Equities, despite the volatility and uncertainty, have held up. Bitcoin recently posted a new all-time high and the development of the crypto space is booming. The battle-tested startup market is generating more revenue earlier than ever before while the AI boom continues to attract capital.

It is looking more and more likely that we are at the beginning of a bull cycle that investors and founders have been praying for. Markets are cyclical, and while challenging times test resilience, booming markets present a unique set of opportunities and risks for both venture capitalists and founders. Success in an upswing requires preparation, strategy and focus.

Here’s how to get ready for the next big wave.

For VCs: stay disciplined

In previous cycles, the beginning of the end has traditionally been marked by such extreme froth in the market that VCs chase deals outside of their focus, cut due diligence corners, and disregard fundamentals.

Don’t repeat those mistakes. Double down on sectors and models you deeply understand and believe in and ignore the pressure to chase trends. The FOMO will be real and the desire to get in on deals quickly to outcompete other investors will be strong.

Resist. Don’t compromise due diligence standards and don’t lower the bar for fundamentals. Capital efficiency, durable competitive advantages, clear paths to revenue and scalability still matter in a booming market and you’ll regret compromising your standards when this cycle ends. At peak-hype cycle, it’s easy to chase the hottest deals — oftentimes to the neglect of your existing portfolio and founders.

Stay focused on relationships, both with your existing founders and LPs. It’s easier to raise that next fund during a booming market, so instead of chasing overvalued deals the best VCs use these cycles to play the long game by doubling down on their winners and securing fresh investor commitments.

For founders: build the foundation for growth

For startup founders, boom cycles are often characterized by an endless, perpetual state of raising money. As capital becomes more accessible, the competition also increases so founders find themselves dedicating an enormous amount of their time to fundraising.

Knowing this is coming, founders should prepare by clarifying their vision, sharpening their pitch, fortifying their balance sheet, investing in talent and warming up existing strategic partnerships.

The more you can do to create efficiencies for yourself in the coming funding cycle by polishing pitch assets and preparing for due diligence cycles, the less time you’ll have to spend during crunch time and the faster you’ll be able to move in the highly competitive race for capital.

Internally, you can create some efficiencies for yourself by beginning long lead recruitment cycles, knowing that the capital to chase that growth is just a few months away. Those partnerships you’ve established? They are going to be tough to leverage during the chaos of the cycle, so make sure you establish plans and channels to capital on those relationships when it matters most.

Prepare, don’t chase

Both VCs and founders must remember that booming markets are as much about timing and preparation as they are about opportunity. For VCs, the goal is to deploy capital thoughtfully and avoid the pitfalls of hype-driven investing. For founders, the focus should be on scaling sustainably while seizing the advantages of favorable market conditions.

Booming markets don’t last forever, but companies and funds built on strong foundations can thrive long after the cycle turns. The best time to prepare is now — before the wave begins.

As the co-founder and managing partner of , is committed to establishing MGV as the premier venture firm for world-class tech entrepreneurs to accelerate their visions. Under Schröder’s stewardship, MGV has swiftly ascended to a top-quartile firm, surpassing the performance of 95% of venture funds. The performance of MGV is driven by Schröder’s unique approach to venture investing — that providing intensive sales training, devising robust fundraising strategies and securing follow-on investments is the best way to support founders and drive the deepest return for investors. has recognized him as one of the Top 100 global seed investors, and his perspectives are published regularly in Crunchbase News and other leading publications.

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The new fund is larger than its initial target for the capital pool ($150 million), and it is the San Francisco-based firm’s largest fund to date. The firm is keeping its prior leadership in place while adding a new partner. Notably, all the partners are men.�� 

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Many firms are raising more capital than before, a move that can allow a venture group to defend their ownership in investments that raise more capital later on and provide pricing flexibility.

Here’s Jackson Square’s new fund in relation to its preceding two, each of which weighed in around the $120 million mark, according to the firm:

It’s a pretty sizable jump in dollar terms ($73 million), and when measured in percent (just under 61, compared to $120 million).

Jackson Square has made 56 known investments to date, according to its Crunchbase profile. Its most recent investment was , a tech platform that enables fans to sell and exchange tickets to live events. Other investments include , which connects athletes to each other, , which protects enterprise sites from attacks, and , a bus rental platform.��

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Part of Jackson Square’s investment philosophy is that it invests in anti-hype industries, .��

The firm, as detailed in the post, wants to invest in new technologies not when they are first put into the market, or when their “hype” takes off. For example, Jackson Square points to artificial intelligence and crypto as examples of industries that bubble up because investors don’t want to miss out on what their friends are investing in.��

Instead of jumping in on those trends, however, Jackson Square wants to invest “a bit later, in what Gartner calls the Trough of Disillusionment.” 

That means the firm wants to invest in tech when it’s at its least popular. So far the plan has worked well enough for the firm to raise a new, larger fund. We’ll know more as it begins to put the $193 million to work.

Why This Fund?

Why cover Jackson Square’s raise out of the mix of newly announced funds? (Crunchbase has a tally of.)

The chief reason is that the firm released a number of statistics regarding its performance: “6 of 59 core investments have achieved a $1B+ exit and/or valuation.” That gave us a chance to ask the firm about SaaS prices. Reached via email this morning, Jackson Square Managing Director said the following regarding SaaS valuations:

The larger market swings from fear to greed. When we are in a greed market, valuations are stronger and in a fear market, valuations are more conservative. We are still in a greed market, but there are signs that fear is creeping in.

All this in mind, recall that we’re still seeing a robust global venture market. It’s possible by Q4 we’ll see some of that fear translate into numbers.��

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When was going public, things looked great for the at-home, teeth-straightening company. After raising , SmileDirect’s IPO pricing cycle went terrifically. The company initially set a $19 to $22 per-share IPO price range before selling nearly 60 million shares at $23 apiece.

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The new per-share price valued SmileDirectClub at around $8.9 billion. For the Nashville-based company, that new valuation was rich and welcome. By pricing where it did, SmileDirect raised over $1 billion with minimal dilution, at least compared to what it would have cost the firm to raise the same sum at its old valuation.

That prior valuation was a fraction of the firm’s IPO worth. Indeed, when SmileDirectClub last raised known private capital, (just one year ago), investors valued it at a smidge under $3.2 billion after counting the value of the $380 million infusion.

Given that the company managed to squeeze a 178 percent gain in value in under a year when it went public, perhaps we should have better forecasted what came next.

Namely this:

As we reported at the time, SmileDirectClub’s shares were instantly spat out by the public markets, closing at $16.67 on their first day of trading, a 28 percent decline.

Today the company is worth just over $10 per share, off 55.5 percent from their IPO price ahead of trading today. That’s a stunning repudiation, bringing the company to a somewhat embarrassing private-public value inversion. SmileDirect is in danger of seeing its public valuation fall under its final private valuation:

• Final SmileDirectClub private valuation: .
• Current SmileDirectClub public valuation: $3.94 billion.

It’s not there ����,��but the value of SmileDirectClub today is a shadow of what it was when its bankers got its IPO put together. (Oddly, this result is an endorsement of sorts for the traditional method of determining the value of a company. If SmileDirect had been valued fairly, it would have raised far less capital in its debut.)

One last thing before we go. If you observe the above chart, there are two lines. The orange line corresponds to the far-right axis. It’s SmileDirect’s trailing price/sales ratio. More simply it gives us a good idea of how investors are valuing the company’s top line.

As you can see, early in its life as a public company, even down from its IPO price, SmileDirectClub was able to garner a double-digit revenue multiple. Calculated on a forward basis that metric would shrink some, but a better question is why the firm was valued at over 10x revenue to begin with?

In retrospect, SmileDirect has all the things that public-market investors seem tired of:

• Dual-class share structure.
• Scaling losses as the firm grew.
• A recent sales and marketing expense boom.
• Majority non-recurring revenue.

To its credit, SmileDirectClub had rapidly scaling revenue (from $175.1 million in H1 2018 to $373.5 million in H1 2019), and strong gross margins (around 78 percent in H1 2019). Those two highlights weren’t enough to sustain a nearly $9 billion valuation.

We’re keeping an eye on SmileDirect, and will report if it does dip below its final private price. Sadly the company doesn’t report earnings until November 12th, so we still have a while to wait for new numbers.

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“I thought [tickets would] be much more, like $200 or $300,” Agilar said, while standing in line for the museum on Wednesday. For reference, general admission tickets to the San Francisco Museum Of Modern Art a few streets away a pop.

Unlike SF’s Moma, however, the Museum of Ice Cream features sprinkle pools, a “sweeter theatre,” and free ice cream samples. On Wednesday, employees, dressed from head to toe in millennial pink jumpsuits, sported ice cream names like Soft Serve Syd or Pistachio Picazzo.

All that said, the real reason Agilar and many others came to a museum about ice cream was not really about the ice cream.

“There’s always fire Instagram photos from this place,” she said. She then added she wasn’t a big user of social media.

Yesterday, the Museum of Ice Cream closed a $40 million Series A to launch Figure8, a development business that is now its working parent company. The business is now valued at $200 million dollars, and the most recent round was led by Elizabeth Street Ventures and Maywic Select Investment.

Since launching in 2016, the Museum of Ice Cream has hosted 1.5 million guests across San Francisco, Los Angeles, New York, and Miami. San Francisco is the museum’s only permanent location.

The Museum also created an ice cream line sold at Target and a makeup collection with Sephora, a press release stated.

When Ryan Almeida and Analise Aldana tried to visit the museum last summer, all the tickets were sold out (you have to pre-buy tickets in order to gain entrance into the Ice Cream haven). Wednesday was their second, more successful attempt.

While Almeida thought the entrance fee cost a little more than expected, Aldana said that it seemed worth it for the photos. The latter was the majority mindset in line, and it is a vote of confidence for the flagship offering of the museum: Do it for the Insta.

All in all, yesterday’s more-than-sprinkles valuation tells us that investors see more opportunity in heavily curated experiences that are Instagram worthy, and that millennial pink isn’t going away any time soon.

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To start, let’s take you through the new class of corporate venture capitalists, folks against term sheets, and a firm that offers VC-as-a service.

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The New Corporate Venture Capitalists

Corporate venture capital (CVC) funds are everywhere. The category is loosely defined as corporations starting venture capital arms to work with smaller startups.

Within CVC, there’s a subset of companies that use a third-party operating group to do their investing. The funds don’t function under their corporate parent’s branding. Instead, they make their own, separately branded fund. Take for example, a firm that was backed by a commitment of $1.2 billion. This is a thread different than say, Intel starting Intel Ventures and investing across startups under that branding.

Another recent example of this happening is Cisco starting Decibel, a VC firm that is an independent entity focusing on enterprise innovations.

“Decibel will execute its own investment strategy, fund operations, and portfolio management, all while still having unique access as a highly collaborative and aligned partner to Cisco,” the company said in a .

For independent venture funds spun out of corporations, check out , and .

The issue with traditional CVC is that they lack the longevity of a traditionally built out venture capital firm, according to , the CEO and managing partner of Next47.

He added: “It’s the cycle.”

This cycle, understandably, could leave the startups that work with a CVC fund in an unfavorable limbo. So much so that at least recommends doing quite the opposite: it brands itself as helping founders avoid traditional investment, and go the bootstrapping route. That brings us to our next topic: the group of investors who are convincing startups they are more than profit hungry, by never taking equity.

The Anti-Termsheet Club

, a new kind of venture capital-ish firm from and , doesn’t have any equity in the over 700 companies it works with. But it put investments in each of them.

How does that work?

Flexing its the firm’s strategy uses an algorithm to sift through a startup’s data and see if its a fit. The entire process was created to be shorter than the average investment timeline. The fund’s definition of the ideal investment? An e-commerce company that has positive ad spend and positive unit economics.

As companies are under demand to raise more venture capital money before going public, Romanow tells me Clearbanc wants to help founders keep more ownership of their company amid the trend.

Romanow cited how, for example, when went public Bill Gates owned of the company. For comparison, when Lyft went public, the founders only owned around of the company.

This data-only strategy has helped Clearbanc break patterns with investing in people who look and sound like the status quo. Romanow says they’ve funded 8 times more women than the average VC. Clearbanc has in 2019.

There are, of course, some aspects that will never go away from traditional investing. She says that while their deal flow is heavily driven by numbers, associates at Clearbanc have the ability to singlehandedly veto a deal if the founder and startups don’t match up culture or personality wise.

“There’s always got to be due diligence,” she said.

But what happens when you outsource that due diligence?

VC-As-A-Service

, a firm which we wrote about last month, invests in startups on behalf of corporations through its “VC-as-a-service” model. It manages over $600 million in assets across all of the large corporations it works with, and has done over 150 investments.

Corporate venture capital’s main issue is that corporations don’t have the motivation to help the startups they invest in, grow to the next step, says , the founder and CEO of Pegasus Tech Ventures. With a third party firm like Pegasus, he claims, a fund can help a startup grow beyond just one round. He claims that Pegasus has made multiple follow-on investments in 80 percent of their portfolio companies.

This idea of an ecosystem, where one sides feeds another, didn’t work well for at least one venture firm: . The company notoriously to participate in every stage of a portfolio’s life company, from startup to unicorn trying to go public.

Additionally Uzzaman says that Pegasus has the network of traditional VCs, unlike CVCs.

“We do not have any restriction from introducing the startup to other corporations and funds,” he said during a phone call. So they do. Once, a startup was even funded by three separate corporate funds underneath the Pegasus umbrella.

In the event of economic downturn, Uzzaman explained that half of their investments are outside the United States. They currently have a presence in 17 countries.

Big Picture

Regardless of all of this innovation and flashy changes, venture capital is a long term business. Returns take time, even up to 15 years, some say. So these new versions are, just like the startups they’re investing in, bets. This is just a part of the evolution, and you can be sure we’ll be tracking the success as and when the first returns roll in.

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Of course not. Nobody is perfect. Who can be? If we’re being honest here: having teeth is great and all, but the maintenance is kind of a drag. It’s something we all have to do, though.

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Accordingly, oral care is a fairly big market – in the to range by 2020, depending on the data source – with proven business models and entrenched incumbents to match. It’s just the sort of market clever entrepreneurs can find interesting, even if only from a business perspective.

Oral Care Startups Chomp Down VC Capital

Before getting into how these companies make money, let’s take a look at some of the venture-backed oral care companies which have raised the most funding.

Let’s start with toothbrushes, specifically electric ones. Following the commercial success of electric toothbrushes produced by incumbent brands like Oral B and Sonicare, several upstart companies joined in the market.

The table below shows a selection of the most-funded venture-backed companies in the electric toothbrush market.

And here’s a selection of venture-backed companies making toothpaste, mouthwashes, floss, and other consumable goods.

There’s a reason why investors might find these businesses appealing: most of these companies position their brands as upmarket, premium alternatives to what the big incumbents produce.

An example is the coconut oil-coated, exotically-flavored floss produced by , which costs $8 for an attractively-packaged 32-yard spool (plus shipping, if your online order is less than $10). On a cost-per-yard basis, even the spendier incumbent floss brands are roughly half the cost of Cocofloss.

The other appealing factor is the recurring revenue generated by both time-tested and emerging business models.

Consumables, Subscriptions, And Services

A large portion of venture-backed oral health companies follow similar models to the razor and shaving industry.

Most consumer-facing startups in the oral care market are predictably focused on consumer goods and electronics of some sort, often with a subscription or other service component to their businesses. In other words, there are a bunch of startups making and marketing toothbrushes, toothpaste, and floss, all shipped to your door at regular intervals.

There are roughly three categories of business model here:

• Fully-disposable products
• Up-front spend on the base device, with replaceable, disposable cartridges sold at high margin.
• High-cost base device, with low-cost consumable component parts.

Let’s get the last one out of the way first: there is no oral care equivalent to buying a safety or straight edge razor handle for a relatively large sum ($25 and up, usually) and then spending just a few cents per blade. Brush heads are priced more like multi-blade razor cartridges at a few dollars a pop.

Many electric toothbrush companies do follow the cartridge razor strategy: sell the handle for a low price, and make fat margins on cartridges and accessory consumable goods that need to be refilled regularly. , for example, currently sells its electric toothbrush for as little as $30 for the base model, and the company will send replacement brush heads every three months for $5. A competing company, , sells its base brush for $50 and ships brush heads for $6.

Just as incumbents figured out that there’s huge lifetime value to a loyal customer, startups are doing the same. This applies to both the high-end subscription toothbrushes as it does to more expendable goods like mouthwash and floss.

Beyond subscriptions, though, some oral care startups offer other tech-enabled services and perks. This includes the likes of , which started as an app-enabled Bluetooth toothbrush company and by using user-specific brushing data to offer lower dental insurance premiums to those with good brushing habits. It’s a similar model to auto insurance companies offering better rates for safer drivers, as measured by insurer-installed hardware.

The Future Smiles Brightly

As sensors grow smaller and cheaper, ever-smarter toothbrushes and oral care products will be available to the folks who are into that sort of thing. As a distribution channel, the internet enables niche products (like $8 dental floss) to find customers. And, if you ignore serious privacy concerns, all the “big data” generated by all these gadgets could be a major boon to health care providers and insurance companies.

It’s important to note that we’re just brushing along the surface of the oral care sector here. There’s surprisingly fierce , for example. And there’s no doubt plenty of companies that sell their wares directly to dentists, which we didn’t cover here.

So brush your damn teeth.

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