Tech’s riskiest founders get $650 million bet from Redpoint Ventures – TechCrunch
For venture capitalists, the noise is ironically important. Wading through constant streams of founders seeking capital and startup pitches can be the hardest part of the job, but it’s also imperative for the success of the same job.
So what if the energy around entrepreneurship slows down? As the recession looms, will fewer and fewer founders take risks? According to Redpoint chief executive Annie Kadavy, there will be fewer total businesses created next year than there have been in the past two years. And, somewhat counterintuitively, the investor thinks the looming slowdown is “a good thing.”
“In an environment where it’s really easy to launch a seed round, it’s very easy to launch your first product as long as you can put more money into the problem you’re trying to solve…that’s a different risk profile she said, “as opposed to what’s really hard to fundraise, and I have to build these products because I care about the problem so much.”
She added, “I think the total number of founders we’re going to see will be less, but the quality bar is rising.”
Led by Kadavy and managing partner Erica Brescia, the startup team at Redpoint Ventures announced today that it has closed a $650 million fund to back startups. The investment vehicle is the company’s ninth focused seed fund closed to date, which it will invest in companies from seed to Series B. The amount of the check will range between $2 million and $15 million, depending the company.
The company targets the majority, around 70%, of its investments from this fund in the Series A space, with the remaining 30% dedicated to seed and Series B startups. It targets Series A holdings between 15 % and 23%.
Brescia, who joined Redpoint last year after being plucked from her role as COO of GitHub, says the company hasn’t seen much activity lately from megafunds such as Tiger Global or SoftBank. .
“The more players you have in the market, especially [last year] tends to drive prices up… and now we see valuations coming back down,” she said. “I think it’s healthier for founders and for investors, and I’m sure part of that is because we’re seeing fewer players actively pursuing the same business.”
It’s not just valuations that change due to changing sentiment; the investor said competition is also changing in startups, thanks to the conservatism of megafunds. “One of the things that makes building a start-up a lot more difficult and a lot more expensive is the number of well-funded start-up competitors you have to cut,” Kadavy said. “But if it might be two or three companies instead of 10 or 12 or 15, the likelihood of success, the ability of those companies to hire and retain great people, the ability for them to continue fundraising, everything increase. ”
Brescia added that Redpoint’s product and the product of a megafund as a venture capital service look quite different, with Redpoint’s biggest differentiation being that its startup GP team is entirely led by former founders. The company did not share its IRR target upon request.
The company’s fresh capital comes after a wave of hiring. Last year, alongside Brescia, Redpoint recruited GitHub CTO Jason Warner. The team also added Meera Clark and Jordan Segall as investors.