C2V Jan 2022 Notes From The Trenches
Welcome friends! We’re still reeling from the ending of that Chiefs-Bills game here at C2V HQ, but at least we avoided more senseless violence against the hard-working tables of Upstate New York. Poor Bills.
We have a new portfolio company, Olive Technologies, to talk about, but first, if you thought the football was crazy this weekend, wait until you see the latest from the wild world of venture (see what we did there? #segue)…
The State of Venture
With the release of the Q4 2021 Pitchbook-NVCA Venture Monitor (aka, the number-nerd’s bible), we thought we’d give a quick update on the state of venture in early 2022.
More of the Same
Well, that was exciting. Already well into the “irrationally optimistic” range by mid-2021, late-stage VC and IPO funding activity and valuations accelerated right into the “pure fantasy” zone by year-end.
Startup deal funding set a new record at $330 billion, double 2020’s total (the previous record) and 4x the annual run-rate from just 5 years ago, while deal activity continued its unrelenting skew to the super late-stage, as $50mm+ rounds accounted for 72.1% of the total funding share (another new record) and Pre-Series A rounds fell to 3.6% of the pie (also a new record).
As they have for the past few years of demand massively exceeding supply, valuations followed suit. While Pre-Series A median valuations did rise for the first time in 3 years, the increase was nowhere near that seen in late-stage and IPO markets, with the median median Exit valuation growing 3.5x faster than the median Pre-A valuation.
The ratio between the two set yet another record, now having more than tripled over the past 5 years.
What can we say, it’s good to be an early-stage manager these days.
So What Now?
The unspent capital numbers in the Venture Monitor are reported on a 6-month lag, but as of 6/30/2021, venture funds and SPACs were still sitting on record amounts of available capital. While venture fundraising also set a new record, it was up a relatively pedestrian 48% year over year, so we may see this dry powder number come down when the 12/31 numbers are reported.
Nonetheless the total available capital is still more than all of what was spent last year (and more than 2x what was deployed in 2018 and 2019).
For their part, the death of the SPAC market seems to have been pre-maturely pronounced. While issuance slowed from the impossible pace of the first half of 2021, the $40 billion issued in the second half of the year was still more than what was raised in all of 2020. That said, unspent SPAC capital actually declined in Q4. Only by $6 billion (out of a total of $138 billion), but it’s the first time we’ve used the word “decline” in anything late-stage venture related in at least 3 years, so it’s still noteworthy.
Is the Bubble Popping?
Too early to say, but with the NASDAQ Composite down over 15% in the first 3 weeks of the year (and over 17% from the all-time high), the pins are at least starting to press on it. It remains to be seen how far it will fall and what the impact will be on late-stage venture funds, but many of them are sitting on tens of billions of dollars worth of deals that may already be underwater and are heading deeper by the day.
Tough spot to be in if you had, say, invested in 568 deals at an average of more than $75 million per deal in 2021 (cough… Tiger and Andreessen… cough, cough).
Our Latest Investment
As regular readers know, our core investment thesis is centered on new software and robotics productivity tools for old-economy industries. Mounting inflationary pressures and labor shortages have only accelerated these companies’ scramble to upgrade their tech stacks, and while our portfolio companies are working hard to address them, company leaders are also struggling with inefficiencies in the procurement process itself.
Enter Olive Technologies, a Vancouver-based startup focused on helping consultants and IT leaders streamline the software selection process. With $4 trillion and climbing spent on technology solutions each year, efficiency in the selection process and use of technology budgets, as well as the efficacy of the tech stack are paramount for companies as they continue to automate.
As colleagues at two different software startups, founders Chris Heard and Dan Harrison spent years witnessing firsthand the inefficiencies and inherent biases in the software procurement process and set out to build a solution.
Olive’s software simplifies and streamlines the procurement process, building requirements from a centralized repository for stakeholder inputs, using those requirements to generate curated vendor lists, and providing a forum for anonymous Q&A with potential providers, enabling key stakeholders to make their decisions based on an unbiased evaluation process that takes weeks instead of months.
We’re excited to welcome Olive to the C2V team!
C2V By The Numbers
We are happy to introduce C2V By The Numbers where we pick interesting and fun stats across our venture practice.
While we are excited about the early data and traction across our funds this is only the start as we head into 2022 and beyond.
Good Times With Chris & Matt
Chris has finally convinced Matt to come on the podcast. He believes Matt’s 20- years of Wall Street experience and knowledge will give our listeners additional insight and context and you can only listen to Chris talk that much. Chris and Matt are having a good time bantering on a wide range of topics and would love you to listen and support the show.
Episodes will available bi-monthly, so let us know what topics you want to hear about by hitting reply to this email.
The first episode is live - Our 2022 Tech Predictions
Heidi Browning Pearson - People Connector
Chris started playing hockey when he was 5 years old. Now he considers himself a midlife crisis hockey player, somewhat living out his childhood dreams of being in the league. So you can imagine how he geeked out about interviewing Heidi Browning Pearson, Senior EVP and Chief Marketing Officer at National Hockey League.
Portfolio Spotlight
Our Fund II portfolio company, OmniX, has been acquired by one of its customers, EverWash, a software-enabled subscription platform for retailers, focused on the car wash space.
A top 50 company in Andreessen Horowitz’s a16z Marketplace 100 the past two years, Everwash has grown revenue at a 127% annual rate over the past 4 years, with a 25 – 30% EBITDA margin and recently closed a Series B round at a $100 million post-money valuation.
Tarform begins its deliveries.
The first two models unveiled were Tarform’s Luna Racer Edition and the Scrambler Edition, which rolled out for pre-orders back in mid- 2020.
Among those, a limited run of 54 Tarform Founder Edition bikes were the first models destined for production after being hand-built in Brooklyn. And the very first of that initial crop has already made its delivery to the Barber Vintage Motorsports Museum.
A tech startup that moved its home base to Cincinnati amid the Covid-19 pandemic plans to more than double its team in the Queen City in 2022 with the addition of roughly a dozen new high-paying jobs.
Rumby, which has developed an e-commerce platform that takes dry cleaners and laundromats online, is expanding its Cincinnati team. The startup is looking to fill 10-15 salaried positions spanning software development, front-end sales, and administrative support. If filled, the jobs would add more than $1.125 million in annual payroll.
Coffee Grounds and Recycled Water Bottles Turned Into Sneakers.
More than 23 million tons of coffee waste is produced globally every year, with only 5% of that coffee waste getting recycled. Experts say coffee grounds produce methane as they break down. Methane is a greenhouse gas scientists say is 30 times more harmful than carbon dioxide. Rens says after sneakers, they want to branch out into clothing.