1Mby1M Virtual Accelerator Investor Forum: With Corey Schmid of Seven Peaks Ventures (Part 4)

Sramana Mitra: Is there anything else that I should have asked you?

Corey Schmid: I’m curious to hear your thoughts a bit on the correction going on in the market now.

Sramana Mitra: It’s way overdue.

Corey Schmid: It is way overdue. It’s not a crash. I think it’s a correction, and it’s happening. One thing that we tend to want to lean in is how do you weather that storm. If we’re investing at seed or even Series A, how do these companies ensure that they’re able to get to that next stage? Funding is moving upstream.   

Sramana Mitra: The big issue however is not so much the correction in the market. The real issue is that there is a huge amount of capital accumulation that has happened in the seed stage. By that, I mean the pre-seed, seed, post-seed, pre-Series A, and even the small Series A. Then the significant Series A and B are so-so.

Then there’s a huge amount of money in the late stages where big funds have raised mega funds and they want to put in huge amounts of money into each deal. They don’t want to do $5 million deals. They want to do $50 million deals. That creates a very odd dynamic in the whole industry.

Corey Schmid: It’s creating this gap. They have to be smart about how they’re raising their Series A and be smart about how you’re spending that money. There’s more money in the seed stage but it’s not filtering down to the same amount, and it’s not as easy to raise at the A. What I found is you have to hit those milestones.

Sramana Mitra: It’s impossible to raise Series A these days without metrics and milestones.

Corey Schmid: I don’t mean to sound draconian but correction cleans up, what may be, an overabundance of investing in every idea that comes across.

Sramana Mitra: I happen to be a very big believer in bootstrapping whether it’s bootstrapping with your own money or with angel money. If you can get to real numbers without guzzling outside capital, that is a much healthier scenario. You are in a much more controlling and powerful position. You will attract the right investors to the table.

Corey Schmid: I think you’re spot on. The thing I like about what I see in regional markets is, sometimes you get more senior CEOs who have lived through that and just by the nature of the lack of capital, they have to do that. We get an opportunity to see them in some of the other companies at that point where they have found that product-market fit and they have customers that are demanding more.

Sramana Mitra: That’s what we advise our companies to pay attention to – bootstrap their way to sustainability as much as possible.

Corey Schmid: That’s right. It’s a good time to be in investing. Quite honestly, we’re protected a little bit more in the earlier stage. If these companies can be smart and use their money well, that’s the best advice that can be given.

Sramana Mitra: It was a wonderful conversation. Thank you.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Corey Schmid of Seven Peaks Ventures
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