I am really glad Fred wrote this post.
Better the diplomat covers this topic than me. The gist…
Over the last 18 months, the early-stage financing market has seen dramatic changes characterized by these three things:
A shift from in-person fundraising to virtual fundraising
A reduction in financing process timelines from months to weeks
A continued increase in the amount of capital available for early stage companies
I believe that for the most part, these changes will be permanent.
And I believe that for the most part, these changes are good for early-stage company formation and innovation.
However, there will be some negative side effects from these changes and one that I worry about is the “bad marriage problem.” Unlike public markets, private market investments are held for many years, often a decade or more. If an investor and an entrepreneur find each other difficult to work with, there is no easy solution. There is no divorce court for startups. And so the result is likely to be entrepreneurs and investors getting stuck in bad marriages.
At Social Leverage we like to be the ‘first check in’ and we do not rely on ‘social signal’. I struggled with the Zoom only investing landscape because of what Fred wrote today. Investing at the seed stage is about long commitments and I worry that compressed timeline to make decisions is going to have many unintended circumstances.
I have not changed my process or timelines, but my partner Gary has been more ‘flexible’ I would call it.
It is an incredible moment in time for venture capital industry.