PNW deal flow — the first six months
Flying Fish has been actively operating as a VC for six months now. For the last three, all three GPs have been full-time so the pace has accelerated. We have been simultaneously running the fund and raising the fund. This is a challenge to say the least. This post focuses on the running part with a description of deal flow and a few early lessons learned.
The punch line from our perspective is that we are seeing great deal flow. However, a problem persists that we knew existed before we started: too many founders aiming for doubles. We and the entire VC community in the PNW, we believe, would like to see more founders going for it.
All founders have our undying respect for starting their company. It’s a brave and audacious and slightly crazy thing to do, especially if you were sitting in a cushy job at Amazon or Microsoft. However, for the PNW to reach its full potential we need founders to take even bigger bets. Much of that relies on aggressive capital being available. That is what we are tying to do with Flying Fish and what other funds that will inevitably come into this market will do as well. It’s a process.
With that as preamble, here is a little view into what we are seeing. Over the last 6 months, we have looked at 160 deals. We have done 6 seed investments (one unannounced at this time) or a little less than 4% of the deals we have seen. This is a little higher than we expect at steady state but we have seen some really good deals of late. More on this in the learnings section. As for breakdown of those deals, here is a rough categorization:
- SaaS 51
- ML/AI 11
- Cloud Platform 7
- VR 7
- DevTools 5
- Marketplace 6
- Security 6
- Consumer 5
- HR 5
- Healthcare 4
- AR 3
- Consumer Service 3
- DevTools 3
- FinTech 3
- IoT 3
- Social Network 3
- Bitcoin 2
- Cannabis 2
- Event Experience 2
- Robotics 2
- AdTech 1
- Advanced Manufacturing 1
- Clean Tech 1
Some early learnings in no particular order:
- We need to continue to do a better job of helping entreprenuers understand the relative nature of the business — e.g. that a pass from us isn’t an absolute commentary on their business but is almost always relative to the other deals we’re looking at. We only did deals less than 4% of the time and that is high for what we will do over time.
- The PNW is getting a better profile outside the region but more can be done. I write this post from NYC where I am attending a fundraising conference. Impressions of the PNW among east coast investors have absolutely improved but are still about 3 years behind reality. We need to do more education and shouting from rooftops which is something we are working on.
- Syndication remains key for PNW deals and this is something as a firm we need to do with more rigor.
- When a company sends you their deck cold and its 59 slides long…that’s probably a signal you should pay attention to.
- When the cannabis company shows up to the meeting with snacks… just say no.
Hope that’s a helpful view inside our world over the first six months.
