Investors are seeking companies with strong growth potential, a big market or the ability to create a market, and a solid team.
Founders ultimately own the responsibility for strategic decisions, with investors providing support and guidance.
Investors are adapting strategies by exploring collaborative investment approaches and learning from each other's expertise.
Deep dives
Series A Investing and Market Dynamics
Investors are navigating the dynamics of the series A market and looking for opportunities to invest. Some firms are focusing on series A investments, recognizing the potential for good deals and lower valuations. While the market has seen fewer series A deals recently, there are signs of increased activity and companies raising capital. Investors are seeking companies with strong growth potential, a big market or the ability to create a market, and a solid team. The timing between rounds and structuring deals to protect ownership are also important considerations.
Navigating Boardroom Conversations and Down Rounds
Investors are actively managing boardroom discussions and navigating tough conversations with founders. The focus is on ensuring that founders make informed decisions and take ownership of those decisions. Experience in down cycles and the ability to manage tough decisions regarding cost cutting and unit economics are crucial. Investors provide support and guidance, but founders ultimately own the responsibility for strategic decisions. Strong communication and relationships within the boardroom are key to managing these dynamics.
The State of the Market and Timing of Fundraising
The market is still feeling the effects of the economic downturn, and many companies are cautious about fundraising. Some are waiting for market conditions to stabilize and valuations to normalize. Timing plays a crucial role, as companies need to ensure they have enough capital to weather the storm and meet their metrics for the next funding round. There is a cautious optimism among investors, with some investing more aggressively in companies that show strong growth potential, solid partnerships, and opportunities for expansion into new verticals.
Investor Strategies and Collaborative Investment Approaches
Investors are adapting their strategies to meet the changing market conditions. Some are exploring collaborative investment approaches, such as co-leading rounds or taking observer seats, to share risks and provide additional capital to companies. The goal is to support companies in gaining more runway and achieving their milestones. Investors are also learning from each other, leveraging the expertise of growth-stage and later-stage investors, and applying those insights to early-stage investments.
Outlook and Predictions for the Future
The future of the market remains uncertain, and it is expected to be challenging for at least the next few years. Investors anticipate further market contractions and expect fundraising conditions to worsen. However, there are opportunities for growth and investment, as well as potential shifts in valuations and sectors that may fuel future deals. The focus remains on identifying strong companies, providing support and guidance, and adapting investment strategies to navigate the changing market landscape.
Origins is a podcast about the VC and LP ecosystem, co-hosted by Nick Chirls of Notation and Beezer Clarkson of Sapphire Partners. We're joined by our guest Beth Ferreira, a Partner at FirstMark focused on seed and Series A investing in a broad range of consumer companies, including next-generation commerce, consumer tech, and mobile startups. Prior to FirstMark, Beth was the Managing Partner of WME Ventures, was Chief Operating Officer at Fab and ran operations in the early days of Etsy.
In this episode, we do a deep dive on the current state of the series A market, including what founders need to prove between seed and A for Firstmark to gain conviction, valuation compression, how to think about the tradeoffs between growth and efficiency, and why Firstmark is as excited as ever to continue leading seed and Series A rounds, even in a difficult environment.