Interview, Fireside Chat
Logan Bartlett: WTF is Happening at Growth Stage Investing? | 20VC #920
- Future podcast collaborations between the speakers are expected to recur approximately every six years.
- The venture landscape is predicted to undergo a price recalibration driven by a shift in entrepreneur priorities toward non-capital value, with specific rational pricing observed in software, digital transformation, fintech, and healthcare sectors compared to the previous two years.
- Seed stage valuations are projected to experience inflation due to the migration of growth funds, while a market gap at Series C and D stages is expected to create a dearth of opportunities as high post-valuations hinder capital raises.
- Capital is anticipated to be pushed into pre-seed and seed stages as funds seek opportunities amidst the lack of later-stage deals, raising a risk that investors may ignore valuation differences at earlier stages.
- Founders are advised to align fundraising timing with macro market volatility, with suggestions to wait until after Labor Day or later in the fall for market stabilization and increased efficiency.
- Venture capital firms face pressure to align later-stage valuations with public market expectations for liquidity, while some firms plan to double down on winners if absolute valuations and blended costs remain justifiable.
- A vintage of investors who confused timing with skill is expected to retire within the last five years, necessitating a shift toward superior stock-picking abilities for early-stage allocations where time is the only constrained resource.
- Portfolio performance outlooks indicate inevitable return compression due to price pressure, even if portfolio composition remains strong, requiring underwriting frameworks to target 3 to 5x returns with 10x plus upside.
- Risks regarding LP trust include GPs maintaining inflated book values and conflicts of interest where mark-downs are withheld to facilitate new fund raises, with a market reckoning potentially flowing through to the end of the year following Q2 adjustments.
- Investment decision-making is characterized by a spectrum of potential outcomes rather than certainty, with a historical tendency to underestimate the magnitude of winners, as evidenced by an investment turning into a $5 billion public company.
- The venture ecosystem expects a negative outlook for the crypto sector, predicting that many funds will see significant asset wipeouts as value does not yet correspond with the capital deployed.
- Early-stage founders are warned against outsourcing PR, as treating it as a non-core competency can lead to failures in competitive markets, while B2B marketing talent is seen as often lacking specialized industry depth compared to consumer or product sectors.
- Board governance expectations include maintaining a seat count of eight to 10, emphasizing the need for partners who can provide constructive pushback rather than replacing CEOs, and prioritizing outcome-based ownership over percentage ownership.
- Specific investment theses for AcuityMD anticipate limited venture-backed competition in the medical device CRM and targeting space, allowing the company to dominate the vertical, while other sectors face risks from over-reliance on trends associated with major tech giants.
- Fundraising strategies must account for the inability to align with stable macro markets, as conditions could deteriorate significantly within six to twelve months, requiring founders to wait for the "great ones" rather than settling for suboptimal deals.