Galileo touched down in SF, NYC and London as part of our first 'world tour', meeting founders and investors around the world.

My favourite part was hosting our first Galileo meetups in each city – we put the call out and stellar people, Aussies in tech and founders who had already applied to Galileo, rocked up to say hello.

For Galileo we want to invest in the best emerging founders, wherever they may be, and this is just the start of us building our global community and network.

Who did you meet?

I met with the world's top venture investors from the largest funds, some with more than $10b under management such as A16Z and Insight, and a few up-and-coming funds such as 20VC across US, Europe and Singapore.

What is the vibe?

Venture investors are generally relieved that we’ve gone back to some level of normality with valuations coming down from 2021. Some investors were investing at a speed that they had never experienced before, such as 2+ new investments per week in 2021!

All that has changed in 2022 with all investors I spoke to slowing down in deploying new money as we ‘wait and see’ what happens in public markets and the wider economy. Some of the investors were now making at most 1 new investment per month if not less. 

America is feeling inflation far more than Australia. Cost of living is up, rents have doubled in some cities, everyday goods and groceries are up, for example it costs A$10 for a decent coffee in SF. The question I have is whether this inflation hit will come to Australia by the end of the year or will we be somewhat sheltered from it like the GFC? 

For their portfolios what this means is VC’s are telling founders not to raise right now unless they have to or if they ‘don't need the money’. For example, if you have a strong business model that is growing and you don’t really need the money, a lot of investors will want to give you money. If you’ve raised Series A+ and have high burn, such as a big headcount, and losing money with no path to profitability then you need to slash burn, and probably let people go to extend your runway as you are unlikely to get favourable terms. The common feedback I'm hearing in the US is to have runway for 2 up to 5 years!

To put some numbers on this, over 65,00 tech workers lost their job in 2022, mostly from larger growth businesses that grew too fast last year. Consumer and creator startups are probably feeling it more than B2B SaaS, as businesses are still buying and purchasing software, with hundreds of layoffs and far less funding than in 2021 in the US. But even B2B companies are feeling the valuation crunch in public markets affecting their next round ambitions. Just look at Canva’s recent write-down by all their investors.

What does this mean for (Aussie) founders? 

VCs are still investing. If you’re in the early stages and have a compelling business, strong technology and competitive advantage and a potentially strong business model you’ll still raise money. But the terms won't be as good as last year. 

The cynic might say that a lot of ‘VC doomspeak’ is self-serving as we get to set the valuations, not founders. On the other hand if you can never get the 100x valuation multiple in public markets ever again, then a lot of our models for B2B SaaS break down as they become a ‘more normal’ style of business model. Perhaps public markets no longer see them as the unicorns they once were?

This also means some VCs are hunting for new opportunities in new markets where the tech edge might create monster new businesses and win out over traditional incumbents. B2B SaaS is not quite as hot as it used to be (but still very appealing). Deep-tech, hardware+software products, and AI are all still hot and getting hotter.

What did you hear?

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1. VCs investing globally is the new norm. No longer are VCs as defined by country borders with investors hunting for opportunities wherever they may lie. 
2. Overheard: ‘I love Aussie businesses, the founders are often more prepared and diligent, and more capital efficient than US companies’
3. VC is becoming BIG business with 400+ staff, multiple strategies and services, global reach 
4. OH: “Bridge rounds everywhere!”...or sometimes called ‘seed-extension’
5. OH: “No more growth rounds!”

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