Venture Capital in Crypto Winter (Video) – Financial Services

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Investors remain optimistic about the prospects for the fintech sector, and companies at various stages of development continue to attract attention.

Watch partner Tim Curry and industry thought leaders who participated in Jones Day’s inaugural FinAccelerate program talk about investments and strategic opportunities in 2023.

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A full transcript follows:

Matt Enriquez: The buzz is finding solutions, finding use cases that make it easier for people to do business, whether it’s kind of enterprise-focused or retail-focused. Everyone is excited about FinTech, excited about blockchain, excited about crypto because of the opportunities to make things easier, more efficient, and more profitable for people.

Tim Curry: The venture capital market is still very healthy. One of the big takeaways that we’ve used is that it’s still on the rise every year other than 2021. And 2021 was a banner year for venture capital funding, including in the FinTech space. And while 2022, especially the second half of 2022, is down from those highs, it’s still above 2020, still above 2019. So while it might not be the best environment for funding we’ve ever seen, it’s still top two, top three, and it’s a really healthy environment.

Elliot Han: There are trades happening, they’re probably happening at much lower valuations, and the pace is significantly slower. There is also a lot more due diligence. It allows companies to really focus on their product, and secondly, for investors, it gives them the opportunity right now to actually deal with companies that are creating real products or services. Many of the quick and fast earners have been weeded out as more time is spent checking what they are doing.

Tim Curry: Where you see the most pressure, especially in terms of valuations, are unicorn monster companies, companies that have been valued at multi-billion dollars. I see very little pressure on the other end of the market, real startups that just closed their first two rounds of funding because their exit events are four, five, six, or seven years away and nobody knows what’s going on. economy or what the stock market will look like at that time, and therefore they are still able to sell on the promise and later liquidity dates.

Christopher Britton: And people have time to delay until they have a bit more visibility on where things are going and what’s going to happen with the coming recession. I personally think the recession is going to be big, but short and sharp because of that amount of capital, and so in 9 to 12, maybe 15 months, we’re going to see a lot of capital coming back into the sector, especially at an advanced stage, and we hope to be back on track.

Stephen MacKenzie: What we’re seeing are companies that raised a lot of money in ’21 and early ’22, for example, that they’re sitting on the sidelines. They have two, three, four years of track left, heads down to build products. So this is going to be the interesting space to see what they’re building? When do they reappear in the next two, three years? It’s going to be the exciting time.

Elliot Han: We think things are going to get better, and that’s why we’re doubling down during this period where the actual transactional work has been quiet, but it’s been very busy with the conversations we’re having, building our relationships, lay the groundwork, not only with crypto companies or blockchain companies that are in the space, but also with many institutional investors.

Tim Curry: The big change I’ve seen is that it used to be that things like SAFEs and convertible notes were what you did before you made your first round of prizes or your first round of favorite stocks. Now, we get a lot of these questions for companies that have done one, two or three rounds of awards and they’re just not sure if they want to do another round of awards right now in this environment. They want to breathe a little, take a little time, see what is happening in their industry, see what is happening on the stock market. If you can get out in February or March or maybe later next year, and then you can get there by doing a SAFE or convertible note, that’s a great space saver to help you get over that hump , maybe through a development stage, maybe to revenue, maybe to a different product launch, and then you’ll be much more attractive when you make your next price round.

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