Within 48 hours, the startup world experienced two important events: Y Combinator’s largest Demo day ever, and the early investor flight to Dispo, an image sharing app. Both incidents taught us much about the importance and difficulty of due diligence in our current world, even though they are apparently unrelated.
As a background, early investors in Dispo distanced themselves from the start-up after a central investigation that revealed allegations about the co-creator and popular YouTuber, David Dobrik. Per the venture capitalists I spoke to, the transition to “breaking all ties” with Dispo was unique.
So what’s the impact here? There is a cheeky awakening to the importance of due diligence. On equity, I argued that Dispo News should push venture capitalists to do a more thorough job of controlling founders in the future. Dobrik’s dubious “pranks” were always a search away.
Even if one person does not represent an entire company (the Dispo team seems good, for what it’s worth), investors still left because of what their money represented. Fast forward, this event can have a relaxing effect on VCs working with celebrities or influencers. The responsibility seems just too great to support a startup led by potentially problematic individuals, so stay away or do your homework.
You would think. Ironically, 24 hours after Dispo investors withdrew from the start-up, YC Demo Day was one of this year’s start-up events. My colleague joked that the founders don’t just have to figure out how to get into Y Combinator anymore – they have to figure out how to stand out in the batch when they get there. The comment, made in jest, emphasized a truth about the current start-up funding environment: too noisy to handle.
Noise turned into free investment. An investor received an email from a batch company that essentially said, “thank you for your interest, if you want to invest here, it’s a document, no due diligence required.” The startup was valued at $ 100 million. Another investor I spoke to said that a company requested an investment without meeting VC.
Although these are just anecdotes, I think these pitches are illustrative of the link between the importance of due diligence and the hype cycle we are in. As Dispo showed us, it is positive to vet your future partner, get back on track and continue the right ones. the money. As YC Demo Day showed us, it’s hard to go slow when you can go fast. If money is in front of you, how can you say no?
I do not have a solution for the link, and in the end the change comes down to the ethos of individual investors and founders. But at least this week of extremes is giving a dose of reality to startup mania right now.
In the rest of this newsletter, we will focus on a five-month unicorn, and Plaid’s harmony at Discord’s expense. As always, you can find me on Twitter @nmasc_.
‘From launch to unicorn in 5 months’
Pacaso, a startup that wants to make it easier for people to have second homes, has reached a $ 1 billion valuation in just five months. The start-up mainly wants to reinvent timeshare, with the goal of “gathering a small group of co-owners to buy a share of a detached house” with access throughout the year, reports Mary Ann Azevedo.
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Here’s what you need to know: The Proptech unicorns are here to stay. My colleague Eric Eldon wrote about real estate trends, from cohabitation to a boom in suburban style.
Outputs, and Plaids lack of it
Even a giant company wants to remind you that society means something. Microsoft is reportedly trying to pick up Discord, in contract talks that will value the latter to 10 billion dollars. The start-up was last valued at $ 7 billion.
Here’s what you need to know: The deal price feels a bit cheap, the Equity trio argues. When you consider the fact that Plaid can be valued at almost double or triple what it would be sold to Visa, one has to wonder if Discord has an antitrust discount that limits prices.
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Throughout the week
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