Let’s talk about gaslighting and fundraising

“Most of the startups I give advice to about how to raise venture capital shouldn’t be raising venture capital,” an investor recently told me. While the idea that every startup isn’t venture-backable might run counter to the narrative to the barrage of funding news each week, I think it’s important to double click on the topic. Plus, it keeps coming up, off the record, on phone calls with investors! READ MORE

Fighting climate change with venture capital is different this time

Silicon Valley got a black eye a decade ago when its big venture capital foray into expensive and nascent cleantech didn’t pan out—but its recently renewed interest in a wider scope of technologies that can tackle the climate crisis could be different this time around.

Why it matters: Climate change is one of the most pressing challenges of our time, and the tech industry’s innovation could be a powerful tool to stem it. READ MORE

Venture funding soared to record $64 billion in Q1

Coming off a boom year for the tech industry, investors spent the early part of 2021 pouring money into food delivery companies, online brokerages and Elon Musk’s SpaceX, leading to a record quarter for U.S. venture funding.

Venture-backed companies raised $64 billion in the first three months of the year, according to analysis this week from Ernst & Young, using data from Crunchbase. That equals 43% of the $1.48 billion raised in all of 2020, which was a record year. READ MORE

SEC Official Raises Red Flag On SPAC Risks

Paul Munter, acting chief accountant at the Securities and Exchange Commission (SEC), issued a warning Wednesday (March 31) to Wall Street over the problems with special purpose acquisition companies (SPACs), Reuters reported.

“We encourage stakeholders to consider the risks, complexities and challenges related to SPAC mergers, including careful consideration of whether the target company has a clear, comprehensive plan to be prepared to be a public company,” he said in a statement, according to Reuters. READ MORE

How to Fix SPACs: Keep Their Backers Locked In Longer

In the summer of 2019, Chamath Palihapitiya, a billionaire venture capital investor, announced that his public shell company would merge with Richard Branson’s spaceflight business, Virgin Galactic.

It was early in what has become a Wall Street phenomenon: using a special purpose acquisition company like his — known as a SPAC or blank-check firm — to take a private business public, bypassing the typical initial public offering process. READ MORE

With optimism running high in venture capital, 4 trends to watch

Although most industry watchers expected the COVID-19 pandemic to take a toll on the venture capital industry, 2020 turned out to be a boom year for the sector.

“Everybody thought this would be the great reset,” said analyst Jeff Grabow, U.S. venture capital leader at Ernst & Young, who noted a “severe tightening” at the end of the first quarter in 2020. But by the end of the summer, “people said, ‘You know what? It’s really not as bad as we thought it was going to be.’ ” READ MORE

Creating diverse venture capital firms is possible, if you’re willing to do it

Venture capital firms are known for being an incredibly exclusive group. The firms themselves are often small. Even smaller is the number of partners, the actual decision-makers who control hundreds of millions — sometimes billions — of dollars. At the biggest firms, there might be a dozen partners maximum. And if you’re an entrepreneur who wants some of that money, it definitely helps to have gone to college with one of those partners. READ MORE

Manufacturers Would Gain SBA-Backed Capital under Rubio Proposal

Small U.S. manufacturing startups would gain new access to federally backed venture capital under a proposal from Senator Marco Rubio.

The Florida Republican is introducing legislation to expand a Small Business Administration program to direct more venture capital to growing manufacturing enterprises. Rubio, a member of the Small Business Committee, has argued that that private equity is too heavily skewed to information technology companies. READ MORE

Market mania has fed a SPAC boom. Here's who is at risk

Exactly one year ago, with the world in the grip of a deadly pandemic, Wall Street put its Covid-19 fears aside. That jumpstarted a wave of market euphoria that has since fed a boom in unusual activity, from the irrational hype around GameStop shares to a huge bitcoin rally.

Sign of the times: Among the most notable indicators of market mania has been the explosion of special-purpose acquisition companies, or SPACs. So-called "blank check" firms, which allow investors to back sponsors that then hunt for a private entity to take public, have raised tens of billions of dollars in 2021, an increase of more than 2,000% compared to 2020. READ MORE

US regulator opens inquiry into Wall Street's blank check IPO frenzy

The U.S. securities regulator has opened an inquiry into Wall Street's blank check acquisition frenzy and is seeking information on how underwriters are managing the risks involved, said four people with direct knowledge of the matter.

The U.S. Securities and Exchange Commission (SEC) in recent days sent letters to Wall Street banks seeking information on their special purpose acquisition company, or SPAC, dealings, the four people said. READ MORE

Increased Regulatory Scrutiny of Private Funds

President Biden has signaled a shift to a more assertive SEC Enforcement program with the nomination, and expected confirmation, of Gary Gensler as the next Chair of the SEC. Mr. Gensler previously served as the Chairman of the CFTC from 2009 to 2014, where he established a reputation as a forceful regulator. This reputation suggests that we should expect a significant increase in enforcement actions against private fund managers. READ MORE

Picking the wrong VC can get a founder fired

It likely isn't obvious to the founder eager to raise capital from a VC, particularly when that journey is hard, but the founder and the VC are in the same game: the frog kissing game. 

A founder will kiss many VC frogs looking for their prince/princess, but a VC will do the same thing in their quest to invest. I routinely see 1,000 or more pitches in a year but when I was a seed investor I would only fund 7-10 companies while as a traditional early-stage VC working for a major firm, the number is more like one, and in some years none. READ MORE

Sole Female Founders Raised $1B Less In 2020 Despite Record Venture Funding Surge In the US

U.S. startups overall raised a record $143 billion in 2020, up 12 percent over the previous year, but funding to venture-backed companies founded solely by female entrepreneurs dropped 22 percent during the pandemic year, Crunchbase data shows. 

But American startups founded solely by female founders raised only  $3.2 billion in 2020, down a billion dollars from $4.2 billion in 2019 — the peak year for funding to sole female founders — per Crunchbase data. READ MORE 

The SEC and New Breed of Startups Fuel the Equity Crowdfunding Flame

For Gumroad's Sahil Lavingia, money didn't always come easily. But in recent months, not only did his digital-goods business book a profit for the first time, but it also signed more than 7,000 non-accredited investors--many of who are Gumroad customers--in less than 24 hours.

"I think if we can start to see more startups raise money from their customers, from their communities, from the average person, or non-accredited investors--I just think that's good for the world," says Lavingia, founder and CEO of the 10-year-old company.  READ MORE