Welcome to the final situation of The Alternate! With TechCrunch+ sunsetting this month, The Alternate column and its publication are additionally coming to an finish. Thanks for studying, emailing, tweeting, and hanging out with us for thus a few years.
P.S. A particular thanks from myself to Anna, who was nothing in need of an excellent lead creator for this article since taking it over. She deserves countless credit score for her work on the e-mail.
Right this moment on The Alternate, we’re digging into continuation funds, counting down via a few of our favourite historic Alternate entries, and discussing what we’re excited to report on for the remainder of the yr! — Alex
Continuation funds
Continuation appeared like an apt theme from our perspective. It is usually a really topical one: “The greatest source of liquidity now is going to be continuation funds,” VC Roger Ehrenberg predicted in a current episode of the 20VC podcast.
In case you aren’t accustomed to the time period, let’s flip to the FT for a definition:
Continuation funds, that are frequent in personal fairness [PE] however uncommon in enterprise capital, are a secondary funding automobile that permits them to “reset the clock” for a number of years on some property in previous funds by promoting them to a brand new automobile that additionally they management. This helps a VC fund’s backers, often known as “limited partners,” to roll over their funding or exit.
When you’ve got been following the previous few months of enterprise capital exercise, the “why now?” is straightforward to reply. Because the StepStone Ventures staff advised our colleague Becca Szkutak in her December 2023 investor survey: “With portfolios awash in unrealized value, fewer immediate exit opportunities, and longer hold periods on the horizon, GPs are beginning to get creative in order to generate liquidity.”
In apply, a continuation fund sees new buyers spend money on present portfolios, however “it reflects today’s valuations,” Ehrenberg stated. This repricing and the potential battle of curiosity round it sound difficult in principle, however Ehrenberg doesn’t suppose so. “You have net new investors looking at a portfolio, so they’re the price setter, not the existing manager.”
It’s not simply very massive funds like Perception Companions and Lightspeed that may discover this selection, both. “It’s a viable strategy for a decent swath of the venture industry,” Ehrenberg advised 20VC host Harry Stebbings.
Whether or not it’s continuation funds, strip gross sales or secondaries, there’s a transparent impetus for VC to search for options to its typically ill-timed cycles, as we had already seen with the rise of everlasting capital and publicly listed funds. A standard thread in immediately’s financial system is that tasks and corporations aren’t given the time they should absolutely succeed, so even when it supposes a brief low cost, it’s good to listen to that web buyers are ready to offer portfolios extra time to shine.
RIP The Alternate
The Alternate started its life in late 2019, earlier than it even had a reputation. It shortly turned a day by day column in the course of the week, and later this weekend publication. For these of you interested by the historic quirks of constructing media merchandise, The Alternate was a TechCrunch+ product on the location, however its weekend situation was despatched out free of charge as an e mail. Why was that the case? As a result of on the time we didn’t have the inner tech to ship out subscriber-only emails!
Over the lifetime of The Alternate on TechCrunch+ we shipped greater than 1,000 columns and newsletters, making it the biggest and — if we could — most impactful single challenge for driving subscribers to what was our paid product. The Alternate and TC+ had been inseparable, so it is sensible that they’re being retired collectively. Nonetheless, as with every challenge that blended each work and private ardour, we’ll miss it.
From its begin, the $100 million ARR membership and the early pandemic days replete with inventory market collapses and worry, The Alternate was round to chronicle the 2020–2022 startup growth, and its later conclusion. We went from tallying monster rounds and a blizzard of IPOs to watching enterprise capital dry up and startup exits develop into rarer than gold. It’s been wild.
Anna took over The Alternate’s publication in early 2022, across the time that Alex turned editor-in-chief of TechCrunch+. The columns continued to be a bunch challenge, however we needed to divide and conquer to maintain our output at full tilt.
Beneath is an inventory of a few of our favourite Alternate entries. In fact, we couldn’t return via all the archive — which you could find right here — so take into account this a partial obtain of the hits:
- The $100M ARR Membership (December 2019). The beginning of a long-running collection wanting into pre-IPO startups. A bunch of the entrants like Monday.com later went public.
- Why is everybody making OKR software program? (January 2020). Our first “startup cluster” model submit, digging into what we discovered to be an unusually busy phase of upstart tech firm effort.
- API startups are so sizzling proper now (Could 2020). API startups would keep sizzling for years to come back, leaning on the mannequin that Twilio helped pioneer. It’s fascinating to suppose again to Could of 2020, when there was nonetheless ample worry out there. Little did we all know what was coming subsequent.
- Don’t hate on low-code and no-code (Could 2020). The low, no-code debates have quieted considerably as the tactic of making software program that non-developers manipulate and bend to their very own will has develop into extra desk stakes than controversial product alternative. Nonetheless, it wasn’t all the time that approach.
- Startups have by no means had it so good (July 2021). By mid-2021, it was clear that the marketplace for startup shares was in a brand new period, with buyers piling money into each software program firm that moved.
- The way to make the maths work for immediately’s sky-high startup valuations (July 2021). Underpinning the large funding growth that we famous earlier than was an expectation that software program development was going to be quicker, and last more than beforehand anticipated. That wound up not being true.
- What may cease the startup growth? (September 2021). We had been a little bit involved in later 2021 that the tempo of funding was not fully sustainable. The market would keep sizzling for some time longer, however our notes about potential disruptors to the startup growth wound up being fairly correct. Rates of interest actually did change the sport.
- Extra LP transparency is overdue (January 2022). VCs will inform you what they spend money on however are sometimes extra tight-lipped about their very own backers. We argued that startup founders are due a bit extra info on the place their capital is in the end coming from.
- Why you shouldn’t ignore Europe’s deep tech growth (February 2022). One fascinating narrative forming in current quarters is Europe’s enterprise and startup resilience in the course of the current slowdown in private-market capital funding. We stated that European deep tech was poised to do effectively. And, effectively, we had been proper.
- Sure, it’s develop into more durable for startups to boost funding (July 2022). By mid-2022, it was clear that the growth occasions had been over, regardless of 2021’s exuberance stretching into early 2022.
- The rise of platform engineering, a possibility for startups (December 2022). As a substitute of investing in additional builders, why not spend to assist them be extra productive? Later cuts to developer payrolls made it clear that the period of mass-hiring was behind us, making the thesis right here all of the extra pertinent.
- The mirage of dry powder (January 2023). After a lackluster finish to 2022, the optimistic take was that VCs had numerous dry powder — capital to place to work — that they had been sitting on. Absolutely these funds would shake free and convey again the nice occasions? Anna argued that among the enterprise capital theoretically sitting on the sidelines was much less “real” than it appeared.
- A core plank of the SaaS financial mannequin is beneath excessive stress (August 2023). A method that software program firms develop is by promoting extra of their service to clients over time. Nevertheless, by final August it was clear that web retention was struggling, which means that a number of natural development that startups might need as soon as counted on was evaporating.
- Will the ability of information within the Al period go away startups at a drawback? (August 2023). If AI is knowledge delivered to life, then do the businesses with probably the most knowledge win the day? And if that’s the case, the place does that go away startups?
- Rainbow or storm? (September 2023). After discussing bettering fintech outcomes, Anna dug into using AI to battle fraud. It was an fascinating turnabout of the standard AI and fraud narrative, which includes AI bolstering fraudulent exercise as a substitute of limiting it.
- Klarna’s monetary glow-up is my favourite story in tech proper now (November 2023). After seeing its valuation slashed, Klarna didn’t decelerate and as a substitute stored rising and bettering its monetary efficiency. Alex gave them an enormous thumbs-up for progress made.
- WeWork’s chapter is proof that its core enterprise by no means really labored (November 2023). What extra can we are saying about WeWork aside from that it was a bizarre leasing arbitrage play that by no means had an excellent core enterprise.
- Why I’m modestly crypto-bullish in 2024 (January 2024). Forward of spot bitcoin ETFs, this column indicated that this yr could possibly be a fecund one for crypto as an entire. To date, so appropriate.
- Sure, the tech layoff surge you’re feeling is actual (January 2024). And to shut out a few of our favourite, or most memorable entries, the current layoff wave has been something however a mirage. Sadly.
We’re not accomplished
Whereas The Alternate is shuttering, we nonetheless have large plans for protection this yr. Fortunately we’re each nonetheless at TechCrunch, so you might be removed from rid of us. Alex desires to work on unicorn well being, the state of debt financing in 2024, and the way AI will discover buy on the OS layer. Anna is interested by AI hubs past San Francisco, GP stakes investing and whichever S-1 we will get our fingers on.
Thanks once more for studying The Alternate’s submit and publication. We’re so very grateful to have gotten to spend a lot time with you on this challenge. Onward and upward!