UP vs. DOWN ROUNDS:
With a decade of unprecedented easy money policies, no one should be surprised that risk on assets have exploded in value. The wealth creation in digital assets, now exceeding $3 trillion dollars, is impressive. But, even more traditional assets such as bonds, public equities and venture capital have benefited.
According to a recent report from AngelList and Silicon Valley Bank, “roughly 11.3% of the 4,920 startups (primarily at seed or early-stage) that AngelList fund managers had seasoned investments into at the start of the quarter raised a round or exited in 3Q21. Of that activity, a near-record 87% was positive, meaning the startup saw a markup (if raising a round) or had a positive exit by selling at a higher valuation than its previous round”.
AngelList continues, “that’s the second-highest positive rate ever observed in our dataset, after last quarter’s record-breaking 90% (in 4Q20 t he rate was 80%, and in 1Q21 it was 85%). Overall in 3Q21, 9.8% of star tups in our portfolio saw a markup or positive exit, while1.5% were marked down or exited at a loss relative to t heir last fundraise”.
BOOM TIMES vs. BAD TIMES:
The scatter-plot below shows (green / top right) that the last two quarters of 2021 have been unprecedented in terms of the positive skew in venture financing rounds. Again, not a surprise given the easy money characteristics of the macro backdrop.
This is the easiest time in history to start a startup, capital is cheap to raise and you don’t need a lot of it to launch an idea powered by software. This is especially true for blockchain and DeFi projects.
I am telling all of my portfolio companies to extend your runway now!
To be clear, WEB 3.0 is just getting started and there are many startups that need and deserve funding. All of my future investments will be focused on this space going forward, with a little AI/ML and GovTech sprinkled in for diversification.
PODCAST:
Tim Ferriss Show # 541 - Eric Schmidt — The Promises and Perils of AI, the Future of Warfare, Profound Revolutions on the Horizon, and Exploring the Meaning of Life.
“The chemist wakes up in the morning and says, ‘Let’s try the following seven compounds.’ They try the seven compounds, none of them work. And at five o’clock, they go home to have dinner and think, watch television, and the next morning they think of another seven. Well, the computer can do a hundred million in a day. That’s a huge accelerant in what they’re doing.” — Eric Schmidt
CONFERENCES:
World Investment Forum 2021: November 7-10, at the Montage in Healdsburg, CA. Panel: Do Digital Assets have a Role in Institutional Portfolios? You can probably already guess what my answer is to this question, but I will try to break it down into simple blocks of why it makes sense for institutional investors to have exposure.
This is the last event that I plan to participate in for 2021.
I hope that you enjoy the letter as much as I enjoyed writing it and please feel free to share the links with friends and associates. If you are interested in startups and are an accredited investor you can join over 750 other backers that follow my AngelList syndicate here.
Stay safe and stay well. Sean Bill / MacroCrunch / Twitter