When it comes to startups’ flight to quality, have we swung too far in the other direction?
Jan 13, 2024
auto_awesome
Jenny Fielding, co-founder and managing partner at Everywhere Ventures, dives into the current landscape of venture capital. She discusses the ‘flight to quality’ trend among startups and how smaller firms are rising to meet the challenge from larger funds. Fielding outlines the emotional hurdles of VC careers and reveals insights on the evolving fundraising strategies and how they vary between seasoned leaders and first-time founders. Tune in to hear about the shifting dynamics in fintech investments and the impact of the 'great VC resignation' on the industry.
Founders are shifting towards being more capital efficient, focusing on building sustainable, profitable businesses with good unit economics.
Mid-tier companies face difficulties raising funding and are left in a funding limbo, hindering their growth and profitability.
Deep dives
Flight to Quality in Startups
Founders are shifting their mindset from raising as much capital as possible to being more capital efficient. The years of excess in venture capital, with skyrocketing valuations, led to many companies shutting down. Founders are now realizing the pitfalls of that strategy and opting for a more austere and efficient approach. They are focusing on building businesses with good unit economics and a sustainable, profitable model. However, there is a risk of going too far in the other direction and hindering growth.
Challenges for Mid-Tier Companies
While top-tier startups and unicorns are still attracting capital, mid-tier companies are struggling to secure funding. Venture capitalists are now looking for companies that have already figured it out and show strong metrics. These mid-tier companies, which are often good but not yet great, face difficulties raising additional rounds and are left in a funding limbo. This trend is worrisome for them, as they require funding to continue their growth and reach profitability.
Opportunities in FinTech
The FinTech sector is experiencing a cooling off period after being overvalued in previous years. This presents an opportunity for smaller funds, like Everywhere Ventures, to invest in the sector. With the public markets being unkind to FinTech and valuations being cut, larger funds are pulling back, creating an opening for smaller players to invest in promising FinTech startups. The recent market shift has allowed for more negotiation and better terms for investors like Everywhere Ventures.
Business Model Mismatch and Partner Blowups
The VC landscape is going through changes due to business model mismatches and partner issues. Larger funds are facing challenges in returning capital and finding success in the market, resulting in fund closures. Smaller funds, on the other hand, are realizing the difficulties of the job and questioning their long-term viability. Additionally, there are instances of partner disagreements and rifts within VC firms, making it harder to navigate the challenging venture capital landscape.
This is our interview show, where we sit down with a guest, think about their work, and unpack the rest. This week, we talked to Jenny Fielding, co-founder and managing partner at Everywhere Ventures, a founder collective and early-stage (think pre-seed) venture firm. Jenny and I discussed a wide variety of topics, including startups’ flight to quality in 2024 and how smaller firms are competing with larger firms in the current investment landscape.
We also dug into the “great VC resignation” so stay through to the end for that. Jenny was a great guest – not afraid to speak her mind and share valuable insights.
Besides founding her own venture firm, Jenny previously worked as a managing director for accelerator Techstars and founded several companies including mobile software company Switch Mobile, which was acquired by Via One.
Equity will be back next Tuesday due to a U.S. holiday on Monday. See you then!
Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products.