A VC Winter Is Coming (Sort Of); A MadTech Prediction Piece You Can Bet On; US, Wild West Of Privacy
This is the FirstPartyCapital weekly newsletter. It covers news and updates about the FirstPartyCapital fund and its portfolio companies.
Winter Is Coming… Sort Of
The permabears are out in force across VC land right now. There are a bunch of pieces in the tech trades talking about the “end of days “ for venture. This recent post on TechCrunch featuring a hyperbolic presentation from famed Silicon Valley incubator YC was probably the pick of the hysterical lot.
We are not saying it’s business-as-usual. A recession is coming. It will get harder to raise money for those further down the road (series B and C). But good companies always get funded - albeit at more sensible valuations.
If you are capital efficient and have enough runway (12+ months or more), you should be able to ride out the economic turbulence about to hit us.
It’s going to get bumpy, but it’s not going to be existential. It’s a necessary and sensible correction.
Our Managing Partner, Rich Ashton, provided some of the aforementioned perspective for Claimer:
We have been advising our portfolio companies to think carefully about the valuation that they will be able to achieve at the funding round after their next one.
It's tempting to take the highest offer possible in order to minimise dilution (and possibly for bragging rights in tech circles).
We have seen deals approaching revenue multiples of 100x ARR, but what happens when multiples are back at 20x at the next round?
That company will need to have grown 5x just to maintain its previous valuation. This leaves very little margin for error and will force many of these companies into taking a down round.
This can be a company-killer, dampening team morale, making it harder to retain and attract top talent.
I imagine that even some of the most aggressive VCs who prioritise hyper-scaling over profitability, will be reviewing their portfolio companies' growth plans and delaying major investments into new markets and verticals, or cutting back on new hires.
It's by no means all doom and gloom, perhaps just a return to more prudent operating procedures.
A MadTech Prediction Piece For The Ages
Our General Partner, Ciarán O’Kane, loves a good prediction piece. In his annual pre-ATS post on ExchangeWire, he proffers a bunch of MadTech possibilities for the year ahead.
Some of the top-line highlights include: Shopify buying Criteo; Mediaocean buying Magnite; a looming zero ID disaster in Europe; a bunch of possible European IPOs; Netflix’s ad tech strategy; and much much more. You can read it in full here.
FirstPartyCapital will be in attendance at this year’s ATS London on June 14 and 15. It remains the OG MadTech event in Europe with over 500+ of the continent’s top decision makers in attendance.
We will be there - and we look forward to seeing all our industry friends and peers.
Twitter Confirms US As The Wild West For Privacy
Twitter was fined $100 million this week for using its users’ email and phone number data for ad targeting. Twitter did all this without gaining consent.
Retrospective fining like this is a ham-fisted way to police user privacy. Where is GDPR when you need it?
It is just another example of the shockingly loose practices that pervades the US ad ecosystem: legislation remains patchy (there are some state laws but no federal approach), and ad tech seems unwilling to productise around privacy.
Apple, to its credit, is single-handedly forcing the industry’s hand. It’s easy to be cynical about Apple's real intentions, but you have to admire its attempts to protect consumers - especially when its own government cannot.
From a privacy perspective, European ad tech is a country mile ahead of its US counterparts.
FirstPartyCapital is excited to see the innovative startups emerging from the region - all built on a post-cookie/id framework. And of course we are investing.
Have a great weekend, readers.