Friday Letter: VCs may take a summer break, but there is no slowing down

VC is not entirely insulated from the impact of the pandemic and economic slowdown, but it sure feels like it really is business as usual.

In the last few years of the current economic cycle, venture capital has grown, some would say it’s been “an explosive growth,” as fundraising has risen to record levels, valuations soared, megarounds dominate and oveall deal activity remains unabated.

So I figured that general VC activity might reset or at least pause in the wake of the covid-19 pandemic and an accompanying economic slowdown. Silly me.

VC seems to be on a normal pace this year. Meaning, it might look a lot like last year. Meaning, we’re possibly bound for another record year in certain categories.

Several VCs have described it to me as feeling like they’re insulated or separate from the calamity that has befallen most everywhere else.

Alex Niehenke of Scale Venture Partners put it to me best when we met over a Zoom call in June. He said that covid-19, rising unemployment, small businesses suffering and increasing racial tensions are all serious issues. “But I feel like I’m in my own little bubble.”

I’ve heard similar comments from half a dozen other investors in recent weeks.

Certainly, there is a lot of change taking place. How VCs meet founders and write checks is different. But it feels like the VC community is totally acting normal.

Niehenke adds that valuations have held steady, and he’s excited about the digital transformation taking place and the opportunities he’s looking at. He also mentioned telemedicine and insurtech as a couple of areas he’s interested in.

I met with Venky Ganesan of Menlo Ventures over Zoom this week and he similarly feels that VC is as robust as ever. He described it as going from a nuclear winter when the lockdowns began in March to a glorious new spring now. He points to the private markets and how they are better now than in February, and “valuations are getting higher.”

I’m not sure what this all means for the short and long-term outlook for VC. So let me know what you think. Do you have a positive or robust outlook for the rest of this year and in 2021? Or do you think the good times will soon catch up to VC, given the ongoing concerns over the coronavirus and a weakened economy?

I would love to hear from you. You can reach me at agoldfisher@buyoutsinsider.com and I’m open to voice and video calls.