Gesprekken in augustus: krimpende pre-seed-rondes, waarom oprichters niet aardig zouden moeten spelen en pay-to-play-bepalingen

Down rounds are down

**Catch up quick:**The percentage of down rounds shrunk during Q2, from 33% of deals in Q1 2024 to 22% in Q2 2024. However, nearly 30% of VC deals were still flat or down rounds. 

Is it good news?Fewer down rounds are a positive sign for founders hoping to raise capital, but the number still remains high compared to pre-2023 levels—and with over a fifth of deals still down rounds, it remains a slow fundraising landscape.

**A potential trend?**Q2 2024 is the first time since mid-2023 that up rounds have made up 70% of deals for a quarter. Will it continue? 

Our interpretation:Investors are showing more confidence, however, the drop in deals valued over $100 million (from 35% to 28%) signals a continued conservative approach.

What makes a succesful founder?

**Catch up quick:**Numbers guy, Nate Silver dove into the personalities VCs take big swings on in Go big or go home:VCs don't care if you're a nice person. They want founders who take massive risks.

**What they're saying:**VCs are increasingly seeking founders willing to take massive risks, often at the expense of being "nice" or well-adjusted. As Josh Wolfe, of Lux Capital, puts it: “chips on shoulders put chips in pockets.”

**The intrigue:**Despite decreased social mobility, the number of self-made billionaires is increasing. VCs are pouring money into these controversial figures’ business, as seen with A16z's investment in Adam Neumann's new venture, Flow. 

**The other side:**This strategy might overlook talented individuals who don't fit the "angry outsider" mold. And the “competitive fire” of adversity can be channeled in both constructive and self-destructive ways, so VCs have to be careful they don’t get burnt. 

Understanding venture capital pay-to-play

**Catch up quick:**Investors are inserting a record number in pay-to-play provisions (8.7% of all deals) into term sheets. While traditionally in for later rounds, an increasing percentage are series A.

**What’s pay-to-play?**Pay-to-play provisions require existing founders, shareholders, and investors to participate in new funding rounds or face significant dilution of their shares. 

**Why it matters:**Pay-to-play terms are designed to benefit new investors at the expense of existing shareholders who don't want to invest additional capital. From a founder’s perspective, it’s sacrificing the risk you and early stage investors took in exchange for more capital to grow.

**The big picture:**The huge rise in pay-to-play is a stark reminder that VCs are facing performance pressure, too, in a tight market.

A generational AI-adoption gap

**Catch up quick:**An American Express survey, which polled more than 1,100 small business “financial decision-makers,” found a massive generational rift in AI adoption. 

**By the numbers:**Almost 60% of millennial and Gen Z respondents said their businesses were already using AI compared to 34% of Gen X and baby boomer respondents. 

**Our hot take:**Younger, more tech-savvy entrepreneurs will gain a significant edge in areas like customer data analysis, automation, and content creation, potentially outpacing their older counterparts in efficiency and market responsiveness.

**Thought bubble:**Is this generational AI gap a temporary phenomenon that will eventually close as AI becomes more mainstream, or are we witnessing the beginning of a long-term divide in how businesses operate and compete?

Pre-seed rounds are shrinking 

**What the data says:**~73% of pre-priced funding events in Q2 were less than $1 million, the most in over three years. 

**The concern:**Less pre-seed funding increases the pressure on startups to do more with less money while still demonstrating enough business traction to capture the interest of later-stage seed and series A investors.

**The upshot:**Smaller rounds lead to a more competitive early stage startup ecosystem where only the strongest survive (get funded). So if you’ve got a winning startup, your path to funding may be less competitive. 

A decline in new business formation

**A stat worth watching:**The US saw a 2.1% month-to-month decline in business formation through July. New business applications in July totaled just 420,802, reflecting the cautious economic environment. 

**What it indicates:**The decrease in business applications suggests a slowdown in initial entrepreneurial interest, which dovetails with lower pre-seed money and a challenging all-around fundraising market.

**The upshot:**For established startups, this trend may deter disruptive competitors from entering the market or gaining a foothold. However, the Census Bureau doesn’t expect the trend to continue, projecting a 0.2% decrease in business formations in the next 4 quarters.