Final week, my colleague Aria Alamalhodaei wrote an unique on protection and house tech enterprise agency Countdown Capital’s plan to close down. Jai Malik, the founding father of Countdown, stated in a letter to his LPs that on account of how aggressive the commercial tech sector has develop into, he’s not assured about smaller enterprise corporations’ capacity to safe the significant stakes in startups they’d want to supply worthwhile returns.
As Aria wrote, the letter reads like a chilly glass of water to the face. Whereas winding down the fund is a mature transfer — GPs have a fiduciary obligation to their LPs, in any case — the information doesn’t assist the rising scuttlebutt within the VC world that the majority micro funds can’t survive exterior of a bull market like 2021’s.
However Countdown shutting down is probably going extra of an remoted occasion than an indication of what’s to return for micro funds this 12 months.
After I spoke with Malik again in 2022 concerning the launch of this very fund, he stated that Countdown was created to fill a void within the protection sector. His logic was that whereas bigger corporations like Andreessen Horowitz and Lux had been excited by backing startups on the Sequence A stage and later, nobody wished to put in writing the primary small checks startups must get going.
That’s modified right this moment, and it isn’t shocking given the sheer quantity of capital it takes to get protection startups off the bottom; the prices are incomparable to a class like SaaS.
That is additionally why Countdown’s destiny doesn’t portend cloudy skies for micro funds in different classes. A micro fund supervisor within the AI house, for instance, informed me that regardless of how energetic AI has gotten during the last 12 months, the elevated curiosity really hasn’t made a fabric distinction in pricing on the pre-seed stage the place their fund invests. So regardless of the class heating up, a $500,000 examine can nonetheless internet a agency significant possession on the pre-seed stage, they stated.
