What Venture Capitalists (VCs) See For 2020December 8, 2019
With the underperformance of IPOs like Uber and Lyft as well as the epic implosion of WeWork, the venture capital market has softened a bit. But then again, this year should still be quite robust—with over $100 billion in investments across more than 10,000 deals, according to estimates from PitchBook.
So then what can we expect for 2020? Will things tighten up? And what are some of the attractive categories that VCs will target?
Here’s a look:
Ben Narasin, Venture Partner at NEA:
“In 2019, WeWork revealed the worst outcomes of lax corporate governance and the market appropriately punished them for doing so. Investors occasionally need to be flexible around terms in order to win the most exciting deals, but the growing discomfort many have felt over the last couple of years has solidified in the wake of very real negative consequences. In 2020, investors will require firmer governance and oversight structures to safeguard against negative impact and ensure these protections are mandated in their term sheets in a normal, plain vanilla manner that has been common over the history of the corporate form.”
Brian Hirsch, the Co-Founder and Managing Partner at Tribeca Venture Partners:
“The IPO market will slow down considerably but will be replaced by a surge in M&A as strategics find pricing to be more reasonable. As public equity investors have begun to shun startups without a clear path to profitability, those startups will turn to strategics for exits. When this occurs, price expectations will decline and come more in line with expectations of strategics that have struggled over the last few years to match public market tech multiples. The record amounts of cash sitting on corporate balance sheets will finally be put to work.”
Alex Niehenke, partner at Scale Venture Partners:
“We’ll see more action in public market and unicorn land: Airbnb’s IPO is hotly anticipated and won’t disappoint. But more interestingly I predict we’ll see another couple ‘surprises’ from business software focused companies like we did in 2019 with Zoom and Datadog. That is, super cash efficient, hyper growth companies operating at significant scale that garner significant public market premiums. I also believe we’ll see another big flame out, while the significance of WeWork is hard to replicate, the tide will turn on at least one hyper-burn, growth-at-all-cost company as funding sources look to reduce risk.”
Matt Murphy, managing partner at Menlo Ventures:
“The market will accelerate to a barbell strategy of firms clustering at Series A and late stage growth, the latter defined as rounds above $50M capital raised. The sweet spot of growth used to be $25-35M rounds and is now $50-100M. The rise of large global growth funds from traditional venture firms will amplify this trend. Series B and C will get harder unless metrics are near perfect.”
Tae Hea, the co-founding Managing Director of Storm Ventures and…