"Web3, Social, and Non-revenue Generating Businesses Will Struggle" Brendan Rogers, co-founder, 2amVC says that unit economics always mattered, but in hot markets they were overlooked. According to Rogers, businesses that didn't pay attention towards it, will need to recalibrate to meet market expectations today.
By Priya Kapoor
This story appears in the July 2023 issue of BIZ Experiences India. Subscribe »
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Brendan Rogers, the co-founder of 2amVC, a sector-agnostic and 'India only' early stage venture fund believes that the present time is more of a correction than a crisis, but the bar still remains high.
"The bar to get a term sheet from a VC has risen significantly. FOMO has more or less left the VC market. We believe that startups that are not live and don't have traction/ revenue will have difficulty raising capital."
Talking on unit economics, Rogers says that they have always mattered but in hot markets, they were overlooked. According to Rogers, businesses that didn't pay attention towards it will need to recalibrate to meet market expectations today.
"Bridge rounds will happen at a flat round/discount. This is part of the recalibration. However, we invest at the earliest stage and our valuations are more or less unaffected. That being said, some of our companies that have raised follow-on rounds will be affected by the change in the market dynamic," says Rogers.
The fund has been taking more lead investor positions now and think that this is the time where the best startups will be built. "We have been deploying at the same cadence since we started. This is the time where the best startups will be built. We see a gap in the market for true lead investors at the seed stage. We are avoiding party rounds," said Rogers, who set up the fund in 2021.
He futher tells that in serious situations like high burn rate of its portfolio companies, the fund work with them on budgeting and make sure they understand their runway and their KPI's to be able to assess the future viability of their business.
"These are incredibly tough and honest conversations to have with founders," says Rogers. Web3, Social, and non-revenue generating businesses will struggle and companies that have software already built out and have shown traction prior to getting any funding will move quicker in the VC market than those that do not, according to Rogers.
FACTSHEET
No. of startups invested : 43
No. of exits: We just started deploying and still deploying
Focus sectors: HealthTech, Logistics, Clothing, Foodtech, and tech enabled D2C brands.
Fund Size: $10M+
Ticket Size: $300K
