The summer season for venture firm parties kicked off last Thursday, as Foundation Capital held its annual summer celebration at its Menlo Park, California-based estate.
I have two more VC-related events to attend in the coming month, but I’m open to more invitations. (Reach me at email@example.com.)
As for Foundation’s summer bash, for the second year in a row it was coincidentally held on the same night that the Warriors played the opening round of the NBA finals. To make sure no one missed out on the basketball, Foundation had six large TVs showing the game. I have mixed feelings about tech parties and venture firm gatherings that insist they must have a TV or two showing whatever game airs at the same time. Either watch sports or mingle at the party.
But I decided the TV area was a perfect spot to meet people. So I got some vegan pizza made by the family of Foundation GP Paul Holland, whose daughter runs a flourishing pizza truck business. And then I planted myself near the TVs, with food and drink in hand, and met VCs and entrepreneurs who walked past or came over to get a peek at the score of the game.
Here’s what I learned, besides the fact that the Warriors are the superior team:
People are concerned about the pace of deals
Several people asked me what I thought about the current state of venture and how much they’re investing.
Can you say “slowdown” because that’s what we’re experiencing?
Of course, it all depends on whose numbers you follow. The Q1 MoneyTree numbers, put together by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters, found that Q1 investments rose just slightly from Q4, when dollars distributed added up to about $12 billion. Deal count was down 5 percent from the quarter before to 969.
As you may recall, Dow Jones VentureSource similarly said investments in Q1 plunged 25 percent, as VCs invested just $13.9 billion in U.S. deals during the period, down from $18.6 billion in the fourth quarter.
I took a look at the preliminary Q2 numbers from Thomson Reuters and it wasn’t encouraging. We usually see deal-making pause a bit in the summer. But the preliminary Q2 numbers indicated only about 530 deals have taken place so far. In comparison, all of Q2 2015 saw 1,216 deals, so unless June catches fire, get ready to say “slowdown” a lot.
The total preliminary amount invested during the current quarter was a bit mixed, with VCs putting nearly $11.2 billion to work. But that includes the $3.5 billion Uber took in and the $1.3 billion Snapchat raised. Take those two mega-deals away, and VCs put just $6.4 billion to work in Q2. Even at $11.2 billion, the industry is likely going to fall short of the $17.1 billion that U.S.-based companies raised in the second quarter of 2015.
It will be interesting to parse the data some more as Q2 comes to a close to see how late-stage fairs in comparison to early-stage. Let me know if you have any initial thoughts. Most of the people I talked to at the Foundation party see good things happening in the late-stage, despite the pullback from hedge funds and mutual funds. It’s the Series A that concerns folks the most.
AI and VR are hot
Not to damper the mood of the party or the Warriors game 1 win, I also asked people about what tech trends are getting them excited.
Without a doubt, artificial intelligence and virtual reality win out. This coincides with a Fortune story from last week about how tech CEOs see the AI market exploding. I met a bot startup looking to raise capital. And one VC told me about one of her portfolio companies, which is also about to raise more funding and which uses machine-learning technology and humans to make sense of data.
Another VC talked me about virtual reality, and how he’s looking at ways to use it in the enterprise. We’re not there yet because VR devices are not that widespread. But like most VCs I meet, he is cautious about the current state of venture capital, and he’s optimistic about the innovative tech he’s seeing.
Now, let’s start planning that next Foundation Capital next year when hopefully the Warriors reach the finals again!
Photo of a tech worker with laptop and espresso © Anchiy/iStock