, to hedge funds to large family offices, basically, super high net worth families, and individual investors. So it really can range across the board. So that's the way capital flows into startups. And so what we're seeing is a very, very, very active market, actually, one of the best venture markets we've ever seen, for our entire data set and what this is showing. And I actually would want to want your attention at the top chart, the 10% rate, what that is representing is in our active portfolio today of investments that we're managing, we're seeing 10% of those companies are actually just got marked up in the last few months. That is very, very high. That means over the entire set of companies we're managing, and we're managing investments into 10% of them are marked up by some later stage fund. So that just to give you a sense of what's going on. There's a lot of interest in venture today. And like I mentioned earlier, LPs invest into funds and those funds invest into startups. What's also happening is there's a massive surge in LP interest in venture. What this is showing as it's actually showing a trajectory of LPs investing on angellist. And it actually is indicative of the broader market as well. And so we actually saw in the last few quarters, a significant uptick in significant change in slope of the number of LPs are interested. Basically what happened was, folks woke up one day and went, rather than just investing in public markets. They're now asking, How do I invest in the private markets? Now? How do I invest in venture? What is my venture allocation, and this is happening across the board, which is causing a lot more capital to flood in an interest of flooding from the LP side, but past to get allocated somewhere it gets allocated to venture funds. So then you see an explosion of venture funds, who are then they have the whole job is to deploy capital into startups. So that's what's happening today. There's a underlying shift in terms of LPs, many more LPs wanting to invest in, in the venture industry. And so all of this of course, means there's a significantly more amount of capital today for founders

Speaker 2

05:03

bought by a huge margin than even a year ago. And we are seeing a lot of the downstream impacts of this. So what this is showing is the median valuation of pre seed companies. And we see a significant uptick from 2019 to 2021. If we look at cede similar trend, we're seeing a significant uptick into 2021. And then series A had the steepest increase. And if we actually take a look at the 75th percentile, which I didn't include here, we saw similar uptick there. So the top top top quartile companies are also seeing a very sharp rise in in the valuation. And as we think about this, sort of looking at it from a founders perspective, what does all of this mean? Well, all of this means is that what all this means is that there are significantly more players in venture today. And it that there are some complexities that you have to understand who they are, what their incentives are, and then how you want to construct your round as a founder for your company. And so at the top level, the way to think about our three different categories, we have the large VC funds and crossover funds, these are the largest cheque sizes, and you can think of the name brand VCs, such as Sequoia, Andreessen, Tiger, global etc, very large cheque sizes, again, each has their own their own investing strategy, they're not all the same, but generally, their cheque sizes are very large. Then you have the micro VCs, which is a very recent movement, and is actually growing very, very quickly. And I put their check size, one step below the large VCs. And then you have the operator angels, and the operator angels are typically folks who are working at technology companies looking to get exposure into investing. Now, the way to think about constructing your round, is to take a step back and ask, What are you looking to do with your company, and any startup usually is created because the founder has a vision of how the world should exist. And in creating that vision, needs to then understand how do you make that vision a reality. And what you want to do is you want to take that map it to what the risks are, sometimes it's team, you have to build the right team could be fundraising, because you need to raise a large amount depending on what you're going after. But just list out those risks. rank order it by the most, the most critical risk first. And then you want to think about each round that you're constructing, you want to think about who the investors are, that can help with those risks that can get you to the next stage of fundraising. And here's the key part, as you think about investors in any one of these three categories, you want to think about their cheque size, relative to their fund size, because that's going to be an indication of how much they can actually help you. Meaning if their check size is like a point 01 percent of their fund there, they don't really have that much skin in the game to really dig in. Which is why there was actually a really interesting tweet by Harry on checkstyle helpfulness, and he was really talking about operator angels, in that he was indicating that he's getting a lot of help from operator angels. And the underlying reason is because the cheque size relative to their fund size or network is quite high when they go to invest in companies. So they will begin and want to help. So here are just few of the things to know as you're thinking about constructing your your round, and how to think about the different players in this in this new world. So with that, we we're gonna move into a discussion component since I think that's where we're gonna get a lot of really great questions that we can dig in on this.

Speaker 1

09:02

Awesome. Okay, thank you so much for that presentation. For the sake of context, can you talk a little bit about your story, and how did you get here?

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