Fall May Be Here, But Winter Isn’t Coming

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Road Less Ventured

3 min readApr 3, 2016

I have a question for any VC reading this with more experience than me (in other words, every other VC in the industry).

All I have been reading about for the last several months is how “Winter is Coming” and how companies better sure up their business models to get on a path to profitability. Growth alone isn’t good enough they say. Unit Economics is the latest buzz word in the industry. Companies will have a harder time raising money and the ones that do, the process will take a lot longer and valuations will be lower.

However, there has been a flurry of firms that have announced new funds since all this talk started taking place (see partial list below). The WSJ reported that “Venture-capital firms are raising money at the highest rate in more than 15 years.”

And this doesn’t even account for corporate VC or crossover fund participation. And then there was also this tweet from Sam Altman about YC’s most recent Demo Day:

So my question is this: With all this new dry powder to deploy over the next few years, can it really be winter?

I am not being facetious, I am genuinely curious.

And for the record, I believe the returned focus on unit economics is a good thing. Having been a part of two bootstrapped startups, I get building sustainable businesses. I am not questioning the logic, I just can’t reconcile the current dichotomy.

I know valuations have dropped (more so late stage than early stage) and capital deployed Q4 2015 and Q1 2016 was down but VC’s are still investing at rates substantially above average.

Given the amount of money recently raised, LP’s are obviously still bullish on venture. Isn’t this influx of capital, which has to be deployed over the next few years, more likely to increase the number of startups funded and valuations along with it? Wasn’t one of the main drivers of every bubble too much capital (whether its VCs, CVCs or non-traditional venture investors) chasing too few exits?

Just trying to get my head around what is being said and what is actually going on.

Here is a list of some (but not all) of the firms that have announced new funds since Dec 2015 when the chatter on this topic began to pick up.

Accel — $2B

http://www.nytimes.com/2016/03/16/business/dealbook/accel-raises-2-billion-to-invest-in-start-ups.html?_r=0

Founders Fund — $1.63B

http://blogs.wsj.com/venturecapital/2016/03/25/peter-thiels-founders-fund-bags-1-3b/

Andresseen Horowitz — $1.5B (In process)

http://techcrunch.com/2016/03/04/andreessen-horowitz-talking-with-investors-about-a-new-1-5-billion-fund/

Index Ventures — $1.25B

http://www.reuters.com/article/us-indexventures-fundraising-idUSKCN0VC1QM

Lightspeed — $1.2B

http://techcrunch.com/2016/03/09/lightspeed-venture-partners-raises-1-2-billion/