While the rest of the tech scene frets over easy-money and inflated valuations, Union Square Ventures partner Albert Wegner is reading the public market tea leaves and seeing something different. In a post on his Tumblr today entitled, “If You Need to Raise Money, Get Your Financing Done ASAP,” Mr. Wenger points out that even early stage companies nowhere near an IPO are still beholden to the vagaries of the public market, making the argument that the time is nigh to grab the cash. Forget micro, think marco.
“While we are still well off the 52-week lows this shakiness in the markets has very real reasons: Europe has been a mess for a while and the US is rapidly becoming one,” writes Mr. Wenger. Then, he explains why even Series A start-ups should care:
“At first blush it makes little sense for early and even growth stage company financings to be driven by the cycle in the public markets. After all, if you are doing a Series A, B or even C financing it is usually with the expectation that the company will be private for at least another 2-5 years and possibly longer. So the things that should matter are your expectations about the company’s growth prospects and valuations in the future. Unfortunately, as it turns out people’s expectations about both of these are largely driven by current market performance. And that actually turns out to be fairly rational when you don’t see path towards how or why things should get better.”
While acknowledging that there are no certainties, Mr. Wenger predicted that “the probability of a dip that could be as big as 2008 or even bigger has gone up tremendously in the last few months.” His advice? “If you are running a company that needs to do a venture round soon, I highly recommend that you get it done ASAP as opposed to optimizing for price.” Mark Birch, another NY tech investor, put it more threateningly in the comments: “My advice, raise now or else…”