Will capital be available for the wave of 2021-22 vintage companies that need to raise again as their runway runs out?

Julio Vasconcellos · Sep 23, 2022

The reduction in capital will produce higher company mortality and loss ratios over the next couple of years, and that is healthy and a return to normal rather than a crisis

The last couple of years were atypical — companies going sideways should not be able to raise money forever, so companies that should already have died will now die, bringing loss ratios back to long-term averages

39:34 20VC: Why Greed is the #1 Enemy of Venture Returns, Why Not Enough VCs Play to Win and Lessons from Scaling to $100M and 1,200 Employees and Then Cratering with Julio Vasconcellos, Founder @ Atlantico

David Tisch · Feb 27, 2023

The coming reckoning will be a wave of company shutdowns rather than a wave of down rounds, arriving in the next eighteen to thirty-six months.

Seed-to-A graduation rates went from historical ~70% to near 100% during 2018-2022, so companies that shouldn't have progressed will fail later and bigger as runway runs out, with no M&A market for acquihires or small acquisitions.

21:56 20VC: How Multi-Stage Funds Changed The Game For Seed Rounds, Why Signalling Risk is BS, The Three Most Important Variables for Founders When Raising Rounds & A Debate on Portfolio Construction: Does Ownership Matter with David Tisch

Harry Stebbings · Nov 11, 2022 · hedged

The only companies raising today are lower-quality ones that have to, and the repricing of good assets will come in Q3–Q4 2023 when extension runway runs out

Good companies either don't need money or have existing investors willing to extend their runway

16:17 Only weak companies are forced to raise now good assets reprice later

Satya Patel · Jan 30, 2023

Companies that cut spend in 2022 to buy time until the market 'came back' are now out of time and will go away, because the market is not returning to 2021 levels and they never demonstrated real business value

They bought time with layoffs rather than proving business fundamentals, and the market they were waiting for isn't coming back

46:44 Companies that bought time via cuts without proving fundamentals will fail since 2021 market wont return

Deven Parekh · Oct 11, 2023

A wave of companies funded at Series A/B in 2021-22 will need to raise in early 2024, and those that executed well will get capital — just not at the price they want

Series A and B rounds fund 12-24 months to the next proof point, not three to five years, so those cohorts naturally come back to market at the start of 2024

5:30 Companies that executed well will get capital in 2024 but not at the price they want

Harry Stebbings · Feb 27, 2023

We are currently in the midst of the crash for seed-stage portfolios.

2021-22 entry prices were high even for good companies, those companies come back to market in 2023-24, funding is down, and some great companies need more time and cash than is available.

19:42 Seed portfolios are currently in the midst of the 2021 22 crash