Tonight we had the opportunity at Flashpoint to do a Q&A with one of the general partners from Sigma Partners. He fielded a variety of questions, primarily around venture capital, and provided candid answers. Here are a few notes from the talk:
- A typical Series A for them involves co-leading with another investor, buying 50% of the company, and carving out 25% for founders and 25% for future employees (e.g. $6 million invested on $6 million pre-money valuation)
- It took a week to raise their previous fund by calling on their existing LPs whereas their next fund will take significantly longer due to contractions in the market
- Many funds from 2007 haven’t returned any money at all to LPs resulting in even more challenges for VCs to raise new funds with the expectation that many VCs will go out of business in the next five years
Flashpoint is a great accelerator and I enjoyed listening to the Q&A with Sigma Partners.
What else? What other thoughts do you have on VCs and the fundraising market?