Has the global VC market locked up?

Why the slow down? There are three reasons why a dramatically slower investment pace makes sense.

-- Dry powder for better times and existing portfolio. The main reason is that capital is (right now) better deployed in different ways (portfolio) and better times (later). The goal here is to have dry power to deploy when visibility increases and to be 100% certain our portfolio has weathered the storm to the extent possible. To suggest anything other than that our #1 priority is making sure our existing portfolio companies are positioned to weather the storm would be wrong and irresponsible. That’s what “partnering” means. Angular is lucky to have significant dry power relative to our fund size — but we need to use it wisely. Founders also need time to adjust their plans, products, teams, and fundraising strategies to the new world we are entering.

-- Impossibility of meeting in person. We have invested in early-stage start ups (once) without physically meeting a team due to some very unique geographic/logistical circumstances. We did a ton of due diligence and are delighted to have made that decision (fingers crossed on a major customer contract in the coming weeks!). But in general, we are strong believers in the power of the physical meeting to communicate values and build trust — two things that are essential (in our view) to successful early-stage high-conviction investments. There is no question that the inability to meet founders in person is going to drag down the pace of fundraising for Angular and, I suspect, for any early-stage VC (or founder) who is honest with themselves. We are still going to do it, but it will be much easier and faster when the temporary slowdown end.

-- Uncertainty is increasing at an increasing rate. Right now, with cities under lockdown and both cases and — tragically — deaths rising at exponential rates, the rate of uncertainty in the world is itself increasing at an ever-rising rate. This is unsustainable. It will eventually and by necessity stop. No matter how bad the situation gets, it will inevitably start to improve. There are reasons to think this will happen sooner than some of the more dire predictions, but it will happen. More importantly, the level of uncertainty will start to drop at some point , and at that point, VC dollars will start flowing a bit more easily. Making difficult business decisions (i.e. making a VC investment decision) under conditions of exponentially rising uncertainty is foolish. We’ll all be wiser in a few weeks and certainly in a few months. LPs are paying VC GPs to be wise custodians of their capital — and at the present moment, the wisest thing GPs can do is wait on new investment decisions. Not forever and not until there is “zero risk” but until the size and shape of the risk is better understood than it is right at this moment.

Doubling down on transparency. I hesitated to write this post. I feared that I may be being too transparent on our thinking and scaring away founders. Ultimately, however, I think it’s healthy for the ecosystems we operate in to be as transparent as possible, especially now. “Zero bullshit” is one of our core values at Angular Ventures — and this post is, I hope, a strong example of that.