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Last week my colleague Alia Alamarhodai wrote an exclusive article about plans to shut down defense and space technology venture Countdown Capital. In a letter to LPs, Countdown founder Jay Malik said the increasing competition in the industrial technology sector makes it difficult for smaller ventures to secure the significant amount of equity they need for startups. He said he no longer had confidence. Generate valuable profits.
As Aria wrote, that letter was like pouring cold water in your face. While downsizing a fund is a mature move, after all, GPs have a fiduciary responsibility to their LPs, the news that most micro-funds won’t survive outside of a bull market like 2021 is shocking in the venture capital world. It doesn’t help the ever increasing recklessness. .
But Countdown’s closure is likely to be an isolated event rather than an indication of what’s to come for microfunds this year.
When I spoke to Malik about the launch of this very fund in 2022, he said Countdown was established to fill a void in the defense sector. His logic is that big companies like Andreessen Horowitz and Lux are interested in supporting startups past the Series A stage, but they want to write the first check that startups need to get started. It was said that there were no people.
That has changed today, which is not surprising given the vast amount of capital required to get a defense startup off the ground. The cost he is not comparable to categories like SaaS.
This is also why Countdown’s fortunes do not bode cloudy for other categories of microfunds. For example, microfund managers in the AI space say that despite how active AI has become over the past year, the increased interest hasn’t actually led to a significant change in the pricing of the pre-seed stages in which funds invest. Told. So even as the category heats up, the $500,000 check has the potential to gain solid meaningful ownership at the pre-seed stage, they said.
Size matters in VC
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