Every startup has AI in their pitch deck and they should according to Forerunner Ventures' Eurie Kim

Consumer startups have taken a hit when it comes to venture funding. But according to Eurie Kim, partner at Forerunner Ventures and founding member of All Raise, consumer is where it’s at. The investor joined Mary Ann Azevedo on Equity to talk through the intricacies of the space. She pointed out that last year, just 7% of seed capital went to consumer startups. Yet, research shows that consumer company performance has outpaced enterprise, Kim contends. Forerunner itself has backed the likes of Oura, Chime and Prose, among others. Kim also talked about the advantages of being dedicated investors in a space that has seen a number of tourist VCs drift in and out. In addition to discussing the state of consumer investing and what consumer investors are looking for, the venture capitalist shared her thoughts on the investment landscape as a whole, what’s up with IPOs and why every startup should have AI in their pitch deck. Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Monday, Wednesday and Friday. Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads, at @EquityPod. For the full episode transcript, for those who prefer reading over listening, check out our full archive of episodes over at Simplecast. Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products. Learn more about your ad choices. Visit megaphone.fm/adchoices

• 0:11Speaker 00

  Hello and welcome back to Equity TechCrunch's flagship podcast about the business of startups. I'm Maryann Azaveto and this is our Wednesday episode where we hone in on a trend in the startup world and dive deep. Today, we'll be talking about a number of topics, including the state of consumer investing, the IPO market, and what it may look like going forward this year, and the overall fundraising environment. Joining us for today's conversation is Forerunner Ventures' Partner and founding member of the Female Mentorship Collective, All Raise, Yuri Kim. Yuri, welcome to the show. We're so happy to have you.

• 0:45Speaker 01

  Hi, Maryann. Thanks for having me.

• 0:46Speaker 00

  Yeah, no, we're thrilled. You've got a really interesting background. I know that prior to becoming a VC, you were an operator. Is that right?

• 0:54Speaker 01

  Yes, for a short period of time, but I had the entrepreneurial bug a long time ago, before it was really this cool.

• 1:01Speaker 00

  Yeah, so you've been at Forerunner for 12 years now.

• 1:05Speaker 01

  12 years. My 12-year anniversary was in May, early May.

• 1:08Speaker 00

  Wow, congratulations. That's impressive. Yeah, it's a long time.

• 1:12Speaker 01

  Thank you.

• 1:12Speaker 00

  So, over the years, you've invested in lots of companies spanning a bunch of different industries, including health and wellness, travel, personal care. You're the Chairperson of the Board at Aura, is that right?

• 1:23Speaker 01

  That's correct.

• 1:24Speaker 00

  Okay, yeah, I have to just say, play a little bit of fangirl here, I have an Aura rating.

• 1:30Speaker 01

  Woo-hoo, get it.

• 1:32Speaker 00

  Yeah, we can maybe talk more about that later, but you also sit on the boards of a number of other companies called The Farmer's Dog, Curology, A-Frame, Junie, and then Forerunner itself has invested in a lot of interesting companies, including Chime, the neo-bank, which of course, me being in the fintech space, have followed, and then Proz, which is in the hair care space, and then Sunday, a D to C lawn care company that I think the founder was actually recently on our sister show, Found.

• 2:01Speaker 01

  Oh, awesome, Colter.

• 2:02Speaker 00

  Yeah.

• 2:03Speaker 01

  Great, yeah. I know, it's always fun to listen to the portfolio companies to sort of outside in because it's such a illustrious group of founders that we have so much respect for, but also such a wide range of problems that they're solving. And I think it goes to a lot of, you know, what our focus area is, which is just really thinking about how our lives are changing as consumers and ultimately what problems we need solved. And then the companies that we want to back solve those things, whether that's products or services, or whether that's enablement tools and SaaS businesses, the business model and the sort of functional area of the market matters less than the problem that we're trying to solve. So any of those, I could kind of go into what we were thinking about when we made those investments. But really, the highest level is to hopefully make our

• 2:47Speaker 01

  lives better for consumers.

• 2:49Speaker 00

  Yeah, I mean, I think consumer investing is an interesting topic right now because there are a lot of people that really believe in the consumer space right now. And then there are others, I think, that have kind of backed away from it. I saw a post, sorry, on X, I think your colleague Kirsten Green tweeted how last year VC firms distanced themselves from the category and just 7% of seed capital went to the consumer space.

• 3:14Speaker 01

  Yeah.

• 3:15Speaker 00

  How did that compare to the year before? Do you know?

• 3:18Speaker 01

  You know, I don't know the exact numbers, but it definitely felt like a hard pivot because there was a whole wave of so many investors, whether new firms or new partners who were super excited about putting money into the consumer landscape. Obviously, there was a very large run up during COVID and coming out of COVID with a lot of consumer dollars being at play. And then just a really hard crash when interest rates started rising. People were starting to pull back in general on investing. And then there was a flight towards what feels safer, you know, will SaaS feel safer, enterprise feel safer? And we as consumer investors have been through thick and thin, up and down. And so it's felt like, well, it's It's actually kind of nice because now with a little less attention, we could have the time that we always like to have to get to know our, you know,

• 4:03Speaker 01

  potential investments and really think through what the strategy is. And consumer is an easy place for people to kind of tourist in and out. And I think to stay long term and believe that ultimately the dollars that consumers control are what runs this world. And if you can find the right problems to solve and really think ahead about where consumers are prioritizing their time and their energy and really what they're going to spend their dollars on, I think it ends up being a lot more sticky than most would think. And Kirsten and my partner Jason had actually launched this large consumer survey, an annual report earlier this year. And really it was to demystify this negative sentiment around consumer. Like everyone loves to poo poo on it and just say everything is so much better with

• 4:48Speaker 01

  enterprise and so much better with SaaS businesses. But, you know, we wanted to look at that data and say, is it really that much better? And so they had analyzed, I think it was 12,000 startups that raised Series B funding since 2010, just to see like, where do that cohort of companies suss out consumer versus enterprise? And do they end up being better as the cohort of enterprise companies versus consumer? And ultimately, we actually found that the consumer bucket was more likely to go public after raising that Series B. They were more likely to, you know, go public after kind of reaching a certain threshold. Enterprise likes to call it the rule of 40, but ultimately, I think they found that over 60% of the consumer businesses had reached that rule of 40 versus only, I think

• 5:33Speaker 01

  it's 45% for enterprise.

• 5:35Speaker 00

  Hmm, that's interesting.

• 5:37Speaker 01

  They were just as likely to trade at 10x revenue and like trade higher at the time of IPO. And so we kind of went through all the metrics you would want to look at to say, well, is consumer actually systemically a worse place to invest? And ultimately, we found that it wasn't. And then, you know, I think there's a question of like, how do you define a consumer business? And some people still think like a consumer business is a company that sells shoes. And, you know, we see consumer really differently, really thinking about where the consumer pays for a product or service or an experience, where a business relies on customer engagement, whether it's B to B or B to C. But that's, you know, Shopify, it's Etsy, it's it's Skins, it's

• 6:16Speaker 00

  Yeah, it's a pretty broad.

• 6:17Speaker 01

  It's it's broad.

• 6:18Speaker 00

  Very broad.

• 6:18Speaker 01

  It's a firm.

• 6:19Speaker 00

  Yeah, I mean, that's a good point. And I I saw also that when Kirsten tweeted about the amount of money going into the space last year, she had mentioned or referenced that report and she noted that the consumer company performance did outpace enterprise, which it is kind of, I wouldn't say a surprise, but a little bit, because I do think consumer got kind of a bad rap over the past couple of years. One thing that I am curious about, as you mentioned, there are different definitions of consumer, but certainly it feels like there might be some spots that feel a little brighter than others and others that maybe have not quite fared as well. What would you say are kind of those bright or weaker spots within the space?

• 7:00Speaker 01

  I mean, if you're thinking more around the recent timeframe, we've certainly seen that maybe 10, you know, 12 years ago, when we first started investing, really, there was the earliest proliferation of social media behavior and engagement and access. And what that did was it opened up a distribution channel and new brands, new companies could come to market and reach their customers in a way that before, if you didn't have a store or you didn't have a big retailer partnership, you just couldn't get into the hands of the customer. And so there were, you know, direct to consumer brands that came up of all types, whether it was Warby Parker, which, you know, is now public, Dollar Shave Club, Bonobos, you know, a lot of our early investments were really in backing

• 7:44Speaker 01

  founders that were bringing new things to life through a distribution channel that allowed for marketing unlock and really kind of an exponential growth rate.

• 7:52Speaker 00

  Well, like

• 7:52Speaker 01

  Over the last couple of years.

• 7:54Speaker 00

  Sorry to interrupt you, but

• 7:55Speaker 01

  Yeah.

• 7:55Speaker 00

  What stands out to me to what you just pointed out are these are products, they're not new products, like

• 8:00Speaker 01

  Nope.

• 8:00Speaker 00

  prescription glasses have been around forever, razors have been around forever. It was just a different way of selling them, right?

• 8:08Speaker 01

  It was a different way of selling them, and it really was a different way of talking to the consumer. Because back then, I mean, it's a little bit of a history moment, but, you know, to buy a razor, you had to go to a Walgreens or a CVS and the razors are behind the counter in a locked box. So I mean, it's not exactly a convenient way to buy something that you use every single day. And so when Dollar Shave Club came to market, it was saying, hey, that sucks. Why don't we have a better experience that's more convenient? And by the way, why is it just Gillette? You know, why isn't there a brand that speaks to a younger sort of, just a different vibe and a different ethos? And so when Dollar Shave came to the market, it was funny. It was irreverent. It was fresh. And I think the consumers, whether they were young teens, all the way up to, you know, people in their 50s, men in their 50s.

• 8:52Speaker 01

  Everybody could get behind a brand that felt fun and one that felt like more connected to who they are as people. And so you really started to see that. It was actually the ability to build a brand that was more resonant with consumers versus historically, it was like the brands were built in this ivory tower with an agency who was going to tell you what beautiful look like and tell you what to wear and tell you how to act. And I think that was the turning point when social media really became this new unlock of distribution direct to consumer, where you had a two-way dialogue with your customers. And it felt like you were, you know, when I messaged into Glossier, it would be like, oh, that's, that's like my girlfriend. You know, my makeup, my makeup obsessed girlfriend or, you know, like best friend, not L'Oréal,

• 9:35Speaker 01

  which feels like a corporate sort of entity that, you know, feels very distant from us. And so, you know, just going back to the question that you had, like, that was really a wave back in the day. And then now, when you think about where the consumers focused, social is sort of a way of life. That's not new. Right. Obviously, there's plenty of challenges with the advertising platforms and, you know, the algorithms and the privacy changes that have happened over the last handful of years. And so I think a lot of businesses have had to iterate on how to reach their customers and how to build better relationships. And so then our investments have been more towards other topics that people care about. So a lot in consumer health and wellness. That's, you know, what's on everyone's mind, particularly coming out of COVID and thinking about, gosh, you know, health is so precarious.

• 10:19Speaker 01

  Like, how can I improve my sleep? How can I think about longevity? How can I think about not getting sick instead of just fixing myself when I'm already sick? And so we've made a bunch of investments in that. And then we've really spent a lot of time thinking about investments in empowering solopreneurs and small businesses because, you know, they've really been advancing digitally as well. And it may be slower to make that shift than some of the bigger companies that have more resources. But at the same time, it's really exciting, especially when you think about, you know, I'm sure we'll hit AI a little bit later, but when we think about AI and how much efficiency can be had, then a one or two person company can actually do all the things that it has to do, thinking about marketing or customer service, or, you know, just relationship management with all their clientele.

• 11:05Speaker 01

  And so we've made a bunch of investments in thinking about how do we use technology to power solopreneurship in an effective way to sort of enable kind of the new American dream. It's not just about coming to this country and starting a shop. That shop is really now digitally powered or has to be digitally conceived. You know, you can still have a brick and mortar store, but you have to have a social profile, you have to understand marketing, you have to understand so many different things.

• 11:29Speaker 00

  Yeah.

• 11:29Speaker 01

  And so we feel like there's so much to be done there. But I think that's where I go back to the definition of consumer is so many different business models. You cover fintech, that's consumer. I mean, that's taking care of my money. Chime was one of our first investments in Fund One in 20, gosh, I think it was 2013. And, you know, originally that started off as a fun shopping card that was meant to give you a place where you could save some money that you could use to spend and get loyalty points. And ultimately it morphed into really a neo-bank that built a brand that stood for this new consumer in this new, really digital forward way. And that's before Citi and Chase and all the big banks actually had good apps. I mean, their apps were horrible back then and it's been a decade now.

• 12:13Speaker 00

  It's been interesting watching it evolve for sure. I've been fascinated by its evolution over the years.

• 12:26Speaker 00

  I'd like to talk a little bit about the overall fundraising environment. Clearly, we all know that things have changed pretty dramatically since 2020, 2021, when things were nuts, right? And there was actually just way too much money being deployed. And we all kind of knew it was not sustainable, just too many checks being written, way too high valuations, right? Just crazy, as one investor had called it. I think they said 2021 was the party, 2022 was the hangover. And I feel like we're still maybe a little bit hungover, but I mean, funding is down, but I feel like it's picking back up this year compared to last. Would you agree with that?

• 13:08Speaker 00

  I mean, as a firm, are you investing less or more than last year? And how does that compare to a few years ago? And just overall, like in the whole landscape, are you seeing more venture capitalists being willing to write checks than they were in 2022, for example?

• 13:23Speaker 01

  I think the data would suggest yes. I was listening to Henry, the CEO of Carta's interview with TechCrunch a couple of months ago. And definitely, the data suggests that it's back up to your 2019, 2020 levels, which actually used to be considered a great time. It's just in comparison to not being up to 2021 levels that it feels like we're still under the watermark. But I think 2021, if we're really honest, there was a lot of pent-up demand because 2020 just halted all activity for so long. Then we were home, working from Zooms. And I don't know about you, but I literally didn't leave my seat from 7:00 a.m. till 7:00 p.m. And the calls were back to back to back to back to back. So I could literally talk to like 10 founders in a row and do diligence,

• 14:07Speaker 01

  you know, 20 diligence calls in one week. And we could get to our answer because nobody was traveling. Everybody was available. And so I think the frenzy was not only structural from a position of capital being there, but also structural because people were like just in front of their computers, working 24/7. And it led to a higher velocity of processing of things. What challenges firms then is even if those deals are all great, you don't have the benefit of just time. Time for each of these early-stage investments to grow, time for everybody to digest and kind of go through their different cycles. All of the cycles are happening at the same time because you've made all the investments in one year. And here at Foreigner, I mean, I think we made 21 investments in 21. And typically, we make

• 14:52Speaker 01

  Ten or twelve.

• 14:53Speaker 00

  Oh.

• 14:53Speaker 01

  So there was definitely a strong, you know, pace that year that ultimately now we're back to, again, you know, similar to maybe what the market is feeling, but back to normal, which feels like a good eight to ten or, you know, eight to twelve. And we have four investment partners here, and so each person doing a handful of deals a year feels like a sustainable place. So it feels good. It also feels like the processes have the time to fully kind of materialize. You can get to know your teams. You can do the back and forth that you need on, on different diligence questions. Of course, AI is probably a sector where it's getting the same frenzy as there were some companies getting that, that energy in twenty one, but it's okay.

• 15:34Speaker 01

  There's always a topic du jour, and I think AI is such a big one and such an exciting one that will change the market, that it's understandable that there's a lot of energy there and, and we're investing a lot there as well. But, and I feel good about pace at least being back to something that is normal and it's sustainable, and it's probably the right pace.

• 15:52Speaker 00

  Hmm. You raised a good, a couple of good points there I wanted to touch on. For one, AI, it's hard, though, to not be skeptical. I mean, I think there's so many startups that feel like they have to mention AI somehow in their product or their offering, or they're not going to be attractive to investors. How, as an investor, are you able to kind of cut through the noise and see where the companies who are touting AI features are really truly doing something innovative or just kind of using it as a way to make themselves look like they're on the AI bandwagon?

• 16:26Speaker 01

  You're, you're hitting the nail right on the head because every deck, every pitch has AI in there. And the reality is, it should. Not that it's a reason to invest, but what company out there isn't thinking about how to leverage AI to create efficiencies in their business? I mean, you'd be living under a rock if you weren't thinking about, is there marketing efficiency out there? Is there customer service or sort of sales efficiencies out there? Like, yes, you're going to leverage AI in any way you can to deliver a service better, cheaper, faster. We think about it from the consumer investment side in two primary ways. One, where the business ultimately AI is the center point of the experience, like ChatGPT. There's no experience other than AI. That's the whole thing.

• 17:11Speaker 00

  Right.

• 17:11Speaker 01

  Speechify, one of our portfolio companies, Perplexity, like there's a bunch of companies that are really thinking about either infrastructure layer or kind of LLM layers, like really foundational layers where there is nothing other than the AI as their business model. And so that's really exciting time and people are investing deep in that. Then there's businesses where the AI or the sort of promise of AI enables a business or service to work. We have a few that we've invested in that are, you know, Atticus is in the legal space, really allowing for people to get access to disability payments and and different sort of legal payments in a faster way. A lot of that is AI powered on the execution side, but we don't bill it as, hey, consumer, we're an AI lawyer.

• 17:55Speaker 00

  Right.

• 17:56Speaker 01

  That's not helpful, right? You just want to know that you are getting a great service and how we execute that hopefully is as efficient as possible. We have one called Duckbill, which is in the personal assistant space. And I'm sure, you know, we've seen tons of personal assistant ideas come up over the last decade plus. Ultimately, it's just a hard problem to solve. Even having a human assistant is hard because you need to let that person know enough about you and your case and your needs and your, the way you think to be effective, and that takes time. But we are excited that AI could start to shorten the timeframe of that learning and then be able to do transactions quicker than a person could be able to do. And and many people can't afford, you know, personal assistant or executive assistant. And so that's a way that AI can really disrupt the human need or a person's need.

• 18:39Speaker 01

  So we we see that there are such valuable ways where AI can make a difference in letting a company deliver a magical service.

• 18:49Speaker 01

  For a unit economic model that works. You know, before people would pitch this and you're like, great, that works. But how do you make money?

• 18:56Speaker 00

  Right.

• 18:56Speaker 01

  And it's like, you know, you just can't make money like that. If you have to hire a hundred people to call all around town to make your reservations, like that's never going to work. And so I think that's where we get really excited to think today, we're still a little bit out from like really getting to the consumer experience layer of AI and how it's going to impact our lives. You know, there's certainly plenty of opportunities to chat with an AI. And we're just doing around our team, all picked a very, you know, a different AI buddy to talk to for the week and just figure out like, what is this? Like, what is this engagement? Is this real? Is it helpful or does it make you feel more lonely?

• 19:34Speaker 00

  Yeah, that would be interesting, I can imagine.

• 19:37Speaker 01

  It's, but today it feels weird, tomorrow or for our kids, it could be totally normal to chat with the AI.

• 19:43Speaker 00

  Probably, which is a little, a little bit scary, I have to admit, because I feel like already our kids are just so much more digitally focused than we were. But when we start to like have less and less true human interaction, I have to admit, it does make me a little bit uncomfortable, but.

• 19:59Speaker 01

  It does.

• 20:00Speaker 00

  But no, I, I wanted to touch base before we go further into another topic about the early stage landscape. I'm curious, because I, as a reporter, am getting a ton of pitches lately, of course, that are focused on the seed stage and seed deals seem to be bigger than they used to be. Later stage deals, less common.

• 20:20Speaker 01

  Yeah.

• 20:20Speaker 00

  Series A and Series B, probably also less common. Series A even less so than B. What, what do you think about that? Why are we? I mean, I, I don't think seed funding is necessarily up, but we are seeing bigger seed deals and I feel like we're seeing more of them than more of those middle stages. What do you think about that?

• 20:39Speaker 01

  So the dynamics at play are you still have a lot of seed investors out there who have capital and ultimately they're making investments. Then you have a bit of a crunch because the A landscape is starting to require more traction. In general, I think that the investor landscape is requiring or wanting to see more traction, more proof points for whatever the raise is. And so you can get at that a couple of different ways. You either raise more in the earlier rounds so you can get farther or you gotta do the. C plus, A plus, B plus, whatever that stub round is.

• 21:17Speaker 00

  Extension.

• 21:17Speaker 01

  And I think what we saw was that in twenty one, a lot of people raised a bunch of money. In twenty two, if you were quick to act, you could still have that bucket of money because you cut your team. Cause you saw the writing on the wall and you're like, wow, this world is different. We need to save for, you know, kind of the, the cold storm that's coming. And so we did see that there was not a lot of fundraising coming out in the later stages. And in the earlier stages, you really only came out if you had to, otherwise you died.

• 21:45Speaker 00

  Yeah.

• 21:46Speaker 01

  You know, you just, you weren't going to get that funding. So you come out of that now twenty three and twenty four, it's a little bit back to like a little bit more normal. But again, if you don't have a good business coming out of those years, you're not growing, but you're break even. There isn't a real business for venture to look at. You know, because we're not in the business of looking at break even businesses. We're looking at what are breakout potential businesses. And so I think that's where a lot of companies are somewhat getting stuck. And when that's the landscape, investors go towards, hey, bigger firms are happy to do earlier investments. Cause it's a small dollar check for the relative risk. If it goes away, then you'll lose two million bucks.

• 22:23Speaker 00

  Compared to their overall fund size. Yeah.

• 22:26Speaker 01

  Yeah. If your normal check is twenty and you put two or three or five in a seed round, like not to be flippant, but it doesn't.

• 22:33Speaker 00

  Yeah.

• 22:33Speaker 01

  Matter as much as losing a twenty five million dollar check. And then for the twenty five million dollar check, you're feeling like, wow, I need a lot more proof points. And so the pressure on the company to get to those proof points is higher. So I mean, I think that's where that series B does feel like sort of the middle child, like lost moment where you could be doing a great job. And unless you've got the right dynamic of growth, but managed expenses and managed burn, which is again, so hard to like thread the needle.

• 23:02Speaker 00

  Right.

• 23:03Speaker 01

  Then everybody would rather just wait. They're like, I'd rather pay three X next round.

• 23:07Speaker 00

  Yeah.

• 23:08Speaker 01

  Or I'd rather, you know, pay three X the prior round, because no matter what, it's still cheaper than the round that's like in the middle.

• 23:14Speaker 00

  I think that's a little hard for founders though, because it's like twenty twenty one or so, like there was less of that, right? I think the criteria was not as strict. Investors really weren't. Necessarily expecting as much. It was more about growth, growth, growth. And so, you know, now it's like completely shifted. So founders are like, oh, whiplash. Okay, now we need to

• 23:32Speaker 01

  It's totally

• 23:33Speaker 00

  change our mindsets. We have to run our businesses completely differently. And so

• 23:37Speaker 01

  Yeah.

• 23:37Speaker 00

  I could see where that would be challenging for everybody involved. But at the same time, I don't think it's a bad thing necessarily to have higher standards for anyone, right? To have higher standards. I don't think that's necessarily a bad thing.

• 23:52Speaker 01

  And maybe just from a practical standpoint, 21 was the anomaly.

• 23:57Speaker 00

  Yeah.

• 23:57Speaker 01

  This is how it should have stayed. And it was starting to get real loose in 21 where, you know, funding rounds were happening with no traction. And you're like, well, it's fine if that's going to be your first round and it just happens to be kind of a a big bet and what have you. But at growth stage, to be doing huge valuation, gigantic rounds with very nominal traction, it just means that you're always investing so far ahead of where you're actually executing that you're just never able to catch up. And at some point, everything needs to be repriced. And so, you know, going back to like, where are we in the cycle? Last year was kind of quiet because if you didn't have to raise, you certainly didn't want to cut it out. If you did have to raise, you were going to get

• 24:39Speaker 01

  a pretty steep cut, just like the public markets were down over 50%. So of course, private markets shouldn't be kind of immune to that. But people didn't really want to have to take it until they had to. And so that started to flush out. And I think you're still seeing the tail end of that, where companies are in good shape. But at some point, you have to raise more funding if you want to do something more aggressive than just kind of putz along and be break even or slightly profitable. And that's where I think all that repricing happens. And then you get back to a place where the companies are appropriately valued for their stage, and then we can all get back to work. But I do feel like the last 18 months to two years, there was a desire for everybody to

• 25:22Speaker 01

  just wait and see and not be the one to deliver bad news. We didn't want to undercut the price on companies that we knew would be good companies, but just, I don't know, it feels bad to have to be the one to say, hey, we're going to give you a 50%, you know,

• 25:35Speaker 00

  Yeah.

• 25:36Speaker 01

  valuation cut.

• 25:36Speaker 00

  Yeah, I can imagine. But like, as I've talked with some other VCs about, you know, it's still sometimes it's better to do a down round than potentially run out of money at some point, right? So, you know, there's when you're faced with that alternative.

• 25:49Speaker 01

  What many of us did, I think, in the ecosystem was we did it ourselves. We talked to the founders, the syndicate, that was an existing investor syndicate. You'd have a conversation and just be like, hey, you know, here's where we're at. If we want to raise qualified, you know, good new partner, and they don't want to do this dirty work of, you know, kind of repricing, maybe we should just do it ourselves, take the hit ourselves and then come out and just have a clean next step. And so I think, you know, everybody, hangover happened, everybody got sober, everyone drank their water and they were electrolyzed, and I think everyone's like, ready to start a new day, which is exciting. And, you know, we feel we've been making some great new investments that, you know, haven't been announced yet. But, you know, really exciting to see the caliber of founders that are still here.

• 26:32Speaker 01

  And that's the other thing is after a bit of a challenging time, whoever's left still really wants to do it. You know, they're not doing it because it feels sexy and like, I want to be on the cover of The Worms and, you know, whatever. Like, it's because you really want to do this and you know it's hard. So I think that bodes well for the ecosystem.

• 26:50Speaker 00

  Yeah. Last but not least, I wanted to touch on the IPO market.

• 26:53Speaker 01

  Yeah.

• 26:54Speaker 00

  Obviously, last year was super slow, super quiet when it came to IPOs. We are almost at mid-year and we had a spurt of time where we saw some companies go public. We kept track of Rubrik's IPO, which that company filed to go public in early April. There was Ibotta that also.

• 27:14Speaker 01

  Yep, Ibotta just went.

• 27:15Speaker 00

  But.

• 27:16Speaker 01

  They're trading well, you know, but it's, it's been quiet.

• 27:18Speaker 00

  It's been quiet. I mean, did you think this year is going to be more active on the IPO front?

• 27:23Speaker 01

  I mean, the good news is 23 was slow. There were five IPOs, but the majority of them were in the last quarter or the last handful of months of the year. So it was slow all year and then, you know, a few of them just kind of pushed out. And then this year we've had four, which I would say is pretty good because, you know, that's already tracking to more than what we did in 2023.

• 27:46Speaker 00

  Yeah.

• 27:47Speaker 01

  And so that feels good. I think the other thing is that, you know, the trading multiples are relatively reasonable for the average of all the companies that have gone public in the last couple of years. I I pulled some numbers here just because I knew you wanted to talk about it, but the average we have on 2024 revenue multiple is a 12.4 and a 9.5 on 25, you know, forward multiple. So it's just kind of back to like a good old fashioned, you normal multiple level. And you still have some that are trading at 30 plus X, like Astera and ARM. And, you know, some of them are super technical companies, but even Reddit, I mean Reddit's trading at eight to nine times.

• 28:26Speaker 01

  So I think you're just getting back to a place where good companies, I think there's a number of great companies that are waiting in the wings. And they've survived the last couple of years, coming out even stronger as companies and with stronger sort of profiles, unit economics, all of that. And so, you know, I think not to create lemonade out of lemons, but I think there are better companies today than they would have been two years ago if they went public two years ago. And so everyone's waiting to see if the market continues to stay stable. And I think, you know, the macro environment today is still all up in the air. You've got elections happening, you've got war. I mean, you've got so much stuff still creating anxiety and and still the unknown or the feeling of unknown. But, you know, I think

• 29:09Speaker 01

  because the companies that are waiting in the wings, they're operating and they're profitable. They don't have to IPO if they don't feel like the environment is productive to do so. And so I guess the benefit of that is we've got some great businesses to come that are going to exit. And I think bring a lot more life and energy to the markets. But timing wise, they don't have to go this year, you know, like they're not going to run out of money. No one's pressuring.

• 29:31Speaker 00

  Right.

• 29:32Speaker 01

  No rush. So, you know, do they wait until post-election and kind of figuring out where things shake out and maybe that kind of lands in 2025? Doesn't seem unreasonable to do that. And we're already in end of May. So you're kind of looking at it's either next couple of months, or you probably wait because it's a lot of action happening at the end of the year.

• 29:48Speaker 00

  Right. I do have a feeling we'll see more 2025. It's not going to be as quiet as last year, but

• 29:54Speaker 01

  I don't think so.

• 29:55Speaker 00

  Not like a super frenzied brush.

• 29:58Speaker 01

  And the companies that I work with that have the option to consider this, they're just getting ready, you know, just building the muscles and kind of acting and behaving internally as though they were public. And if it turns out that maybe it's not a good idea to go public, then they won't. But I feel like it prepares the business all around for a better, more successful exit moment, if that's what they choose to do. And hopefully then the investors, public market investors, reward them for that. And also, you know, you want them to be successful after they go public. So it's not just a

• 30:27Speaker 00

  Right, for sure.

• 30:28Speaker 01

  one hit wonder, right? You gotta like sustain that. And so being able to watch the cohort of the last two years, just kind of continue to show growth, continue to show stable trading multiples. I think all of that would give people more confidence to take the plunge. My partner, Brian, says there's a notion of like the sacrificial lamb, like the company that just

• 30:45Speaker 00

  Yeah.

• 30:46Speaker 01

  rips off the Band-Aid and goes for it. And if it goes well, then everyone else goes. And if it doesn't go well, then everyone's like, oh, maybe it's not.

• 30:52Speaker 00

  That's a good way to describe it, that kind of like the guinea pig in a way, too.

• 30:56Speaker 01

  Yeah.

• 30:56Speaker 00

  Yeah, that's actually a good way to describe it. We'll see. I'm very curious. I know there's a number of companies I've been following that are eagerly anticipated to go public, but you know, are still not there yet. So we'll see. Well, this has been so much fun, but we've got to wrap up now. But Yuri, thank you so much for joining us. This was great. Really enjoyed this conversation.

• 31:16Speaker 01

  Thank you so much.

• 31:17Speaker 00

  And

• 31:17Speaker 01

  Me too.

• 31:18Speaker 00

  I know our listeners learned a lot, as I did. Where can they find you on social media?

• 31:23Speaker 01

  Oh, thanks, Mary Ann. It's been fun. So I'm at Yuri Kim, so Yuri underscore Kim on X. And you can find Foreigner at foreignerventures.com.

• 31:31Speaker 00

  Awesome. And you can find us on X and threads at EquityPod. Be sure to come back on Friday. We've got another great episode for you. And of course, if you like what you hear, leave us a rating and a review. Equity is produced by Teresa Loconsolo with editing by Kell. Bryce Durbin is our illustrator. And we'd like to give a big thanks to our audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thanks so much for listening and we'll talk to you next time.