DeepSummary
The podcast episode discusses the current state and future outlook of the venture capital industry, with a focus on M&A activity, IPOs, and the need for late-stage investors to seek liquidity in 2024. The guests, Ed Sim and Jamin Ball, share their perspectives on the challenges companies face in achieving growth and profitability targets set during the pandemic era of easy funding.
The conversation examines the reasons behind potential M&A deals and firesales in 2024, as well as the dynamics between founders, early-stage investors, and late-stage investors regarding such exits. The guests also explore the requirements for companies to go public in 2024 and the potential catalysts for the reopening of the IPO market.
Jamin Ball and Ed Sim also reflect on the mistakes made during the low-interest-rate environment, the importance of focusing on real problems rather than just "cool" ideas, and the potential impact of AI on the venture capital landscape. They express optimism about the current period as a vintage for investing, with valuations resetting and new technologies emerging.
Key Episodes Takeaways
- Late-stage investors are likely to seek liquidity in 2024, either through recycling investments or distributing returns to LPs, due to the challenges faced by companies that raised significant funding during the pandemic era.
- M&A activity is expected to be limited in 2024, with potential acqui-hires and firesales driven by companies struggling to meet growth and valuation targets.
- Companies aiming for an IPO in 2024 will need to demonstrate cash flow breakeven, strong growth rates, and adherence to the "rule of 40" or "rule of 50" metrics.
- The impact of AI technologies is likely to drive the emergence of new categories, such as AI security, presenting investment opportunities.
- Despite the challenges, the current investment climate is seen as an attractive vintage for venture capital, with valuations resetting and new technologies emerging.
- Successful investing in 2024 requires patience, a focus on solving real problems, and a willingness to support companies through difficult periods.
- Bridge rounds and private-to-private acquisitions may play a role in the venture capital landscape as companies seek additional funding or strategic consolidation.
- The dynamics between founders, early-stage investors, and late-stage investors can influence the decision-making process regarding potential exits or further funding rounds.
Top Episodes Quotes
- “This shit is really fucking hard and it takes a long time, so you got to be patient.“ by Ed Sim
- “If you're going to go public, I think you've got to be cash flow breakeven. You have to have 30% plus growth. You know, you've got to be moving towards the rule of 40 or 50, in my opinion, slanted more towards growth than you are cash flow break even.“ by Ed Sim
- “There's no AI in the enterprise without AI security. And I think that's a completely new category now.“ by Ed Sim
- “This is the time to put money to work. This is going to be an amazing vintage.“ by Ed Sim
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Episode Information
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
Harry Stebbings
1/10/24
Jamin Ball is a Partner @ Altimeter Capital where he sits on the board of Airbyte, Clickhouse, dbt Labs, Prisma, Tabular. Jamin has also led investments in Deel, MotherDuck, Personio and Starburst. Prior to Altimeter, Jamin spent 5 years at Redpoint where he led investments in Workato, Monte Carlo, Cityblock Health, Root Insurance.
Ed Sim is one of the best seed round investors in venture as the Founder and Managing Partner @ Boldstart, Ed focuses specifically on developer, infra and SaaS at pre-seed and seed round. Over the last decade, Ed has backed some of the best including Snyk, BigID, Kustomer, Front and Superhuman.
In Today's Episode We Discuss:
1. How to Invest Successfully in 2024:
- What are the three biggest mistakes growth investors can make in 2024?
- Why should founders not start a platform company?
- What were Jamin and Ed's biggest mistakes from the ZIRP era?
- How does Jamin justify paying an $8BN price for Hopin? What were his lessons?
2. The M&A Markets in 2024:
- Did Figma kill the M&A markets for 2024? What should we expect in M&A?
- Why will private companies buying private companies be a massive segment in 2024?
- What are Ed and Jamin's biggest tips to founders considering selling their company in 2024?
3. When Will IPOs Come Back:
- What will be the catalyst to the opening of the IPO markets?
- Will Stripe and Databricks go public in 2024? What others should we expect?
- What are the three requirements for a company to go public in 2024?
4. Firesales: Investors Need Cashback:
- Why does Ed believe now is the time in the cycle where late-stage investors want cash back to distribute back to their LPs or to recycle?
- What should we expect to see in terms of acqui-hires and firesales?
- What are the different incentives when comparing founders vs early stage VCs vs late stage VCs when it comes to acquisitions?