2016, an opportunity for VCs

2016 is off to a very rocky start.  I don’t know if we are headed into the recession but the private market will be impacted with what is currently happening in Chinese stock markets, oil prices and US stock markets.

I expect 2016 to be similar to 2009 in terms of how the private market (venture world) will be impacted.  I suspect that many VCs are going to pull back this year, mainly to focus on existing portfolio companies in order to get them another round of equity/debt financing (aka oxygen) and/or help them get to an acquisition (or soft landing).

That being said, some VCs are going to be opportunistic and make MORE investments in 2016 vs 2015.  In down markets, VCs can get more ownership in companies since valuations drop due to supply/demand dynamics.  Many VCs will tell you that in order to generate 3x+ fund returns, entry valuation price / ownership % is critical.

I utilized CB Insights to research which VCs increased their Seed/Series A investment pace in 2009 vs 2008.  The top six firms that increased their pace were Founders Fund, First Round Capital, True Ventures, Accel Partners , Venrock and Bessemer (listed by most # of early stage deals in 2009).

It will be interesting to revisit 2016 and do a similar query to see which VCs increased their pace in 2016 vs 2015.

 

 

4 thoughts on “2016, an opportunity for VCs

  1. Pingback: Mattermark Daily - Thursday, February 11th, 2016 - Mattermark

  2. sorry, i’m not quite sure of the point of your post…to summarize:

    1) global financial markets are in flux due to china’s struggles, oil prices, etc
    2) some investors will reduce their rate of new investments
    3 eight years ago, a few investors increased their rate of new investments

    is there a point that i’m missing?

    • 1) correct
      2) correct
      3) correct – my point here is that in a down market it is a great time to invest in startups, so encouraging VCs to be opportunistic and not withdraw from the market (but many will)

  3. Pingback: Startup Survival Tips

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