While not dormant there is a slowdown in the world of Seed and Series A investments. Early stage investors have slowed down pushing startups to seek funding elsewhere or simply fade. Based on the numbers, investors invested $1.95 billion into early-stage startups across approximately 115 deals in the second quarter. In the third quarter we saw roughly $300 million invested across 66 deals. So as you can see a wide difference. There are always many reason for investments to slow down from market volatility to the Federal Reserve raising interest rates. The reality is whatever the situation it is happening and does not look to let up.
I have been preaching this all along and now we are beginning to see this take shape. There are a lot of companies that are going to need additional investments and right now all the indicators are pointing to a much larger impact on the private side than thought.
When market volatility becomes an issue what we typically see is Angels and Early Stage Investors run for the hills and hide. This is common practice and while they typically take the most risk they are also the most spooked during uncertain times. With so many variables not looking strong today we are beginning to see this shift.Click to tweet
News came out that Angels themselves were saying at TechCrunch Disrupt a couple weeks ago that they were writing less checks which begins to shed more light on the situation. VC's and Angels are becoming more wary of the high valuations that people like me say is a bubble waiting to burst. And while we may not see a complete meltdown like 2000 and 2008 we will see a down turn in the market. Today, pre-money valuations have essentially doubled creating an unhealthy ecosystem. A lot of institutional and individual investors who fund venture funds have held off making commitments because they’re affected by capital markets. When investors start getting nervous, fewer checks tend to get written out to startups. This is going to be the downfall of some very good companies as we know the Unicorns will continue to get there's. It is always the companies in need that suffer.