Dispatch From VentureCrushSF: Why Aren't There More Dead Unicorns in Venture Capital?

Dispatch From VentureCrushSF: Why Aren't There More Dead Unicorns in Venture Capital? 960 633 C-Suite Network

Last Thursday, over 800 venture investors, founders, senior executives at tech companies and others in the venture capital ecosystem mingled with winemakers and musicians for our 2017 VentureCrushSF event, featuring music from Grammy nominee Tift Merritt and her partner, Eric Heywood. Before the evening festivities, we held a series of nine simultaneous breakout discussions (I wish I could have sat in on each of them, but without the benefit of time travel, that proved impossible). This article seeks to capture key aspects of the discussion that occurred in my breakout session, Why Aren’t There More Dead Unicorns?

In this breakout room were some 60+ venture capitalists, founders, limited partners (investors) in venture funds, angels, and startup/growth company executives. Having sat in on the discussion between venture investors and the limited partners that back them at our May VentureCrushParis (article here), it seemed appropriate to participate in a very different discussion for this event.

https://twitter.com/elizabeth/status/878037950637850624

[Elizabeth Weil, a Managing Partner at 137 Ventures, photographed and shared her view of our breakout room. I’m going to say that she was enjoying a glass (or two) of Meursault, but it could be Riesling.]

Some of the questions we considered were:

  • Have we finally seen the demise of FOMO (fear of missing out) in Silicon Valley’s venture community, which could mean that if they don’t fear missing out, valuations and the pace of venture deals will both decline?
  • Are there presently so many seed and Series A-funded tech startups solving the same problems that VCs are just letting those companies battle it out until a winner becomes obvious, so that startups must wait longer and prove more to obtain next round funding?
  • Have M&A buyers of venture-backed startups largely gravitated toward either big deals or small deals with a much leaner market for mid-size acquisitions?
  • Are more and more founders and early employees getting liquidity in growth and late stage deals or on the side and does that continue to enable companies to remain private longer?

In short, the answer to all of the above questions was “yes,” but we also discussed why and how things will likely play out in the coming months. If this sounds gloomy (and it was definitely not all gloomy), I’d note that in July 2015, I published a column on the Wall Street Journal’s Accelerators on the growing scarcity of Series B rounds, which was based in part on a breakout session at VentureCrushSF 2015, so perhaps whenever VCs gather to talk shop, they predict declines!

Death of FOMO: Narrowing Window for Series A Rounds

Brian O’Malley, a general partner at Accel, kicked off our session by asking whether people felt like we were seeing more bridge funding rounds than in the last…