Yes, valuations are down for some, but when it comes to the “perfect company,” venture capitalists are still fighting to close the deal.
That’s the take of Jason Caplain, co-founder of Durham’s Bull City Venture Partners, among the panelists for the Coffee with Virginia Venture Partners event Friday.
“We’ve been doing this for like 23 years,” Caplain said. “We’ve seen this movie before.”
When the IPO market freezes, it trickles down to venture capital, where fewer checks are being written and “there’s a lot of cash on the sidelines,” he said.
“For our region … you see valuations for the most part way down, with some exceptions,” Caplain said. “The exceptions are companies that are totally de-risked. … If you’re a perfect deal, there’s so much competition for that perfect deal that price is being driven up and still at record levels.”
Exits are still happening. He points to the recent exit of Playmetrics, a Morrisville-based youth sports platform.
“The metrics of the business were incredible,” he said.
While the panelists all said artificial intelligence is a buzzword in pitches, it doesn’t necessarily create that perfect deal, Caplain said. “We just see a lot of hype around it, that concerns us,” Caplain said. “It reminds me of when everyone was talking about crypto.”
Caplain said he cautions founders against focusing on AI “because it’s a sexy thing to do and it may help raise capital.”
“It’s, what is the problem trying to be solved?” Caplain said.
But for those getting it right, AI could mean major returns, said Phil Bronner of D.C.-based Ardent Venture Partners.
“We’ve all seen ChatGPT, which is offered by OpenAI,” he said. “That model is very powerful, so out of the gate, it can do quite a lot. So you as a founder can put sort of a thin wrapper on top of that and solve some interesting problems … [but] it doesn’t create a lot of differentiation.”
Bull City Venture Partners hosts an event called Founders First on Dec. 6 at the Carolina Theatre in Durham. The event starts at 12:45 p.m. and, according to Bull City, will bring in more than 700 investors, entrepreneurs and others.
