This week Alexia Bonatsos of Dream Machine and Niko Bonatsos of General Catalyst swung by Extra Crunch Live to discuss where they are investing today and what the future might look like.
As expected, these seed and early-stage venture capitalists had a lot to say about their current investing cadence and what interests them in the world of edtech, Clubhouse and more. A big thanks to everyone who came out and submitted some great questions.
Going back through the chat today, a few sections jumped out. For this recap, I’ve gathered answers from the transcript regarding today’s fundraising climate, the future of AI and the possible impact of the downturn on VC-backed founder diversity.
And for everyone who couldn’t join us live, I’ve included the full video replay below. (You can get access here, if you need it.)
Today’s fundraising climate
Alexia:
It’skindofa Rashomon; dependingonwhoseperspectiveyou’regettingthestory,isjustcompletelydifferent.
Let’ssee,are[VCs]beingasactiveastheywerein2018?I’mgonnasayno.Imean,lookatyourdata,yourdatasaysno. But does that mean people [have] shut down the shop and are all in Montana? Also no, right?
We know that these kinds of “crisistunities” — and I’m not diminishing the crisis at all, it is very sad and very scary, and it’s something that I’m very privileged to be able to be experiencing from inside my apartment and not from outside within an emergency room or a food bank or any other place that it’s actually at the front lines, right?
So we know in the last recession, Airbnb, WhatsApp, Uber, Instagram [were founded], how much value was created from the last contraction? Multiple billions of dollars, $100 billion-plus. So the reason VCs aren’t saying, “oh, we’re just gonna wait until valuations drop,” is because then they’re not going to get the email from the next [Airbnb CEO] Brian Chesky. If someone’s saying, “I’m putting up a closed sign on my business,” then they’re not going to be the person that the next category-defining founder automatically reaches out to.
But are many of us pausing, or trying to see if we can get more ownership when valuations correct to the amount of demand in the market? A lot of people are. That being said, I did two deals in March [and] April. And I’m chasing after a deal right now. And I’m still taking meetings and I’m still doing my job. I have to, that’s what I owe to my LPs.
So were we in an overheated market before? Yes. Are people waiting for the market to cool down? Yes. Are they still taking meetings? Yes.
Niko:
Ithinkthat’saprettygoodread.Maybeacouplemorepointstoadd.Thefirstone is [that] it’sbeenajourneythelast10, 11weeks.Atthebeginning,youstartwithmoreintrospection, checking outwhattheportfoliolooksliketofigureouthowyouwanttospendyourtimeandhowmuchdamagehasoccurredoverthere.
Thenwhathappensis,youstartseeingsomenewareasexploding,wherethe — inagoodway —wherethefutureisgettingaccelerated.Andyouguyshavedoneagoodjobsharingsomeofthesetrendsaroundlikee-commerce,telehealth,enterprisesecurity,education,remote–workacceleration. [Those] sectors are lookingfreakingawesomerightnow… themetricsarelookingreallygood.Theproduct-marketfitisverystrong.Soanycompaniesyoucanfind inthesesectors,forexample,Iwillsay it’sbusinessasusual.
ThentheotherpointthatIwouldliketoaddtowhatAlexiawassayingbefore… ittakessometimeandadifferentmindsettoadjustto, “let’smakedealsovervideoconferencing.”And [it’s] probablyeasierifit’s asmalleramountofcapital,or,mostimportantly,you’vekindofrelationshipwiththatteamfrombefore.Butit’snotforeverybodytomakethatjumpandbelike, “youknowwhat,forpeoplewe’venevermetbefore,we’regonnawritethema$15millioncheckbecausethey’regoingtogetustothepromisedland.”
Soittakessomeadjustmentfromtheventurecapitalcommunitytodothat.Andyou’reseeingitalsofromourportfoliocompaniesorcompaniesthatwerenotremote-firstorhadadistributedteam.Recruitingistrickierforthem, for executives.
How AI is used today
Alexia:
I don’t necessarily know if this is a better future, [but] when I think of [AI] in terms of the consumer context, it’s something like TikTok, where you don’t even have to log into TikTok and it automatically serves you a personalized feed [of] short videos that are tailored to your unique tics. Whether that’s somebody surfing a pool or doing a dance with their dad. TikTok gives you exactly what you want in your feed.
I have a portfolio company named Trash that looks through your camera roll [and] allows you to scoop up videos that are trash and uses AI and ML editing to turn those trash videos into treasure. So it’s more of a personalization aspect, than a, you know, crazy science-fiction Elon Musk neuro-link vision. It’s more subtle than what science fiction would have had you believe in consumer.
Niko:
Somethingtoaddtothatisitcouldbealsosomething running inthebackground around contentmoderation, forexample. It’slikeoneofthecompaniesthatAlexamentioned,likehowdoyoumakesurethatit’s [a] moretrustedenvironment,wheresafer,morepositiveconversationsarehappening?Sothere’scertaincompanies, like ourportfoliocompanyHive,that’sworkingwithalotofconsumer-facingcompaniestohelpthemeradicatealltheNSFWcontent.
VCs, diversity and founder capital
Alexia:
I’malsoconcernedthatthey’llbackslideonmultiplelevels.
Sowhenthereisashocktothesystem,whenthere’sanearthquake,whenameteorstrikes,whenthere’sa black swanevent,wedefaultbacktomoreconservativemodes,wedefaultbacktothepatternsthatwe’reusedto —thewayofnormalityisastrongerforcethangravity.Andthatnormalityis womendoingalotoftheunpaidlabor —whichischildcare,cleaning,cooking — andthatunpaidlabortakesawayfrompaideconomicproductivity. That’s oneangleofit.
Andthen iftheventurecommunity — whichispredominantlymale,predominantlywhite —isgoingtodefaultbacktooldpattern-matchingthatisalsopredominantlymale,predominantlywhite.So whatwehavetodoasacommunityisstartbuildingoutplatformsforgreateraccess. It’snotapipelineproblem,itisanaccessproblem.AndthewaythatyoubuildoutaplatformforgreateraccessissomethingalongthelinesofwhatRyanHooverdid with Fundraise From Home,whereyoucouldsubmitvideosfromanywhereintheworld.
Ryan,Niv Dror,HarryStebbings[and]Vedika Jain [and]myselfaresittingtheresiftingthroughthevideos,pickingthreethatwe’reinterestedinandthenlisteningtotheseamazingambitiousfounderseveryThursdayfromhome. And that’snotlikeanoldboys’club,that’snotavelvetrope,thatdoesn’tnecessitatethatyoulivenexttothe Blue BottleonSouthPark.That’sthatisopeninguptheaccesstoeveryone.
Now,hopefully theprogressthatwehavemade,thewomenandthepeopleofcolorthatarealreadyintheindustry,willholdfast.Andmakesurethattheycontinuetodiscardthecognitivebias.Butthat’shard,that’saconsciousactioninatimewherewe’reoperatingfrom … soyouhavetobevery,veryself-awareasaVC,whichishard.
