The unprecedented rush of venture capital into startups is having an interesting knock-on effect:

“Venture capital investors are racing to pay more to buy smaller pieces of startups that are less profitable than before,” writes Alex Wilhelm, who studied Silicon Valley Bank’s State of the Markets Report Q4 2021.

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Going for larger rounds with higher multiples means reduced ownership, and it’s shifting more power to founders as investors are “paying more and at shorter intervals for less of less profitable startups.”

I have never used this space to offer advice, but if you believe you have a good idea for a startup — go for it. When venture capitalists say this is a good time to be a founder, you know they absolutely mean it.

Thanks very much for reading!

Walter Thompson
Senior Editor, TechCrunch+
@yourprotagonist

Mixing the personal with the professional in startup fundraising

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The pandemic has rewritten the way investors and startup founders do business, but “chemistry is important,” notes Brian Heater.

Laela Sturdy, general partner at CapitalG, and Webflow co-founder and CEO Vlad Magdalin joined Brian on TechCrunch Live to discuss COVID-era deal-making and the changing nature of startup-investor relationships.

“As great as Zoom is, to me, that in-person experience takes you to the next level of getting to know someone,” said Sturdy.

15 sectors pi Ventures expects deep tech to disrupt in the next 5 years

Image Credits: Nigel Sussman (opens in a new window)

Deep tech holds a lot of potential for changing how our world functions, but many applications are still years away from reaching the market.

Looking to the future, Anna Heim analyzed pi Ventures’ Deep Tech Shifts 2026 report, which explores 15 deep tech subsectors expected to reach an inflection point in the next five years.

“If you invest too early in an innovation, then you will have suboptimal returns,” said founding partner Manish Singhal. “If you invest too late, you may also end up getting suboptimal returns, because it is no longer a cutting-edge thing.

“If investment and the timing of innovation getting to a resonance point come together, then good things happen.”

Why QED, hot on Nubank, is bullish about LatAm fintech

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Brazil-based Nubank’s IPO is generating a lot of interest, so Anna Heim and Alex Wilhelm interviewed Lauren Morton, a partner at QED.

Her firm invested in Nubank’s Series A, B, D and E, but “since then, the fintech-focused fund has made more investments in the region,” they report.

In an extended Q&A, Morton shared why QED is bullish on LatAm fintech and offered a few predictions:

I think the volume and pace we have seen so far this year will continue into 2022, but we’re also realistic enough to know that valuations can’t keep rising indefinitely. There will be a correction at some point, but make no mistake that some big, real businesses will emerge over the next few years regardless of whether money into the region slows down or not.

How China’s regulatory crackdown whomped Vision Fund 1’s returns

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SoftBank’s Vision Fund 1 is still the world’s largest tech investment fund, but founder Masayoshi Son committed to an $8.8 billion buyback after it reported its latest quarterly results.

One aggravating factor: Chinese regulators made ride-hailing app Didi, one of the fund’s chief investments, stop accepting new customers and pull its app, resulting in the company’s shares plummeting.

The Japanese fund’s investment in Didi has now lost nearly $5 billion in value since its initial investment, Alex Wilhelm writes.

Taking a production-centric approach to enterprise-wide AI adoption

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Training an AI to do something is difficult, and deploying AI solutions across an entire enterprise is an undertaking most companies struggle with.

Because the field is still taking shape, there’s no single framework for managing such a project, and organizations need best practices like fish need water.

Roey Mechrez, co-founder and CTO of BeyondMinds, outlines the main barriers to enterprise-wide AI adoption, offering detailed suggestions for addressing “the orchestration problem.”

According to Mechrez, “enterprises should take a step back and see the big picture of the AI journey, and start thinking of a systematic way to utilize many AI models in a single, robust framework.”

Haven’t switched from CentOS 8 yet? Here are your options

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The work lives of the users of CentOS 8, the popular free-to-use clone of Red Hat Enterprise Linux, were upended when Red Hat announced that it would cease supporting release 8 after December 2021.

“You can’t really blame a profit-centered organization for focusing on its objectives, but a shift in objectives can have significant implications for some users,” says Joao Correia, a technical evangelist at CloudLinux.

If you haven’t yet found an alternative, he shares a few open source options companies can use to reduce risks and comply with enterprise security policies.

“With just a month to go, time is running out.”

HashiCorp’s IPO filing reveals a growing business, but at a slower pace

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HashiCorp’s IPO filing last week gave us a good look at why the software company has managed to grow to where it is now: a strong subscription model driving “mostly recurring, high-margin revenues that have proven sticky over time,” Alex Wilhelm writes.

The company reportedly expects to be valued at about $10 billion, but with slowing growth, its per-share IPO pricing and resulting valuation may depend on whether the investors who are along for the ride get queasy during deceleration.

With a Section 1045 rollover, founders can salvage QSBS before 5 years

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Founders of companies that are eligible for Qualified Small Business Stock (QSBS) can pay zero federal capital gains tax when they cash out — if they hold those shares for five years.

“However, not everyone can time when to sell their company,” write Calvin Lo and Peyton Carr of Keystone Global Partners.

“The fact that many acquisitions happen before five years leaves some founders and investors short of qualifying for these powerful tax savings,” but a Section 1045 rollover “can salvage the opportunity in some cases.”