Peering into the ‘Series A chasm’ with Everywhere Ventures’ Jenny Fielding | Equity Podcast

[Music] Hello and welcome back to equity Tech Wrench's Flagship podcast about the Business of startups I'm haa and today Is our Wednesday episode we're bringing Deep dive conversations back to the Podcast on Wednesdays and today we're Taking a look at what some are calling The series a cliff to give us some Context we'll be talking to Jenny Fielding co-founder and managing partner At every everyware Ventures Jenny Welcome back to the show thanks so much For having me excited to be here Jenny's Been on Equity B4 talking about how Startups have to double down in quality And how smaller firms can compete with Their more established peers and much More that's not what we're talking about Today however it's rough out there for Startups and Jenny you put out a tweet Which sparked a whole bunch of debate What exactly is the series a cliff yeah I'm actually calling it the chasm that's My newort so essentially it's much Harder to raise a series a right now the Bar has just moved right and so I think What Founders are feeling is that while Back in 2020 2021 you could get to Something like a million dollars in ARR And be able to raise a proper series a From a great series a fund there was you Know a lot of variables on that what Area you're building in your team

Background all those things but let's Just call that General and fast forward To today where you know the goal posts Have really moved and so the Tweet was Really what I'm kind of seeing which is The million has now gone up to sometimes 3 million and let's not just talk about Absolute numbers there's also a growth Rate that these investors are looking at So it's really a tough moment for Founders because they may have raised With different expectations and now all Of a sudden the game has changed yeah Awesome in your Tweet you specifically Mentioned 30% month-on-month growth Which is you know super aggressive Obviously I feel like why combinator is Pushing for 15% week on week growth Which is even Wilder but the compound Growth in that is I mean that is crazy Amounts of growth is that really the Like bottom end of where you're able to Raise well I think and many people Pointed out in the tweet that if you Know if you compound that out a few Years we're talking about billions right And so I think what these VCS want to See is in a snapshot in a cohort that There is impressive growth right let me Walk through a scenario because I think That that would be helpful so often Times we'll see Founders are getting Started and maybe they bootstrap maybe They do an accelerator maybe they raise

An angel round they raise a small amount Few hundred K right that gives them call It 12 months to build an MVP then you Have we'll call it the institutional Preed that's where I come in and so Let's say they raise you know another 1.5 and that gives them another 18 Months and that gets them to a small Amount of Revenue now that small amount Of Revenue few hundred th000 ARR it's Not enough to raise a series a so they Go out and they raise a seed this all Sounds reasonable that gives them you Know another 18 months and maybe they Can get to 100K mrr now if you take all The time and add it up of what I've just Mentioned right so you've got kind of Angel accelerator round the preed and The seed we're already at four years in And now they're getting to some Revenue Like let's call it a little over a Million well you can't raise a series a On a million as I mentioned so now we Need to raise another round and we'll Call that a seed plus and so maybe they Raise a few million and that gives them Another 18 months so now we're 5 and a Half years in to starting the company And maybe they're at 2 million ARR and Let's say that that is enough maybe They're at closer to three great they're Still five and a half years in so even Though the metric would say like okay You're you're doing two and a half

Million like that should be enough for a Series a some of the VCS are coming back And saying well this is a slow growth Business this isn't going to move the Needle for me we're not going to see the Type of momentum that we need to see so All of a sudden it's not just about Absolutes of Revenue but it's about time To get there yeah and so in that Scenario which we see in our portfolio All the time we're talking about over Five years from inception through to Getting a series a done so I call that The chasm yeah no totally I get that do You see this across every industry or Are there certain verticals that are More challenging than others well I mean The elephant in the room is maybe that's Not all AI companies although it kind of Depends where in the stack you're Playing in AI but yeah a lot of the Trends are lagging indicators right so When we see things in the public markets Tank maybe like finac all of a sudden It's hard to get a fintech deal done but The truth is like we're not looking at What an exit opportunity would be today We're looking at in 10 years so like I'm Bullish on finac why I love to talk to Maryann because I'm looking at Exit Opportunities that are going to happen a Long time and do I think that that's Where the world is going the answer for Me is yes so it definitely is industry

Specific to a certain extent but I Haven't looked at the data maybe you Have I feel like this series aasm is Really happening across Industries even Industries that we don't invest in I've Heard that biotech is really challenging Right now yeah I mean I feel like the Numbers back that up right I looked at Numbers from pitchbook and crunch Bas And duck send and seed companies so far This year have raised about s billion Doar which is down a billion year on Year and in general you know especially At the later stages it's down Significantly so it's really challenging You know the numbers from crunch Bas Kind of seem to think that this is like An extended adolescence almost where you Have to get to a much more sensible Place and at the same time this seems to Kind of reflect a desire for VCS to get To a place of lower risk right and at That point I'm like wait this doesn't Seem like Venture anymore right if all The risk is designed out of the company Like I I work with a lot of Founders who Get very exasperated and the general Battle cried is like okay well VC's are Cowards at the moment for not backing Actual risky companies does that ring True for you at all yeah I think to Understand the landscape we have to take A step back and kind of understand how Seriesa funds operate and the reality is

That they raised larger and larger funds During 20120 to 2022 and now they're Kind of thinking to themselves or Scratching their heads how are we going To return all of that Capital when the Exit multiples that we thought maybe Have come down right so if we thought That our companies could exit a fintech Company could exit at 10 billion and now We've come back to reality because Things have been repriced the public Markets have spoken maybe that company Can exit at three billion all of a Sudden our model is a little bit out of Sync right couple that with the fact That there's just no liquidity there's No IPOs and so the series a funds are Getting a lot of pressure I think from Their LPS and from kind of the larger Ecosystem but I think fundamentally what It means to be a fund returner when You've raised billions of dollars maybe Has shifted with the kind of exit Opportunities so the reality is they're Doing less deals I recently pulled some Data just because I was looking for one Of our companies to see if it matched What I was reading in Carta and the Other ones and it matched perfectly in Terms of number Investments around the Series a so I looked at index Ventures An incredible fund that really have a Lot of admiration for them it's only Saying good things but I looked at their

Q2 number of deals for 2022 and so they Did about 37 deals and I think Throughout that year a little bit Earlier was around the same q1 2024 so This year their total number of deals That they did was 11 and so that's Really what we're seeing is that Everything has been cut in about a third And across the stack money in number of Deals and that's real so you know I Think that contributes to this series a Chasm again those numbers don't lie no Absolutely that makes [Music] Sense I'm curious I mean you mentioned LPS and as far as I understand your LPS Are different than many of the others Could you just quickly give us a little Bit of context on that yeah so Everywhere Ventures is backed by a Community of Founders and operators and What that means is our LPS are the People that we often invest in so they Are founders and operators themselves so They have different challenges I'd say Than some of the institutions right you Know the challeng is when founders are Investing in you is often they're Running these companies that also are Having hard times and so you know that Is something that we think about is rlp Base and how it's not necessarily Diversified you know our Founders are in The same boat as rlps so that's

Something that's unique to us it really Fuels our community because that's where All our deal flow comes from it's where The support of our large portfolio comes From we have 250 portfolio companies so It is really the core of everywhere Ventures but at the same time those Folks are also feeling the the series Aasm and be Beyond I mean you talked a Little bit about growth growth has just Been devastated I had lunch with one of Our LPS who's a founder and running a Company that's past Series E and it's Just been a struggle he had to do huge Layoffs and just kind of rethink the Opportunity for the business yeah yeah Thank you for sharing that I think what I'm seeing across the industry in General from kind of more institutional LPS kind of reflects that right I mean They have so many opportunities to make High-risk Investments and ultimately Venture is only one of the opportunities There and as the risk profile shifts Across the entire ecosystem for them It's all about the internal rate of Return if you don't have to invest in VC As an asset class like why would you It's so high risk kind of thing and I'm Seeing a lot of the especially kind of Beginner fund managers but also the more Established folks I mean the crunch goes All the way up like yes it's hard to Raise for series a right now but the VCS

Are seeing a similar huge amount of like Push back on like hey let's see some Return before you deploy more money and Of course that compounds the whole Problem does that reflect what you're Seeing across the ecosystem for sure and I don't think we've even scratched the Surface yet so I read some article that Said hundreds of billions I think it was Like 300 billion are on the sidelines Just in Venture yeah so that's money That's been raised but not deployed that Money was raised 2020 to 2022 so folks Are still investing out of those Vintages and maybe can stretch them Another year or two we raised our Fund In 2022 but when that money dries up Then what happens right so if the market Hasn't returned what's really going to Happen so although there's all this Money on the sidelines that still Propping up the numbers that we're Seeing you know in pitchbook and Carta It could get a lot worse in a few years So yes very nervous about that I think In the emerging manager landscape it's Just getting hard because if you're an Institutional Investor and you can Invest in a blue chip name taking a Chance on an emerging manager even Though the data shows that they Outperform it's just you know it's that Adage of not getting fired for buying IBM right so even though you know the

Data shows it and intellectually you Know that you can outperform uh with an Emerging manager your emotional response Might be let's just put the money in Andreon so I think we're all going to Suffer and and I do see colleagues Really worried about it and and going Through longer cycles and it's tough Yeah yeah as you said it's just Rippling Throughout the stack yeah no absolutely You mentioned you were doing a bunch of Work with your portfolio right now to Kind of figure out how to navigate these Choppy C's what is the advice you're Giving like what should you do as a Founder once the gravy train stops yeah I mean it's interesting a lot of the Advice you're hearing kind of the in the Macro is you have to control your own Destiny and understand what it takes to Get to profitability now you're going to Run into the same problem I just Mentioned with the five and a half years From inception to series a if you have a Slower growth rate so I do worry about That advice but I think that in this Environment you don't don't have a lot Of choices so I think the advice that We're giving Founders is a few things One is understand very clearly what your Metrics are so if you have to get to Break even or a profitable State you Know what you need to do to get there if The money comes and you're able to raise

The round that's amazing but just know What you need to do and be able to act Fast I'd say that's the second important Thing we saw a lot of hesitancy and I Understand it took you like a year to Recruit that amazing person and now you Have to let them go but you have to act Swiftly if you know you realize that Your Opex is not sustainable so that's The second piece of advice is know your Levers and know how to pull the rip cord If you need to yeah totally so those are Kind of the big ones that that we're Giving and then the third one most Obvious is just the founders that are Spending time fundraising year round They just do better and I know it's a Huge distraction and it's the same Advice I can give myself and other Emerging managers you have to spend 10% Of your time always getting to know new Investors developing relationships Because that will make the fundraise go More quickly right and so it doesn't Mean that you need to pitch these people It just means you know you have to be on Their radar we have a Founder going out To raise and you know she seemed Actually quite confident she wants to Raise $5 million and she said oh yeah I Have 40 people that I've been speaking To since the round that you came in Jenny the last around and I just keep Them up to date with updates I make sure

To Ping them when I go to a conference I See that they're there and so she felt Really good because she had 40 Relationships and she never pitched These people she never made it formal She didn't I think some even wanted to Preempt her but she just kept that going And I can tell you out of 250 companies It is a very very small amount that Really do that or are able to do it yeah And so it feels like we've had a big Kind of paradigm shift that has happened Kind of below the radar which is going From growth at all cost to like higher Slow Fire fast keep the belts tighten That kind of thing and kind of focusing A lot more on operational efficiency Like it seems like the days of infinite Cash are gone does that but also grow Fast right so grow fast but don't spend Money growing fast kind of thing exactly Yeah I think we are we've entered a new Era and I think people are finally Feeling like this isn't a blip like we Had a great 10 13 year you know run of a Bull market but this is kind of a new Normal and I think you know the Confluence of things that are happening In the world the uncertainty about our Economy the election inflation is down But it's a little precarious I think People don't think that it's going to Get better anytime soon we have seen a Few bright spots right there were a few

Good IPOs this year already so you know If money is getting returned to LPS in Their pocket that's always a good thing Because they can can deploy but two or Three or four IPOs is is just not enough So the whole system is is backed up and I think that that is really pushing Everyone to this new normal except if You're in a few verticals right so if You're doing infrastructure Ai and You're living in San Francisco just Cover your ears and pretend we never had This conversation yeah for sure doesn't Apply to you so you have around $40 Million under management and invested in About 250 companies right so that's About 160ish thousand per company on Average you're like at the earliest Possible stage of investing in companies Is that right yeah that's correct we Call that a pure preced yeah for sure Like real Venture look at look who I Just called out earlier but here you are Doing it well there was also a funny Tweet you know some very well-known tier One VC was like I mean you're not even You know really running a VC strategy You're like a a super angel I was like Okay I mean I take money from other People but I think the the point is the Names have morphed quite a bit over the Years and so maybe with this series a Chasm maybe what we're also seeing is That seeds are the new series a right so

If you need four rounds to get to that Series a like maybe the terms are just All off yeah totally so has this series A casm the kind of overall macroeconomic Risk across the ecosystem has that Affected how you evaluate the startups You are willing to invest in you know we Have not slowed down our pace and so This always shocks people when I give This stat we invest in almost a company A week again we're precede we don't Anticipate exit opportunities for a Decade with these companies and so we're Thinking where do we feel like the world Is going to be in a decade and how are These companies going to get there so we Actually have not slowed down I think What we have come to realize though with This Cliff or this Chasm is that some of The companies might not make it to high Growth companies right and for our Portfolio which is obviously high volume That's actually okay and our model can Support it in our latest fund we'll have About 80 Investments 85 Investments Because we have such coverage it's Actually okay if a company 3x's we need Those outliers like every other fund but Because we don't have billions under Management we don't have to be as Ownership sensitive and so if a company Kind of decides that they want to become Profitable or maybe take a smaller exit That actually can be impactful for us

And I'll just give you an example our Fund one we had a healthc care company Actually an AI company which is kind of Interesting because we invested in 2018 And it was kind of acquired basically an Investor came in and said like I want to Take everyone off the cap table and we Didn't have much choice this was 1K Check and this returned a third of our Fund because we're such a you know our Fund one was so small yeah and so 150k Check could actually make a dent in our Portfolio and so that's the strategy That that we are operating which is like Quite different than the series a Strategy which is you know 25 bets deep Ownership and really kind of a different Module right and I guess the other piece Of this would be like what if that Founder had held off for longer right a Third of the fund is great but what if It could be a full fund returner did That well I mean this is actually the The end of what I should have said which Is for us you know selling for 150 Million was very you know significant For us but that would have been a huge Failure for any series a fund right if They sold for 150 million the series a Would fund said like that's just a drop In the bucket for us to own 20% to Return our billion dollar fund so for a Small fund actually going back to your Question we don't actually need a whole

Portfolio of unicorns or outliers we can Actually these small wins can really eat In to our DPI interesting and at the Same time you know you invest in 250 Companies half of them are not going to Do great right you're you're in the Proper super high risk super high return Business Yeah and that's that's a really Interesting place to be I think it's Kind of unfair to compare what you're Doing with angels because you do have LPS you do have all that kind of stuff And the risk reward profile Falls I mean I'd be very surprised if your investment Thesis model looked very different from An angel investor right or am I Misunderstanding yeah I mean you get When you invest in our fund you get like Incredible diversification across in This fund 85 Investments but the way we Operate is more like an angel group so Our deal flow comes from this community Of 500 Founders and operators who are LPS coupled with our portfolio company So call that another 500 if there's two Founders that's where deal flow comes And they help us with our diligence they Help us support our portfolio so it is a Little bit more like an angel portfolio The way that we operate and then in Terms of our model I mean although we're Structured as you know in a regular Fund In terms of our model and how we can

Return Capital also looks a little bit More angelik yeah we're getting in at Low valuation so we're doing small Rounds our average round is about 1.5 Million and valuations are call it Between six and 9 million post so my Point is that if you get in at a low Valuation even though it's a small check Your ownership percentage is is higher So that can actually make an impact on Your fund yeah yeah I love that and so Across your portfolio I mean 250 Companies is a pretty decent sample size Right how many people are worried about What happens with the next round of Funding yeah so we have 45 companies That are raising right now and of that I Would say about eight are raising series A and I would say about eight of the Eight are in a Panic really just because it's It's just Tough and everyone's telling them it's So tough and again if you go back to the Index example they're investing in a Third of the number of companies Everyone is and so it's just you're Competing with your cohort but the other Data point is there's still 300 billion On the sidelines which which means There's still a lot of money going to That early stage and there's so many Preed and Seed deals getting done and Now they're competing for a much more Limited number of checks from those

Series a so everyone's worried and again We're just telling them you got to Buckle down you got to know your numbers You got to focus on growth and Efficiency and you got to understand the Rip cord if you do need to cut so that You can live another day yeah and I Think that's why we're seeing four or Five rounds before the a because we're Seeing these topups and Bridge rounds And plus plus rounds and I think I saw The card of data said about 42% of the Rounds were actually Bridge rounds at The seed yeah they weren't kind of a new Round so we're seeing all that it's a Scary time but we are we're Founders so We're optimistic yeah I mean look we're Both in the universe of capitalism right And I feel like it is always sad when People lose their jobs and it's always Sad when companies fail but at the same Time like I feel like we're kind of back In the OG days of venture like where You're like hey you have to really fight For your existence and if you don't Stand out from the masses you know You're not going to make it and on the One hand I do have empathy I mean I've Been a Founder many times over and it it Really sucks when you have to shut down A company and it's not a bad thing for The ecosystem to have some like fresh Blood come through like somebody who Fails at one startup if they're hungry

Enough they go back and do another one Right and maybe get it right that time Well it's actually full circle to the Tweet right because if you looked at the Comments a lot of the OG VCS who I kind Of only know from Twitter or you know Admired from afar chimed in saying Jenny It they've always said that it's always Been like this you know what I mean they Were kind of like this is old news like It's always hard to raise a series a People have been complaining about it Forever so you know I mean the data Shows it is a little bit harder but I Think their larger point is right right Which is only a certain number of Companies can make it through and be Outliers and we've just had such a glut Of early stage companies funding Excitement about tech which is a great Thing but you know the reality is only a Small amount can make it through and I Think I forget who said this or like Where it came from but if you're a Series a or or gross stage fund if You're not in two or three of the Biggest outliers of that cohort like You're not going to have an Outperforming fund that's a very Different reality than a preed fund Right so we don't have to have been in Stripe or canva or one of those just Kind of massive outliers to make our Numbers look very attractive yeah

Awesome I think that's a really good Place to rap I always like to end these Interviews on a question like what's Next or what should we keep our eyes Open for that's a good question we are Just doing more of the work that we love To do investing very actively so you Know we want Founders to reach out get Connected to us and be part of our Community and we do a lot of events in Lots of cities if you're coming to New York New York Tech week I I think we're Doing seven events so come find us we're Very happy and approachable so um yeah That's what's next love it well this Whole conversation started with us Talking about a tweet but I haven't Actually asked you what your account is Yet how can people follow you they can Follow me at J fielding and they're sure To get some good hot takes on startups Nice thank you so much for joining us I Really appreciate talking to you and Good luck with it it sounds like it's Interesting times ahead thanks so much It was fun thank you so much well we'll Be back on Friday but but until then you Can find me on X at higher and you can Find Equity under the handle Equity pod On X and on threads don't forget to Check out our sister show found which Dives deep into the stories behind the Startups with the founders who built Them see you

Later Equity is produced by Teresa Lo Conso with editing by Kell Bryce Durban Is our illustrator and we'd like to give A big thanks to our audience development Team and Henry pet who manages Tech Crunch audio products thanks so much for Listening and we'll talk to you next Time

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