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Archangel Gossip Session #3 Notes

By
Andrew Cicutto
September 9, 2022

Archangel had the pleasure of hosting our 3rd Angel Gossip session today. A big thank you to everyone who attended and to those that shared their insights on a handful of the key issues impacting the sector at the moment. For those who missed out we are sharing our notes from the call below.

Conversation Starters

  • Valuation is down, is this a good time to angel invest?
  • Layoff everywhere, any insights?
  • Key observations across your portfolio in these uncertain times.
  • Should we be buying Mosman properties instead?
  • Free style open mic

Call Notes

  • Valuation is down, is this a good time to angel invest?
  • Starting to see a trend of founders going from trying to raise and full time build to bootstrapping as a side hustle - withdrawal of talent is a negative - increases time to market but also potentially impacts big vision thinking/action 
  • Raising process is taking a lot longer - not unusual to see 2-3 months plus as VCs increase the level of due diligence - more so in the US than Europe and Aus 
  • Angels are pulling back - partially a function of difficulty filling full rounds. 
  • Starting to see milestone based tranches in early stage raises - ensure founders and investors are aligned however there are some downsides and makes the deal much more complicated
  • IPO market has slowed and this is beginning to trickle all the way down from growth/pre IPO funds into the venture market. Interest rates stabilising or a high profile local success story could be be the catalysts to get the market moving again 
  • Returns should always be considered relative to the risk/return of other asset classes - emerging cloud index has moved from 24x ->8x revenues … If you can buy an established successful business growing 30-50% yoy at 8x what is the right price/multiple for riskier early stage ventures?

  • Layoff everywhere, any insights?
  • Most of the layoffs are being absorbed so talent is still very tight - no downward pressure on salaries to date. Some are being absorbed by the bigger listed companies, in particular the banking sector seems to be sucking up a lot of tech talent. Potential policy changes to open up migration could have an impact on the employment market. 
  • Trend up in ESOP covered roles: 30% of all roles 2 year ago, 49% last year and expect 65-70% this year. Hard to say how this will impact the allocation pool for ESOPs. Valuations get questioned more in interviews as candidate sentiment on ESOPS has weakened as valuations have pulled back.
  • Some cases of founders not cutting deep enough in the first round of redundancies and potentially having to cut further in the near term which creates morale problems in those companies
  • Similarly VCs themselves seem to have slowed/stopped hiring investors

  • Key observations across your portfolio in these uncertain times.
  • Valuations are down - there are some predatory terms coming back mainly at the later stage via growth funds - longer term this may disincentivise founders 
  • More bridging rounds designed to give the company more time to reach a value inflection point
  • Variability in how founders have responded to the downturn - many have been proactive but some have been in denial about its impact on their business and its prospects which is now causing the pain to compound as they return to the funding market

If it's of interest you can view our notes from session #1 and session #2.

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