The "great VC resignation" with Everywhere Ventures co-founder Jenny Fielding | Equity Podcast

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this episode is sponsored by Morgan Stanley atwork visit morganstanley.com assessment to get your free transaction Readiness assessment [Music] today hello and welcome back to equity a podcast about the business of startups where we unpack the numbers and Nuance behind the headlines I'm marann aavo and this is our interview show where we sit down with a guest think about their work and unpack the rest today we're talking to Jenny Fielding co-founder and managing partner at everywhere Ventures about startups flight to Quality in 2024 how smaller firms are competing with larger firms in this current investment landscape and we'll also dig into the great VC resignation so stay through to the end for that Jenny welcome to the show thank you so much for having me really looking forward to this yeah me too I'm really excited I've enjoyed reading your posts on X over the past year or so they're just refreshingly candid and authentic and we just thought you'd make a great guess that would have a lot of valuable insights for our Founders listening to the show and just listeners in general so first of all you started everywere VC in January of 2018 but prior to that you worked as a managing director for Tech Stars for about seven years and you also founded several companies can you share a little bit more about your background before we dig into your current workload I guess yeah um I actually call myself an accidental entrepreneur because I started very traditionally so I went to law school I worked in finance and then I had an idea for a company I hesitate to even call it a startup because I was just trying to you know solve a problem I saw in the world right it was a personal problem that I had and so nights and weekends while I was working at you know a big bank I started kind of hacking on this and ended up starting you know my my first company while I had this full-time job and so that's been kind of the theme throughout my career is is trying things experimenting iterating and then launching them and so a similar thing happened while I was at techstars I was running the New York program I'd been there a number of years and I had this thesis for a fund that was kind of by Founders for Founders I started it in 2018 kind of with the blessing of the fund I was working at as a nights and weekends project and like many people nights and weekends side hustle sometimes becomes the main hustle so after about three and a half years of running it as a side hustle kind of spun out and decided to go full-time with my co-founder and then last year we raised call it our first real fund oh okay and how much did you raise in that fund our last fund was about 25 million and we had had funds before and I like to call them kind of proof of concept funds so U we were both working full-time again we were experimenting with this model of by Founders for Founders based in local geography and kind of activating communities on the ground we learned a lot of things what worked what didn't work and then decided to kind of take the plunge in 2022 so you invest in preed companies so do you invest only at the preed stage or seed stage as well it's an interesting question a few years ago I would have said we only invest in preed but as you know some of these terms are uh fungible and have have changed right and so preed in our mind were the first kind of institutional round of capital call it you know 500 to about 2 million and I think for many years that felt very preed thesis I'd say in the last year with kind of the reset happening in Venture we're seeing more proper seed deals that kind of fall into maybe that bucket and so it's a little more blurred in my mind but I consider myself that First Institutional check okay and so you've invested in the preed rounds of over 200 50 companies over the past 5 years that's a lot it is Keeps Us busy for sure have you had any wild success stories that you can share yeah you know while I was at Tech Stars I really developed this muscle around investing early stage kind of at scale and so I think that was the thing that I learned reviewing thousands of applications and taking kind of a Leap of Faith with these early stage Founders in a way my job is really more Around Talent development than digging into Financial models or or any of those things yeah we've had some great companies in in our portfolio that many people in the audience potentially have have heard of a company that announced a really large round past summer is called Headway and it's in the mental health space they announced their unicorn round we were in their first preed round many years ago and that's a company that's doing great one of the things I've noticed well first of all we know it's been a really bumpy past few years we had craziness happening in 2021 with investors going wild valuations just skyrocketing to some crazy levels that were not necessarily realistic and now we've been dealing with I guess what a lot of people are calling a reset over the past year and a half or two almost now and it's been kind of interesting watching that play out from my perspective as a journalist and so I've enjoyed reading about your perspective on the investor side so one of the things you recently posted on X about is that you're seeing this flight to Quality and you're seeing that more startups are actually not necessarily trying to raise a lot of capital like they just want to raise some early funds and then try to just keep going which feels like counter to what we'd seen in the past few years where it was like the more money we can get the better can you share a little bit more about that Trend yeah I mean as you mentioned you know 2020 2021 were just the years of excess now we're dealing with like The Hangover of that excess or for the last probably 18 months we've been dealing with it and I think that that's seeped into the psyche of many Founders right of raising as much as you can at really high valuations doesn't always make sense for your business and we've seen many company shut down and just kind of the pitfalls of that strategy and so I think there's this almost movement now of Founders kind of going the other way saying listen we can be austere we can be efficient we can actually do a lot with a little and I think it's kind of an amazing new ethos that we're seeing I sometimes wonder if we've gone a little bit too far because now I'm having Founders pitch me at the preed hey this money is going to get us to profitability and I'm not sure that's really what Venture investors are looking for either so I think we probably need some Middle Ground which is like run your business with good unit economics think about building towards some type of sustainable profitable model but probably at the precede you need that Rocket Fuel you need that Capital to grow with every extreme we see an overcorrection and I I feel that that might be what we're seeing but I'm I'm definitely hearing a lot of that the founders that just want to build different types of businesses well that's interesting and I also read that you think that we'll see some big rounds still in 2024 but also a lot more shutdowns which I also agree with because unfortunately I feel like every week I'm writing about another company that is shutting down its operations for one reason or another and know you said that's it's kind of like a weird dichotomy but can you elaborate on that yeah I think that's what I mean by flight to Quality where if you think of your portfolio you kind of have your top performers in the portfolio I mentioned one company in our portfolio or another one's a company called pair that raised a monster round in the summer as well and those companies had multiple term sheets and more investors actually wanted to pour in it and they raised at very attractive valuations that were up rounds from their last rounds and you might think to yourself well what's happening all we keep on hearing about is how growth is in trouble and all the valuations are are being caught but there's this kind of top tier class of founders of companies that all the capital is rushing to then you have like the mid tier and I think that's where people are are really getting stuck and that's unfortunate because those are the companies that are good companies they're just not great companies yet and they need a little more time and unfortunately right now Venture capitalists are not funding time we're kind of done with that modality and they're just looking for companies that already have figured it out yeah and so that mid- tier of companies are the ones that are kind of getting caught no one wants to fund them they've done multiple Bridge rounds already and if they haven't gotten to profitability those are the ones that are really in trouble yeah think that's worrisome for them and and like you said it's a challenge to try to raise Capital so they're in this kind of weird limbo phase it sounds like and it's really sad for me because as I said these are good companies for the most part I think these are companies some of them have been over capitalized some of them have taken too high valuations and there's just there's nowhere to go for them and and this is really sad for us we see this in our portfolio as does every venture capitalist but I really feel for those Founders right because the game has changed and it feels a little bit unfair yeah I see what you mean and if we could just quickly bounce back to what we were just talking about a moment ago about how more Founders seem to be less eager to raise a lot of cash compared to years prior another one of your post you mentioned that you coached a day Zero startup to raise half the amount of cash but keep the same 18 18 month Runway and you mentioned you have a feeling that this particular team because they had some pretty experienced Enterprise leaders would move faster if they had less cash available and then your quote was if this Tech reset taught me anything it's that Capital efficient teams win the long game I do think that's been a prevalent theme over the past year and a half or so but can you talk to me a little bit more about what do you mean by coaching them to raise half the amount of cash but keep the same Runway and is that something you would advise for every startup or just only certain ones like this one that had experienced leaders well you know my co-founder and I always have this kind of joke between us where Founders you know tell us their Runway and then we look at the model and we say well actually that isn't what your monthly burn is your monthly burn is however much cash you have in the bank divided by 18 to 24 months right so it's this idea of not saying this is how much we need but repositioning that is this is how much we have and so what I was saying to this team who actually have the ability to raise a large amount because of who they are actually what if you raise less but you keep the same amount of Runway so you keep that 18 to 24 months but you just make your monthly burn go down and how are you going to do that you're going to have to be Capital efficient you're going to have to not hire all those nice to have hires it's just must have hires it's going to really take kind of a more auster look at your business and so I guess that's what we mean is that you can do more with less now yeah well I think also curious though would you say though that that is easier for a company that does have like experienced leaders as opposed to like a firsttime Founder I think it's the opposite so in this particular case these Founders had come out of a brand name company and they were used to having a lot of resource available and so they could spend on things that I don't consider necessities and many kind of firsttime Founders wouldn't have the luxury of at their fingertips right so what I was saying is that you're not at that big company anymore so we need need to think like a startup in everything we do right it's a little bit more of like a mental shift and so we're seeing tons of talent flood out of places like Google and and all these companies Amazon but do they really have kind of the grit and the DNA to act like a startup and I think in these times you really have to prove that you can not that you can't raise that first round and maybe it's a large amount but then where do you go from there and is that the precedent that you're setting with your company well next I'd like to talk a little bit more about some of this sectors that you're investing in and also some of the VC practices that we're seeing going into the new year but first a quick break is your company planning to go public or conduct a shareholder liquidity program within the next 18 to 24 months did you know that proactively planning for your next private company liquidity event or IPO can help you maintain greater control over timelines and outcomes Morgan Stanley at work believes that when you have the right technology and systems in place working in harmony leading up to a transaction you can prepare and execute with more accuracy and ease visit morganstanley.com assessment to connect with their issuer strategy and Excellence team for a free assessment to find out if your company is transaction ready again that's morganstanley.com assessment to get your free assessment today so Jenny I understand that you invest quite a lot in the fintech space which is an area that I'm pretty familiar with having covered it pretty extensively over the past three and a half years what other sectors interest you and where do you see most of your investment dollars going this year as I mentioned you know I've been investing from essentially out of our everywhere thesis since 2018 and I'd say at the beginning we were real generalists we wanted to go where the opportunity was and so as we got ready to raise kind of the second fund we looked across our portfolio which at that point was like almost 200 companies and we said are the outliers in the portfolio and where do we think the world is going and let's kind of reconcile that with a little bit more of a thesis and so we kind of came up with this term which I call the table Stakes economy what do you actually need to live and that falls directionally into three buckets which are large buckets but we call that money so essentially fintech Health digital health for the most part and then work which is future of work and automation so those are the areas that everywhere is focused on or business model agnostic alth we do tend to do more B2B but we're really looking for kind of foundational companies that want to make the world a better place in those three areas and your average check size is about 50,000 to 250,000 is that right yeah I'd say 200 is is our sweet spot for a quack and so if I understand correctly as well 50% of your new fund is invested into fintech or fintech adjacent companies yeah so we're looking at those three areas but coincidentally we have kind of over index on fintech and we think what's happening right now is that the public markets obviously have not been kind to fintech not at all as you know and the big picture is just down rounds and fraud and shutdowns and I know a lot of fraud right yeah a lot of this stuff that that you know you're hearing about and then you know obviously the public market comps and many people are saying that finac was very you know overvalued and so it's really out of fashion well what that means is that we have a lot more opportunities right now as more people kind of rush out of the space and so the reason I think we're kind of overweight in finac right now is that we're actually seeing opportunities that we think are great and we can now afford them again so that's just being really camed right as everyone rushed into fintech the prices just got completely marked up there were these kind of large funds I remember in 2021 one of the large funds you know West Coast bace was basically going to Founders that were still working at other companies but that could potentially be Founders and saying like we'll give you a million dollars on a $16 million valuation and they didn't even have an idea yet and so the reality crazy is like just too much yeah small funds like us can't compete even if they were going to make room for a small fund like investing at that type of valuation doesn't fit in our business model so now that the feeling around finac has cooled a little bit it's it's a nice wedge for us to be able to kind of reinvest in a sector that I personally have been excited about and have been investing heavily since 2015 but was really priced out for a number of years well you rais another interesting point so last week one of our reporters Arya broke the news about countdown Capital having to shut down and this was an early stage Venture Capital firm for those who don't know and it was focused on hard tech hard tech Industrial startups and I know that the founder was really disappointed about having to shut down but one of the things he said that really caught our attention was the fact that he felt like as a smaller fund it was just too hard to compete with the bigger players that when he was trying to get into deals it was just too competitive and would often lose out to larger multi-stage firms so this something that really stood out we were talking about it and and what does this mean for other smaller firms so what are your thoughts on that I mean how challenging is it as a like aess smaller player dealing with such a competitive landscape with different firms that have you know these multi-billion dollar funds like how do you compete and what do you think other firms in this that are smaller such as countdown capital or yourselves what is your competitive Advantage like how do you win over a Founder that's getting glitzy offers from one of these flash year and I don't mean that in a derogatory way at all but you know like a flash year firm that just has like really deep pockets and then this this name so in the example I gave of the finac m stage fund that was giving term sheets to everyone for 16 post it actually wasn't that we couldn't slip a check in cuz we're small and Nimble we have a really large founder community that people appreciate and people are generally Founders are generally excited about having us on the cap table it was a little bit more that we couldn't afford it right so to the point of the founder who shut down his fund potentially I don't know his situation it wasn't that he couldn't wedge a check in it was that if the multi-stage funds are kind of going going earlier and really doing it for optionality they price insensitive and so they can just do a preed deal at a 20 million because it doesn't matter for them because what they're really looking for is when that company raises the $20 million series a or the $50 million series B they're just using this as an option so in that case we're priced out because it doesn't work with our business model personally I thought this was rampant in uh 2020 2021 and it seems to be getting a little a little bit better meaning what I was seeing in those years was the multistage you know call them the big sandill road investors coming into rounds precede rounds which is our sweet spot maybe a million or 1.5 and writing a small check a 250k check and basically either letting the founder price it or just saying sure we can do that at a 12 or a 15 and then everyone else is kind of stuck so we either kind of come in at with this group who hasn't even they're not even leading right we either take it or we try to convince the founder of something else or we leave it in our case we just walked away from many of them right now as we see this kind of pullback in Venture it seems to be that the big folks are kind of staying in their swim l a little bit more so if they're series a they're really focused on finding those great series a deals and doing a little bit less of the spray and prey like I'll have optionality in a million companies so from my perspective that part seems to be a little bit better and Founders have gotten the message that if a multi-billion dollar fund gives me 150k check they're not actually leading and setting the terms and so running around to everyone else and saying like yes this round is at a 15 is just not doable so I think it's getting a little bit better actually well that's good to hear because I mean it feels like to me that that really was not necessarily very helpful for for Founders or these startups because then they lost out on some some really potentially valuable investors such as yourselves right not that the others weren't valuable but it's different I think we know that sounds like to me you're pretty Hands-On right yeah I think you can say that we were priced out so you know you don't get our expertise but really the truth is they didn't do themselves much service because when they go out to raise their next round they've already priced their preed out of 15 where do you go from there if you don't have the metric so now you've had this reset and so then they go to the seed funds and say okay well now now we need to raise at a higher value and the seed funds are saying well you don't have much to show for it so it's going to be a down it's going to be a reset I think there's been a lot of that kind of come to Jesus moment it's sad for Founders because quite frankly we were trying to coach them not just so we could get our check-in so it wasn't just a selfish thing it was really like hey I've been there I've run two companies is this the best thing for your company and can you kind of three to five x your multiple your valuation in every round and I think we've seen now the answer is no you mentioned earlier that your business model agnostic so a couple of quick questions I have is a how do you mostly Source your deals I mean I know you're very well connected but do you do you get a lot of pitches or is it more by introductions or do you seek them out and also like what really draws you to invest in a company then if it's not the business model is it the founder or exactly the problem they're going after like what excites you the most so in terms of sourcing the truth is although most funds say they invest preed through whatever round the real precede funds are not that many we're kind of few and far between and we we all know each other quite well we all share deals and we're on the cap table I mean they the precede funds that are out there that are you know names that you know I might be on the cap table with them literally 50 times so we really get to know these people and so there's a lot of sharing and that's one of the beautiful things I think about early stage is that we can all get along we can all Syndicate and it's a kind of a closed group so that part is great in our case our deal flow comes from the community of 500 Founders that are rlps so we over the last 5 years of running the fund have hand selected a group of folks to give us money that are all running their own businesses and they're located around the world and those folks sometimes they're their own Angel Investors sometimes they're just happy to be part of our community but as they see deals on the ground and this might be a Founder in sa Paulo Brazil or a Founder in Canada or in Nigeria they're seeing interesting deals they're surfacing them to us because they're really aligned with us they're investors in our fund they want to see our fund succeed and they want to kind of help their own ecosystems and communities so we call this kind of this founder flywheel that we've built and it's quite large at this point with about 500 of our founder LPS wow I love that that's pretty unique so are all of your LPS Founders or are there any institutions or just strictly Founders yeah the first kind of two proof of concept funds that we raised it was all founders and operators so 100% And then the last fund which was a little bit larger we layered in a few family offices and some fund of funds but the kind of core Integrity of the community and what really makes the fund crank along is this community of Founders yeah that's really how our our deal flow comes we're a very small team and so we don't really believe that you can have kind of a pyramid at the early stage and that like we can't really have Associates and all these people doing calls with Founders because so much of precede is really this kind of visceral reaction of do you feel like this founder Can Go the Distance is resilient has a secret about the market all these types of things I think what Founders appreciate is like when they pitch us like they're pitching myself or or My co-founder something else that we've been seeing so when we recorded our predictions show one of the things that I predicted borrowing from a post on X that I had read from another VC was that we're going to see fewer VCS in general and in the coming year or so and I I think that's I believe that I believe that we're going to see fewer VCS and I know I've written about layoffs at One Fund for example we've written about others shrinking and I think some people are calling it The Great VC resignation so what are your thoughts on that do you feel like that more investors at Big funds are going to move to operating roles or GPS at emerging or smaller funds might you know think about doing something else yeah we are seeing this all over the place right now it's kind of incredible but I think there's two things happening one is like a business model mismatch and then one is kind of a partner mismatch so on the business model front I think you've covered some of the big funds closing right and really what that was about was like the business model wasn't potentially working anymore right if you're a billion dollar fund how are you going to return a billion dollars in capital with the market also shrinking right so if we're saying that the potential for how big these companies can get has now come down how how are we going to return that if you don't have the unicorns if you don't have the uprs I think that it was a business model mismatch on the larger fund size on the smaller fund size if you think of the micr funds and kind of the solo capitalists I think there was a realization that wow this job is hard yeah they say it's just a very hard way to kind of make money or or or have success as people kind of contact me as they're getting into this business I always tell them I actually almost gave up so I was working at Tech Stars I was five years in and I hadn't returned a dollar of capital to my LPS and I called my mentor at the time Brad Feld and I said Brad I actually don't think I'm good at this and he asked me why and I told him you know I hadn't returned any capital and so I just didn't think I you know probably should just go back to running a company and he said Jenny like this is a long game put your head down and like things will move along and at five and a half years like to the day one of my companies was acquired and it returned our whole fund and I was like oh gosh your whole fun BR was right and so but you have this kind of crisis of confidence now that was for me five and a half years in many of the people that started funds think about when they started it just a few years ago so where are they in this cycle right they haven't returned money to to LPS they're living on emerging manager salaries which is not much and they're hustling and yet they're not feeling kind of the fruits of that so I think we have to assume that many people many managers are not going to have kind of the resilience or the drive to keep on going because it does take a long time absolutely and then just the last thing that I would add is um there are a lot of partner blowups so there are a lot of funds you're going to hear about more in 2024 where the partners have decided to part ways and we hear kind of in the shadows the back channel of what's going on but if you think about it in the good times when everything is up and to the right in your portfolio you're much more likely to you know my partner's annoying but I'm just going to deal with him but we can just figure it out get along things are going well but when there's a lot of pressure and LPS are calling you and Founders are upset and like your fund might not be doing well you really look in the mirror and you say wow like do I want to do this for another 10 years with these people and so I think that's another thing that's happening in this great VC resignation is just people realizing that Partnerships are hard as many startup Founders that don't work out as partners there's just as many fun partners so it's it's a real problem that's a really interesting point I know I I'm not going to name names but I did hear about it something like that happening last year well the whole firm didn't blow up but there was there was some tension between partners and and one was left under I understand some pretty Rocky circumstances so I'm sure there's a lot more of that going on that I don't know about so I believe you there and it makes sense because yeah when times are great it's easier to get along and when it it's just like any relationship right when things are going well it's a whole lot easier to get along when you're facing troubles or challenges that's when you you know the true test comes but anyway Jenny I am so glad it worked out that you can make it on this show I was very much enjoyed talking with you and I'm sure our listeners are really going to enjoy hearing your insights so thank you so much again for joining us where can people find you online so they can keep up with you and all the fabulous things you have to share well thank you for having me I'm a huge fan of the show folks can obviously follow me on X where I definitely have some Punchy takes on on the industry or they can email me directly you know at Jenny at every . BC so yeah always happy to meet great Founders okay great listeners can catch up with us at Equity pod on X and threads and at TechCrunch pods on Tik Tok you can follow me at Bay a your riter on X thanks again for listening hope you enjoyed the show and we'll see you next time Equity is hosted by myself editor and chief of Tech runch Plus Alex Wilhelm and Tech runch senior reporter Mary an aeto we are produced by Teresa locan solo with editing by Kell Bryce Durban is our illustrator and a big thank you to the audience development team and Henry pabet who manages Tech wrench audio products thank you so much for listening and we'll talk to you next time