Jason M. Lemkin, who backed Pipedrive and Algolia early on, explains why seed investing still works for experienced investors. His portfolio is up 4.4x. The problem now: founders struggle to raise the next check after seed, because later-stage funding dried up after the 2021-2022 hiring spree.
2013
2016
$1.5 billion
$3 billion
$10 billion
I think founders should. An executive should learn a lot about how investing works. Right? There is. There is. It's just. But my story. So. So, yeah. So after I left Adobe, one of my investors, a fund called Storm Ventures, asked me to join. I went there, I worked there for two years and it was a great, A great opportunity to really learn to invest. And it went pretty well. So my first investment was Pipedrive that ended up selling for 1.5 billion.
Yeah.
My second was that a Vista pickup? Yeah, they bought it for cash. That was the first one. So I learned a lot from that. The second one was Algolia, which is doing hundreds of millions and is worth 3 billion today, which will go IPO when we come out of this search is a service API. The third one was Talk Desk, which is worth 10 billion today. The fourth one is what became Greenhouse, which is worth about over a billion dollars today. The fifth one was Salesloft, which, as you know, sold for well over $2 billion last year. Right. So I was kind of five for five in the beginning and had a few other pretty good ones too. I actually didn't. You didn't know back then that they would be so good, but those ended up aggregate on the aggregate being fairly insane outcomes. And then in 2016, I kind of struck out on my own for a variety of reasons. Got harder, but still done pretty darn well. And I try to do three or four investments a year of like 1 to 4 million. The world's changed. It got harder during the boom right from late 2020 to early 2022 when everything got insane. So I kind of slowed down a bit and now I'm behind. I actually have too much money, as do some I actually have. It's interesting. Interesting for founders or founders to be actually probably have too much money to invest now and would love to do, you know, four great investments. Was a lot of talk about too much dry powder. Now people aren't talking about it anymore because VCs that do later stage stuff are just terrified. They're terrified. But there's a lot of. For folks that have been around for a while like me, here's something for founders to know. For folks that do seed up to late seed up to early a folks that have been doing this for I started investing in 2013, so anyone that's been doing it since 2015 or so, they're excited to invest now.
Folks that started more recently are declined.
And so not even just that. It's just like, it's still pretty good. Like, like good, good Companies today are still worth $5 billion. Like, if you invest it at 10 million valuation and get labs worth 5 billion and Hashi Corps with 6 and Mongo's worth 8, you could still make money. So maybe not as much as last year, but. So folks that have been doing seed for a while that have some. Some had some returns, some hits, right? Yeah, maybe they're worth half of what they were last year, but. But we know how to do it. But folks that started investing more recently, actually, no matter what they claim to their LPs, their portfolios may have, like, nosedived, right? Oh, yeah, definitely. But. But yeah, even with market adjustments, my current batch of companies is at 4.4x. So, like, that's still good. Like, you can still make money if you. If you quintuple your investors money. Right? So, so that's why hunt out investors now that have been around for a while. Hunt out investors that aren't scared. If you're early stage, they'll invest. But late stage, oh, my God. I've been stunned the last 30 days. How much worse, and I just wrote about it on Sasser today, how much worse late stage investing is. And this is why there's so many layoffs in the industry. It's not. Sometimes these companies are struggling, but for the most part, CEOs are waking up to the fact that there's just no more money coming. That's the issue. That's what's layoffs. There's no money coming.
Yeah, like, what, what, what? Used to be like, okay, this is good for 24 months. Now it's like, that actually might be enough for 36 months. It might be enough for 38 months. Yeah, it might be. It might be it.
Right, so.
So, exactly. So like, just, you know, rejigger tune your spreadsheet a little bit there and say, like, oh, okay, gosh, like, I guess we can't be that upside down, right?
We can't be that upside ever. And then like, yeah, ever. And what if. And then I can go back to the point. But basically, what if you're wondering what happened to layoffs? Like, what Stripe said is, like, was transparent and true. Basically everyone doubled their hiring last year. Everyone doubled their hiring. And so best case, they're freezing hiring now because they don't need twice as many people today. And capital was so cheap, and there was just so much capital that every, every VP was like, well, they hit this crazy plan, I need 100 more reps. I need. I need $100 million marketing budget. I need a thousand CSMs. And yeah, when capital seemed to be infinite, you just gave it to them. Right? You just gave it to them. But. But the thing is, people hired 50% more people than they needed last year. When I look at the go back at the headcounts of the later stage companies I've invested in, all of them doubled their headcount. Even some of the most conservative and lowest burn ones doubled their headcount last year. And they didn't. No one needed to. Like, let's be honest, no one really needed to double. You do need to grow your sales team to meet your plan and do. But you didn't need. We didn't really need to double our headcount. It was too fast.
