Patricia Nakache Trinity Ventures: Series A crunch & valuations that don't match partner perspective

TL;DR

The content discusses the differences between Series A and Series B investments, as well as the shift in investment focus from Series A to Series B due to higher risk-return ratios.

Transcript

end result is there really is a with what's been called a series 8 crunch it used to be called the series be crunched by the way if that existed for a long time outs of series a crunch and I do think that the you know a lot of companies are coming to market for series a and they're kind of in that tweener mode in their ass gates sort of the the rou... Read More

Key Insights

• ❓ Companies seeking Series A funding often struggle with valuation due to the misalignment of progress and investor expectations.
• 🥳 The shift towards Series B investments is driven by better risk-return ratios and the presence of specific traction.
• ✋ Series B investments offer a longer period of market data and higher valuations relative to traction, making them more attractive.
• 🔙 Investment focus has shifted from Series A to Series B, mainly due to the availability of more established metrics and traction in Series B investments.
• 🔙 The valuation at Series A stage may be less favorable compared to Series B due to limited market data.
• ✋ Series A investments carry higher risks compared to Series B investments.
• 🥳 Investors are gravitating towards Series B investments for better risk-return ratios and more certainty in investment decisions.

Questions & Answers

Q: What challenges do companies face when seeking Series A investments?

Companies seeking Series A investments often face difficulties in valuation due to the misalignment of progress and investor expectations. These challenges can make fundraising challenging for early-stage businesses.

Q: Why is the focus shifting towards Series B investments?

The shift towards Series B investments is driven by the better risk-return ratios and the presence of specific traction that these investments offer. The longer period of market data also allows investors to make more informed decisions.

Q: What makes Series B investments more attractive?

Series B investments are more attractive due to the availability of 18 to 24 months of market data, which provides a clearer picture of a company's performance. Additionally, the higher valuations relative to traction make Series B investments more appealing.

Q: In terms of risk, how do Series A and Series B investments compare?

Series A investments carry higher risks compared to Series B investments. Series A investments typically involve raising funds in the early stages, with limited market data available. In contrast, Series B investments benefit from more established metrics and traction.

Summary & Key Takeaways

• Many companies seeking Series A funding struggle with valuation as their progress may not align with the high expectations of Series A investors.

• In 2015, 40-50% of investments made were in Series A, but in 2016, only 20% were, with more emphasis on Series B investments due to better risk-return ratios and specific traction.

• Series B investments are more attractive as they offer a longer period of market data and higher valuations relative to traction.