VCs slow down pace of investing activity while early-stage founders still busy seeking funding
DocSend, a secure document sharing platform and Dropbox (NASDAQ:Â DBX) company, today released new data based on its Pitch Deck Interest metrics showing Q2 founder and investor activity declined 6% and 12%, respectively, in comparison to Q1. However, the year-over-year (YoY) comparison for Q2 reveals a divergence between a slower pace of VC engagement and higher rate of founder pitch activity.
After a record year of fundraising in 2021, investor activity has cooled. Startups are still actively pitching for more funding, though: the supply of founder pitch decks being sent to VCs is up nearly 11% compared to the same time last year. Founders are now facing a more temperate audience as VC interaction with pitch decks, a proxy for demand, is down 7% YoY. This equates to a gap between supply and demand of approximately 16%.
While the new Q2 data paints a somewhat sobering picture, the mid-year analysis of the same data shows a healthy, if not more balanced, fundraising marketplace. In the first six months of 2022, VC engagement with startup pitch decks increased 3% YoY. During the same time, founders increased the average number of pitch decks sent to investors by almost 14%.
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As more founders clamor for the increasingly discerning attention of VCs, investors continue to become more efficient in their evaluation of pitch decks – shaving off 10 seconds (2:46 – 2:36) on average in Q2 of this year compared to last. This speaks to an overall trend of efficiency in the marketplace, characterized by the need to manage high-volume deal making in a remote environment.
DocSend’s Pitch Deck Interest data primarily reflects early-stage fundraising activity – from pre-seed to Series A. Additional market data on funding outcomes indicates that many investors are wary of betting big money on late-stage startups following declining valuations in the public and private markets. Instead, they have shifted their focus to smaller, early-stage bets. For example, seed-stage deal count is estimated to be over 1,300 deals closed in Q2 – surpassing the highest mark set during all of last year’s frenzied VC activity, according to Pitchbook data.
“Early-stage investing is operating like business as usual, and that’s a trend I anticipate will continue in the second half of the year,” said Russ Heddleston, DocSend co-founder and head of commercial, DocSend at Dropbox. “A number of funds were raised over the past couple of years and investors are still sitting on a lot of dry powder. The wise VC is looking at opportunities in pre-seed and seed stage startups with strong fundamentals. As the marketplace settles, investors are looking to get in early on a larger number of small bets, and that’s keeping this section of the landscape healthy.”
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Key Leading Indicators of VC Fundraising Activity
There are three core metrics unique to DocSend for tracking investors’ hunger for deals and founders’ quest for capital.
- Founder links created – the average number of pitch deck links each founder is creating via DocSend. This serves as a proxy for supply of startups seeking funding. A “link” refers to the unique URL a founder creates using DocSend to share their pitch deck with investors. When the average number of links increases, it means that founders are sending their decks out to more investors.
- Investor deck interactions – the average number of investor interactions for each pitch deck link. This serves as a proxy for demand for investments. The higher the interaction metric, the more often decks are viewed, shared and revisited by potential investors.
- Investor time spent – the average time spent per pitch deck by potential investors. This metric offers a look at how long VCs are spending reviewing deals. More time spent per deck could mean investors are more closely scrutinizing deals.
