Lightspeed Venture Partners formalizes its scaling efforts, as other outfits make similar moves
The obstacle for Series A funding is much higher than it was a year ago — and startup investors need to respond.
They don’t have many options if they want their startups to survive. When the market turned sharply in the spring of 2022, later-stage companies were the first to feel the pain. But that downward financial pressure has more recently led to much younger companies receiving lower valuations in their next round – 1.6x in the second quarter, the lowest since the third quarter of 2013, according to Pitchbook data – and facing more elite Series A Investors with many options.
There’s no shortage of ways VCs are getting creative on this front. European venture firm Breega is touting its “scaling team” to help support its many bets. Pear VC, a business events company based in the Bay Area, is constantly developing new programming aimed at supporting and educating the emerging teams it supports.
Even the biggest, agnostic companies are doing more to telegraph that they are responding to the current market. In October, for example, investment firm Greylock launched Edge, a three-month company-building program designed to advance select pre-seed and seed founders from inception to product-to-market adaptation.
VC heavyweight Lightspeed Venture Partners is also stepping up its game. The company has long written early (and sometimes, first) checks on startups, including messaging app Snapchat. the application performance management arm AppDynamics (purchased by Cisco shortly before its IPO); and publicly traded cloud computing company Nutanix (current market value: $11.2 billion).
According to the company, it has long focused on polishing such rough diamonds. However, given the growing standards of Series A investors across the board, Lightspeed tells TechCrunch that it is now formalizing some of the mentorship it has long offered to its portfolio companies through a company-building program for its founders called Launch.
Led by partner Luke Beseda, the purported idea isn’t to attract more founders to Lightspeed, but rather to pave the way for the startups it’s already funded to get to that Series A round. the same questions and obstacles, Beseda explains. “They need to know: how do I start and run a business? How do I hire and build a core team? How can I build my product strategy through customer interviews and plan partnerships and increase revenue?”
In the future, Lightspeed hopes to answer these questions more systematically through expert-led workshops, “toy products” and other tools that Lightspeed offers through its new program.
Certainly, any little bit of help should be welcome at this time.
While many startups simply fall apart — at least 3,200 U.S. venture capital-backed companies are out of business in 2023, according to data compiled for The New York Times by PitchBook — others find that the emphasis on year-over-year growth and annual recurring revenue is here to stay and not going away anytime soon .
At the moment, this includes the Series A stage of things.
“We went through a period where there was just a lot of exuberance in the market – 2020, 2021, the end of 2022 – where there was a sense that gravity was not there,” Benchmark VC Sarah Tavel told TC. event earlier this month where he addressed the changing landscape for Series A funding.
“Now, we’re back to a place where we all realize that the work of building a company is really hard. You must have an incredible customer orientation. You have to have an incredible orientation to the fundamentals of the business you’re building.”
Tavel said, “It’s not just the vanity metrics – the top numbers – that I think a lot of people got lost on. Ultimately, startups that [succeed] they are what generate profits and cash flow.”
