Back in Q1, you couldn’t swing a dead cat without hitting someone advising startups that the world, as they knew it, was coming to an end. Venture dollars flowing to startups had decreased from $16B in Q3 ’15 to $12B in Q4 and VCs were telling anyone who would listen that nuclear winter was in sight and funding would be drying up. The media just ate it up. Take a look at just a tiny sample of headlines from early Q1.
Imagine my surprise when I opened PWC’s VC Q2 Money Tree report on Friday (ok, I’ll admit that I wasn’t surprised at all). Take a look at the chart from their report below. Not exactly the apocalypse everyone was predicting, right? To be fair, while dollars have increased again, the number of deals fell by about 5% (suggesting that larger dollars were going into some later stage companies).
I wrote a post about all this in February and my advice to founders remains the same as it always is. Raise more than you think you need. Price your rounds to avoid the pain of stacked notes. Watch your expenses. But whatever you do, don’t pay attention to what anybody’s saying about the macro because they’re all full of shit.
Will the funding environment get worse for startups? Yes, of course it will. Eventually. Bill Gurley’s been telling us we’re in a bubble for years now. He will undoubtedly eventually be right. But there’s also logic supporting the notion that an entire generation of globally important companies will be born and go public by the time he is. We’ve now had ten quarters in a row of over $10B of venture capital flowing into the system. Venture Capital firms raised more money in 2014 than ever before in history and then they raised even more in 2015! All of those firms have a mandate to put that capital to work which means VC dollars will continue to flow liberally to startups at least for the next 3-4 years.
My $.02? I think we’re in the greatest tech innovative cycle in history and capital will continue to be available to fuel it. Technology is solving more problems for more people in more ways around the globe than ever before. I see it when I travel to our 24 Techstars accelerator programs and the hundreds of events we put on for entrepreneurs around the world in over 130 countries. Barring a global economic collapse (which certainly does seem like better than a zero percent chance given the events of 2016 and the potential fallout from our Presidential election this November), I think we’ll continue to see a healthy environment for startups for years to come.