I feel like a missing part of this is the end customer. With more investment it seems to me it would be easy to create more seed investments but if those can't find product market fit then more seed investments will not lead to more Series A,B,C etc. This may be reflected in the "Too Real" chart.
Yes - the marginal Seed startup doesn't seem to be creating enough "real" value for customers (PMF) to survive to the next phase. So we get more early-stage companies without seeing more growth stage companies
Attractive—and tough—article, so, according to your analysis, we should stop investing in startups at current market conditions or at least redefine drastically the way to compute the portfolio value of each company.
It's always hard to say what "we" as an industry should or shouldn't do, but I would say investors should think through whether or not their fund strategy protects them from these dynamics. I would guess not for the vast majority of funds.
I feel like a missing part of this is the end customer. With more investment it seems to me it would be easy to create more seed investments but if those can't find product market fit then more seed investments will not lead to more Series A,B,C etc. This may be reflected in the "Too Real" chart.
Yes - the marginal Seed startup doesn't seem to be creating enough "real" value for customers (PMF) to survive to the next phase. So we get more early-stage companies without seeing more growth stage companies
Reposting this in the eu.vc newsletter, Nnamdi. What an amazing read 🙏 Thx!
Attractive—and tough—article, so, according to your analysis, we should stop investing in startups at current market conditions or at least redefine drastically the way to compute the portfolio value of each company.
It's always hard to say what "we" as an industry should or shouldn't do, but I would say investors should think through whether or not their fund strategy protects them from these dynamics. I would guess not for the vast majority of funds.