The club is for people who are confused about startup investing. In the last few months, public company shares have been hammered, yet startup funding seems as brisk as ever, and VCs are still announcing enormous new funds as they have for many years.
Danny Rimer, who was born in Switzerland but now splits his time between London and San Francisco, spoke with us this week. The office just opened in New York.
Rimer, whose bets include Good Eggs, was caught in California. The conversation has been edited for a bit.
Lightspeed Venture Partners made a $7 billion announcement this week. According to the company, it has closed on $3.8 billion. Almost $2 billion was announced by Oakhc/ft. When the public market is down, institutional investors are less likely to commit to new funds because of that.
The question is a great one. Over the last few years, there have been extraordinary gains for many of these institutions. Their positions have grown more and more during this time. You can see an allocation to funds that have been around for a long time. I believe investors are looking to put their money into institutions that understand how to allocate new money in the market.
The funds keep increasing in size. Is there a new source of funds? In the last few years, we have seen more of a role for sovereign wealth funds. Is index looking farther away than it used to?
The market has been split between funds that are more in the business of asset aggregation and funds that are trying to continue the practice of venture. Our fund sizes have not changed very much. When it comes to our institutional investor base, we don't have family offices, and we don't take money from wealth funds Our base of investors are made up of endowments, pension funds, nonprofits and funds of funds. We are fortunate that most of those people have been with us for a long time.
You announced $3 billion in new funds last year, you have a lot of money under management. It is not a small amount.
It is not small, but relative to the funds that have grown a lot and have done sector funds or Crossover funds, if you look at how much Index has raised since the beginning.
What amount of money has been raised by the firm?
We should make sure. The exact number at the tip of my tongue is something I would love to have.
You don't know it's refreshing. Do you know if you are in the market? It feels like it has been a year since most firms last raised money, and that this isn't going to change.
We are not looking to raise money. We're in the market to make money.
Many companies are reseting their valuations. Are you talking to your companies about doing the same thing?
Nothing is off the table when it comes to discussing companies within our portfolio. When it comes to reality, we don't want to suspend disbelief. I don't think it's an umbrella discussion that we're having with all our companies We try to make sure that our companies understand the current climate, the conditions that are specific to them, and make sure that they're realistic when it comes to their future.
Sometimes the valuations of the company get ahead of themselves and we can't count on the funds coming back. Some companies have to make sure they are prepared for difficult times ahead. During this time, other companies have an opportunity to gain market share.
You would prefer that a startup conduct a down round instead of agreeing to a specific valuation, like a lot of VCs. Do you believe that down rounds are acceptable in this climate?
It's really hard to say. I think you have some new funds that are not investing in the best business, that makes it difficult. They are either investing in the best business or trying to fund the best business. Some of the entrepreneurs are feeling some pressure from some of the VCs.
Some companies don't need to take a cold shower with regards to valuation. Many companies are doing well in this environment.
Fast, an online login and checkout company, shut down earlier this year, and Index had to remove the company from its website. In retrospect, what more could Index have done to help? Your team probably had a postmortem on this one.
I didn't know that it was taken down from our website. I think it is likely there but harder to find. Companies that are doing well are promoted.
We tried to learn from it and digest it as a firm. It was difficult to evaluate talent and understand the people we were working with when we were in COVID. I am sure that my partners who were responsible for the company would have been able to spend more time and understand the entrepreneurial culture of the company if we had been able to spend more time with them.
We will have more from this interview in a few weeks.
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