The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC Roundtable: Are IPOs Back? Is Growth Dead? What Does it Take to Raise a Growth Round Today? How Do VCs Solve The Liquidity Challenge? Will We See a Massive Resetting of Valuations? AI Hype Growth Rounds?

Oct 11, 2023

Deven Parekh and Woody Marshall discuss the current state of growth in the market, the challenges faced by companies with slow growth and high burn, and the correlation between revenue and profitability. They also debate Clavio's market cap and growth rate, and delve into their investment strategies and viewpoints on stock prices.

50:42

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Episode guests

Woody Marshall

Deven Parekh

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Episode notes

Podcast summary created with Snipd AI

Quick takeaways

The recent IPOs indicate that growth is still alive in the tech industry, but low-quality growth and high burn rates pose challenges.

Reasonable valuations and alignment with performance are crucial in the late-stage growth market to avoid overvaluation risks.

While AI has transformative potential, caution is exercised due to valuation concerns and market frothiness in the AI space.

Deep dives

Implications of the Tech IPO Drought

The podcast episode discusses the year-long absence of tech IPOs and significant strategic M&A, highlighting the recent IPOs as a positive sign that growth is still alive. However, the challenge lies in companies with low-quality growth and high burn rates. The discussion revolves around the question of whether growth is truly dead and the prospects of future IPOs. The guests, including experienced growth investors, provide insights on the current state of the market and the importance of executing well and aligning valuation with performance.

Introduction

2min

Introductions and Discussion on Growth Assets

3min

The State of Growth in the Market

15min

Market for Companies with Good Revenue Scale

25min

Discussion on Clavio's Potential Market Cap and Growth Rate

2min

Investment Bets and Stock Price Discussion

4min

Deven Parekh is a Managing Director at Insight Partners, one of the leading investing franchises of the last 25 years. Deven has made more than 90 investments since joining in 2000 including in the likes of Twitter, Alibaba, JD.com, Chargebee and Automattic (WordPress) to name a few.

Woody Marshall is a General Partner @ TCV, one of the most successful growth funds of the last decade with a portfolio including the likes of Facebook, AirBnB, Spotify, LinkedIn and many more incredible companies.

Jason Lemkin is the Founder @ SaaStr one of the best-performing early-stage venture funds focused on SaaS. In the past, Jason has led investments in Algolia, Pipedrive, Salesloft, TalkDesk, and RevenueCat to name a few.

In Today's Episode We Discuss:

1. The Growth Landscape Overview:

Is growth dead? Are any growth deals getting done?
How has the price changed for growth deals that are getting done?
Which type of growth companies will vs will not be able to raise?
What happens to all of the growth companies with $300-$500M in cash but little revenue?

2. The Great Reset: Valuations Need to Change:

Why should companies be actively resetting their valuations? What are the benefits?
What will happen between VCs and LPs when there is no incentive for VCs to reset their portfolio valuations when they need to go out and raise from those same LPs?
Structure is often part of these valuation resets, is structure to rounds always bad? When is it good? What type of structure is acceptable vs unacceptable?

3. Are the Public Markets Creeping Open:

Should we take comfort from ARM, Instacart and Klaviyo and assume the public markets are going to open again? If not, what will cause them to open?
How should we analyze the performance of the IPOs above? Many have been negative, are they right to suggest this is not the response we wanted?
Why does Woody believe, like Instacart taking a 75% discount to their last round, we should have more and more companies go public at discounts to their last private round?

4. Late Stage Growth is Dead and Revenue Multiples:

Why is late-stage growth dead? How long do we think this will last?
How should we assess revenue multiples today? New normal? Same as always? How will revenue multiples look in 12 months from now?
How should we analyse the large late stage growth rounds for hyped AI companies? What happens there?

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