Earlier this year, IVP General Partner Tom Lovero declared that the post-pandemic recession is over and that companies that have made it this far should prioritize growth over cost cutting.
But Brian Hirsch, co-founder of Tribeca Venture Partners, said there are still thousands of companies struggling to raise their next round of funding at a higher valuation or survive outright. It is said that there is a possibility.
Unlike traditional growth funds, the 13-year-old firm has a late-stage strategy that invests in companies that are forced to raise capital at valuations that are at or below their final price. In many of these situations, existing investors are willing to back the company with additional capital, but they need a third party like Tribeca Ventures to evaluate the deal, Hirsch told TechCrunch.
Venture capital is excited to back AI companies at sky-high valuations, “but everything else is really difficult,” Hirsch said.
Nothing proves how big the story of this two-city venture has become like Carta's latest ratings data. The cap table management platform analyzed nearly 2,000 software deals closed this year and found that the bottom 10% of Series B deals had a pre-money valuation of just $40 million, while the top 10% had the same. It turned out to be on stage. It cost nearly $1 billion to develop.
The price dispersion was even more pronounced for Series D deals, which ranged from just $27 million to $5.2 billion.
Companies at the top of this spectrum are definitely doing AI-related work. Notable examples include Eleven Labs, which raised a Series B earlier this year at a pre-money valuation of $920 million, and Kohia, which closed a Series D at a pre-money valuation of $5 billion.
For non-AI startups, the funding landscape is very different, even if they do so after the ZIRP-era frenzy has subsided.
Hirsch said non-AI companies that raised a Series A round 18 months ago are likely facing challenges securing Series B funding, even if they see decent revenue growth. Ta.
He said founders of startups other than GenAI must feel like “when you were in high school and didn't get invited to a fun party,” and they often have good businesses but no one cares. No, he added.
In fact, Carta data shows that only 9% of Series A companies secure Series B funding within two years, down from 25% previously.
But Tribeca Ventures is leveraging its growth fund to help lower the price of rounds for more mature startups, primarily those with more than $20 million in revenue.
Many of these startups are growing at a reasonable pace, but their valuations are too high for the current market.
“We're still in that unwinding process,” Hirsch said. “I think cleanup work will be needed for at least a few more years.”