Final week, my colleague Aria Alamalhodaei wrote an unique on protection and house tech enterprise agency Countdown Capital’s plan to shut down. Jai Malik, the founding father of Countdown, mentioned in a letter to his LPs that attributable to how aggressive the economic tech sector has turn out to be, he’s not assured about smaller enterprise corporations’ potential to safe the significant stakes in startups they’d want to provide worthwhile returns.
As Aria wrote, the letter reads like a chilly glass of water to the face. Whereas winding down the fund is a mature transfer — GPs have a fiduciary obligation to their LPs, in spite of everything — the information doesn’t assist the rising scuttlebutt within the VC world that the majority micro funds can’t survive exterior of a bull market like 2021’s.
However Countdown shutting down is probably going extra of an remoted occasion than an indication of what’s to return for micro funds this yr.
After I spoke with Malik again in 2022 in regards to the launch of this very fund, he mentioned that Countdown was created to fill a void within the protection sector. His logic was that whereas bigger corporations like Andreessen Horowitz and Lux have been eager about backing startups on the Collection A stage and later, nobody needed to put in writing the primary small checks startups have to get going.
That’s modified immediately, and it isn’t stunning given the sheer quantity of capital it takes to get protection startups off the bottom; the prices are incomparable to a class like SaaS.
That is additionally why Countdown’s destiny doesn’t portend cloudy skies for micro funds in different classes. A micro fund supervisor within the AI house, for instance, instructed me that regardless of how lively AI has gotten during the last yr, the elevated curiosity really hasn’t made a fabric distinction in pricing on the pre-seed stage the place their fund invests. So regardless of the class heating up, a $500,000 verify can nonetheless web a agency significant possession on the pre-seed stage, they mentioned.
In VC, dimension does matter
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