[PreMoney SF 2016] "Broken Unicorns"

TL;DR

Eminent VCs discuss the broken system of late-stage funding and forecast valuation corrections amidst a surge in unicorns.

Transcript

so hello my name is lizette Chapman and I cover venture capital for Bloomberg and with us today we're going to talk a little bit about in search of the unicorn kind of how you get there but we've kind of started renaming the panel and talking about this right before we came up here and we think it's it's a broken broken system or possibly it could ... Read More

Key Insights

• 😀 Late-stage funding landscape faces challenges with companies optimizing for valuation over fundamentals.
• 🦄 Valuation corrections are expected as a result of unsustainable unicorn growth.
• 💝 Mutual funds and hedge funds have shifted focus to late-stage private markets due to the current growth opportunities.
• 🇨🇫 Public market trends influence M&A activities between companies, with more action in public M&A due to clearer valuation discovery.
• 👨‍💼 Startups need to match their business stage with appropriate investors to ensure successful partnerships.
• 🔒 Growth in late-stage private markets highlights the importance of private funding for high-growth companies.
• 😤 Investors emphasize the significance of addressing market needs and having a strong management team for continued success.

Questions & Answers

Q: What concerns do venture capitalists raise about the late-stage funding system?

Venture capitalists highlight concerns about companies optimizing for valuation rather than focusing on fundamentals, leading to potential valuation corrections and challenges in growth.

Q: How do mutual funds and hedge funds contribute to the late-stage venture capital market?

Mutual funds and hedge funds are crucial players investing in late-stage ventures as growth shifts to the private market, offering opportunities for high-growth companies to stay private longer.

Q: What are the implications of public market trends on late-stage funding and mergers and acquisitions?

Public market trends influence valuation discovery and M&A activities, with companies facing hurdles in private M&A due to limited visibility on valuation resets, while public M&A sees more activity with discoverable pricing.

Q: How do VC investors advise startups in managing valuation and selecting appropriate capital partners?

VC investors stress the importance of having a strong board and capital partners to guide startups in managing valuations, making rational decisions, and aligning with investors suitable for their business stage.

Summary & Key Takeaways

• Venture capitalists discuss the potential shortcomings in the late-stage funding landscape.

• Valuation corrections are expected due to the influx of unicorns in the market.

• Mutual funds and hedge funds play a significant role in the late-stage venture capital ecosystem.