Why founder-focused VC fundraising and valuations are unstustainable - Business Insider

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Read the letter a fintech-focused VC sent investors laying out why 'hype rounds' that drove ballooning valuations just won't work anymore

Instead, Falvey and Griffen predict thesis-driven models will succeed. Betting on high-skilled founders who fall in line with the investor's long-term vision "has been remarkably effective," and will continue to be the case, they wrote.

"We believe that this return to thesis- driven investing will benefit smaller specialist funds like ours, which can find and support compelling teams, complete thorough early diligence, and telegraph quality to larger multi-stage funds. In short, we expect broad investing trends to break in our favor," they wrote.Similarly to our founders, we believe our own orientation should reflect this new reality. Our view is that the current crisis will last for an extended period of time.

This fundraising technique relies on frequent communication and networking among VCs to develop a consensus around such winners. Remote work has slowed down interactions among managers and also eliminated spontaneous discussions at networking events, replacing them with calls or videoconferences with enumerated agenda items.

The other industry that has been seriously disrupted is financial services. The current crisis has highlighted the inadequacy of our existing financial system and the financial fragility of huge swaths of the American middle class. From the chaotic deployment of Payroll Protection Funds to unprecedented unemployment levels, we are experiencing a recession that is fundamentally financial and that will create unparalleled demand for innovative financial services businesses.

 

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