How to Handle Silicon Valley’s Rising Valuations

It’s getting a little crazy out there in some pockets of the startup investing world. All the Series A deals I’ve seen lately have been much more expensive than they were even a year ago. I recently saw a fast-growing software company raising a Series A with just a few million dollars of revenue. But its valuation was more than $1 billion. 

I continue to prefer seed and pre-seed rounds for investments. The valuations (and traction) are far lower in those rounds — and low valuations increase the chance for upside down the road. 

I also continue to prefer opportunities outside of the San Francisco Bay area (SFBA). The vast majority of VCs are still based in SFBA. And that pushes up prices for any competitive round there crazily. Prices are far less inflated in other areas of the country.

As a non-SFBA guy, most of my big winners are outside of California. Shipbob is in Chicago. Cleartax is based in India. And Cabify is in South America. FabFitFun is in California — but it’s in Los Angeles, not the SFBA. I have a few nice investments from the SFBA — like Density — but I invested in that one very early (pre-seed). 

In summary, I’m looking for early-stage startups outside of California. That’s where my interests lie today because that’s where I see the most opportunity. Trying to compete inside the SFBA as an outsider is tough. It’s much easier in the rest of the country.