WEBVTT - A VC Pulse Check for Second Half of 2023

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<v Speaker 1>But Jess Wild markets are still open. Here, we're going

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<v Speaker 1>to have a great talk with Marlee's Van Romberg, editor

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<v Speaker 1>and chief at crunch Base. She's joining us on zoom

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<v Speaker 1>from San Francisco to talk all things tech and an

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<v Speaker 1>outlook from crunch Base for the second half of the year.

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<v Speaker 1>Marlee's thanks so much for getting on a call with

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<v Speaker 1>us on this half holiday. Here. You have a report

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<v Speaker 1>that your organization did on the outlook for twenty twenty

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<v Speaker 1>three that I found so interesting. One of the results

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<v Speaker 1>saying that companies only have six months of runway left

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<v Speaker 1>in the bank. That's according to almost a third of

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<v Speaker 1>your company respondents there. What are the other big standout

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<v Speaker 1>data points for you when it comes to that midyear

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<v Speaker 1>report from crunch Base.

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<v Speaker 2>Yue, good morning, Thank you for having me so. Yes,

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<v Speaker 2>we actually just published we do a quarterly reader survey.

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<v Speaker 2>So these are mostly obviously people in tech and venture

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<v Speaker 2>capital who are taking that survey and sort of telling

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<v Speaker 2>us that they're thinking. And some of the things that

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<v Speaker 2>we've been tracking since the beginning of the year is,

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<v Speaker 2>as you mentioned, runway. That's a big hot topic right

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<v Speaker 2>now is how much money do startups have before they

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<v Speaker 2>start running out of cash. And what I thought was

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<v Speaker 2>really interesting this time around was, as you mentioned, about

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<v Speaker 2>a third of respondents who answered that question said that

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<v Speaker 2>they actually have less than six months of runway, which

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<v Speaker 2>is definitely, you know, sort of red alarm status for

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<v Speaker 2>your company, particularly given that venture funding is very difficult

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<v Speaker 2>to come by, so you know, that's really an emergency

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<v Speaker 2>situation for those companies. What was also interesting is that

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<v Speaker 2>it seems to be kind of a barbell, about the

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<v Speaker 2>same percentage who answered the question said they have more

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<v Speaker 2>than twenty four months of runway. So it seems like

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<v Speaker 2>there's almost these two classes of companies that are emerging

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<v Speaker 2>right now. Those that are doing pretty well on managing

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<v Speaker 2>their cash and can probably you know, kind of survive

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<v Speaker 2>the current environment if if nothing else big kind of

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<v Speaker 2>comes along. And then there are those that are really

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<v Speaker 2>in a difficult situation right now. And I think that

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<v Speaker 2>might be where we start to see uh more mergers

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<v Speaker 2>and acquisitions. It's something we've sort of been anticipating in

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<v Speaker 2>the startup world for a while and haven't quite seen

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<v Speaker 2>that come along. But there were actually quite a few

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<v Speaker 2>larger deals announced last week, including the Big Data Breaks

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<v Speaker 2>purchase of another venture back startup, so you know, we

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<v Speaker 2>might start to see some of those trends emerge.

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<v Speaker 3>Now, what's been the catalyst for why there's been a

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<v Speaker 3>divergence between those that are still doing well and then

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<v Speaker 3>you have on the opposite side of that those that

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<v Speaker 3>are struggling to get that funding?

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<v Speaker 2>You know, I think I think there are a lot

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<v Speaker 2>of factors at play. In general, funding is hard to

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<v Speaker 2>come by for all companies right now, with you know,

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<v Speaker 2>some obvious exceptions like AI. Investors are very very interested

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<v Speaker 2>in what's going on. Then, you know, I think when

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<v Speaker 2>money was easy to come by, a lot of startups

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<v Speaker 2>dig over higher. And that's why we're seeing a lot

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<v Speaker 2>of layoffs in the sector right now, as you know,

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<v Speaker 2>some of those corrections are being made. I think, you know,

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<v Speaker 2>some companies were really kind of trying to grab as

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<v Speaker 2>much market share as they could when when things were hot,

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<v Speaker 2>and as the market slowing down now, you know, maybe

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<v Speaker 2>didn't manage the cash they had as well as they

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<v Speaker 2>could have.

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<v Speaker 3>How much of this could be repercussions to what happened

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<v Speaker 3>with SVB and some of these other banks that we

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<v Speaker 3>saw earlier in the spring.

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<v Speaker 2>Yeah, I think we you know, really can't overstate the

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<v Speaker 2>impact that the collapse of the SDB had on this sector.

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<v Speaker 2>You know, partly it was really an impact to the

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<v Speaker 2>confidence in venture backed startups, but you know, it's also

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<v Speaker 2>just SVB was was by far the largest source of

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<v Speaker 2>venture debt for a lot of startups, So that's something

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<v Speaker 2>that's become even harder to come by and for a

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<v Speaker 2>lot of companies as venture funding became more difficult, venture

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<v Speaker 2>debt was was sort of a plan B, so that's

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<v Speaker 2>become more difficult as well. Well.

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<v Speaker 1>Even though that space has been a challenge, AI is

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<v Speaker 1>certainly alive and well here when it comes to funding

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<v Speaker 1>for these AI firms, what are you hearing people look

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<v Speaker 1>at and question when sussing out which firms to invest in.

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<v Speaker 1>I think about the difference between the guests that we

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<v Speaker 1>have on who talk about betting on a C three

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<v Speaker 1>AI versus you know, a qual Calm or an Intel

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<v Speaker 1>some of these names that are AI adjacent but a

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<v Speaker 1>little bit more stable. What are you hearing when it

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<v Speaker 1>comes to that decision making.

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<v Speaker 2>Yeah, you know, obviously there's a lot of interest and

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<v Speaker 2>hype kind of around generative AI, but what we're also

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<v Speaker 2>seeing is investors are really interested in more of those

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<v Speaker 2>kind of infrastructure companies that are going to be powering

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<v Speaker 2>a lot of what's going on in AI that are

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<v Speaker 2>sort of you know, adjacent or tangential to the core

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<v Speaker 2>AI companies. There's a lot of interest in that. I

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<v Speaker 2>think one investor who spoke with us kind of, you know,

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<v Speaker 2>described it as looking for the nuts and bolts that

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<v Speaker 2>are going to be powering the AI revolution. There's a

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<v Speaker 2>lot of money going into that as well, you know.

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<v Speaker 2>I think, as with anything startup or venture capital, we

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<v Speaker 2>are also seeing a lot of companies that are sort

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<v Speaker 2>of just grabbing the AI label and sort of trying

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<v Speaker 2>to affiliate themselves with that. And I think with time

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<v Speaker 2>we'll sort of see a bit of a sorting there

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<v Speaker 2>of what's real and what's not.

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<v Speaker 3>We only have about a minute left, but what's next

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<v Speaker 3>that you're keeping your focus on on your radar as

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<v Speaker 3>far as what the trajectory could be. When we're talking

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<v Speaker 3>about these companies that are going through angel investment or

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<v Speaker 3>these seed funding grounds, you.

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<v Speaker 2>Know, I think seed funding at the beginning of this

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<v Speaker 2>venture downturn had held out fairly well, and that's not surprising.

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<v Speaker 2>It was really the late stage startups that were the

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<v Speaker 2>most impacted, but we are starting to see that downturn

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<v Speaker 2>trickle down through to the earliest stages, and that's, frankly,

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<v Speaker 2>that's worrisome because that's you know, the next class of

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<v Speaker 2>companies that are going to be unicorns, you know, five

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<v Speaker 2>ten years down the road. And so I think we

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<v Speaker 2>will see this decline really kind of extend for quite

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<v Speaker 2>some time, with exceptions around some of these sectors that

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<v Speaker 2>really get a lot of funding, but right now we're

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<v Speaker 2>seeing venture funding down across all stages of funding.

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<v Speaker 1>All right, MARLEEZ, thank you so much for joining us

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<v Speaker 1>to talk about your outlook and some of the picture

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<v Speaker 1>when it comes to funding for startups in San Francisco

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<v Speaker 1>and more broadly in the tech space. Really appreciate it.

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<v Speaker 1>That was Marlee's Van Romberg. She is editor in chief

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<v Speaker 1>of crunch Base.