Arvind Gupta assessed 470 startup presentations last year between his responsibilities as co-leader of Mayfield Fund’s engineering biology group and founder of IndieBio. He calls his method “simple,” but that’s a bit of a misnomer: after evaluating a deck and setting up a meeting with the founders, he’ll spend hours learning about both the underlying technology and the people on the team.
During a TechCrunch+ Twitter Space last week, he remarked, “For seed deals, I spend a maximum of 10 days so I can offer a response to a founder and I make it a commitment.” “In ten days, I can do primary research and collaborate with the founders to get a resolution.” If you’re looking for a bigger Series a check, this is the place to go. It could take a little longer than that, but not much longer.”
Last month, I spoke with Gupta to learn more about the possibilities he’s searching for and to obtain his counsel for first-time founders, but last week’s Space provided an opportunity to go even further. He gave me a personal market correction when I mentioned that the public market slump would provide businesses an opportunity to focus on establishing product-market fit rather than pursuing expansion. Recessions or downturns are always the most difficult periods to start a firm, for entrepreneurs, VCs, and everyone else involved. Because it doesn’t matter whether the market is bad. It’s not like you get a buy and say, “Forget it, we’ll simply ignore the poor returns.”
During our talk, we learned a lot about financing in a down market, why he thinks it is still a good time to start a business, and how entrepreneurs should avoid flashing one major red flag that scares away many investors: “I believe it is critical for entrepreneurs to have a learning attitude, just as [some] VCs are arrogant.” Gupta explained. “Entrepreneurs who think they know everything better be correct, since learning on the fly will be difficult if you already know everything.”
Arvind Gupta: I believe it is, particularly in my field of reversing climate change and healing disease. It’s never too early to start, since certain things can’t wait. What’s occurred in the stock market is that multiples have shrunk as valuations have decreased… So, if a company’s IPO valuation is $2 billion, and its revenues are $100 million, the IPO value is 10 times sales. This has decreased significantly, by roughly 30% from its previous level. Because private markets are not repriced on a daily basis, it takes time for them to catch up.
Late-stage financing has dwindled significantly… It’ll take some time for it to filter down, but there’s a lot of money in the system right now. Most big VC firms raise substantial seed funds, microfunds abound, and angel investors are active. There is a lot of hope that technology will still be able to deliver meaningful solutions that will generate real value. So far, I haven’t seen any slowing in the seed, pre-seed, or Series a sectors.