Adam Hardej

Jul 21, 2022·Newsletter

Hot VC Summer

Hot VC Summer

Flashback to January 2020. Nobody knows what's going to happen. Covid is on the rise. Is the world going to shut down? Are VCs going to keep writing checks? Young startups were warned that they might not survive.
Fast forward to Summer 2020. Deals are getting done and the typical VC Summer Vacation just isn't an option. Everyone has to stay home. Without the distraction of travel, VC S20 wasn't much of a Summer at all. Deals got done remotely and things started to heat up.

Fast forward again to Summer 2021. Markets are up, vaccine rollouts started a few months earlier, and VC "revenge travel" is on the rise. Even with the return of Summer travel we were in the midst of a record breaking 2021. "If you slept for a day, you’d miss out on something big,” Matt Murphy, a partner at Menlo Ventures, said of 2021’s funding environment. Aspen was busy, but with FOMO at all-time highs and due diligence at record lows - deals were getting done on iPhones between morning golf and afternoon hikes with the family.

We have now officially arrived in VC Summer 2022. Deal velocity is down and VC-European-vacation velocity is up. Investors are enjoying international travel they missed out on in recent years and have returned to pre-covid Mediterranean rituals in force. Unlike 2021 though, many investors will look to unplug completely rather than close deals from their beach chairs. A "we just need a break" narrative has begun to circle, but what it really looks like is a welcomed ceasefire for investors who want to avoid missteps as the markets go through a bumpy road on the way to some sort of new normal.

This can leave cash-strapped founders in a precarious position. Fundraising introductions and outreach have started to see more "Can we reconnect this Fall?" responses. VC-backed founders like Bruno Faviero who closed their rounds before the slow-down have publicly noted this dynamic and tweeted some advice: "If you're not already well into your fundraise, you should just wait until September. Many VCs are on vacation rn, and the landscape will likely be better than as well."

That being said, this is not the same at every stage. Seed stage investors are used to a more lively Summer generally and are still mostly in the office. Here at Stonks, June was our busiest month ever and July is on a similar trajectory. Where this phenomenon is more pronounced is in Series A+ and later stage financings. With companies like Klarna taking ~85% markdowns, big check writers who typically take longer to complete transactions are ok with waiting a month or two to see where things land.

Click here to check out the full article by Erin Woo from The Information.

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