‘The tortoise and the hare’ story is playing out right now in VC

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Marc Schröder
Contributor

Marc is the managing companion of MGV, specializing in working with world-class entrepreneurs in tech.

The unprecedented liquidity that has entered the enterprise market prior to now 12 months has spurred a number of tendencies that require VCs to adapt to a extra aggressive surroundings the place startup founders have much more leverage than they did prior to now.

Structurally, there are solely so many startups seeking to elevate capital, and regardless that some founders could also be opportunistically pursuing offers they wouldn’t have beforehand, the provision of capital into enterprise funds has nonetheless outpaced the demand for these {dollars}.

This implies VCs are in an uncommon surroundings of accelerating competitors to get in on offers with startups, and as they jockey to win spots on cap tables they’re shifting quicker than ever to shut offers.

The very best early-stage VCs take the time to seek out the founders they consider in and who want their experience, as a result of they’ll be proper there working with them for the lengthy haul.

What’s extra, newcomers within the VC market like Tiger World in addition to plenty of non-VC funding funds like PE corporations with a lot bigger swimming pools of capital than the market has seen are aggressively pursuing monumental offers in an effort to drive quicker exits and returns on their investments.

With so many traders vying for his or her consideration, many founders are taking the chance to boost larger rounds and coming again for extra funding quicker than ever, which is clear within the fixed drumbeat of funding information in addition to the 250 unicorns and the report $288 billion invested in startups within the first half of this 12 months.

How can VCs adapt and be aggressive?

For some, the reply could also be shifting quicker to get in on offers. Methods like doing extra due diligence upfront of ever assembly startups and leveraging applied sciences like AI to complement traders’ skill to judge firms can assist with this. For others, it might be making bigger investments and accepting smaller possession stakes in startups than they’re accustomed to.