#8 March 2023: Valuations vs. Vibes
Your monthly filter for economic data & insights that matter.
A Note From the Scale Team
It's been quite the month at Scale! We're prepping for Missouri Startup Weekend, launching a Mentor Network, investing (TBD), and building something hugeee we will announce soon.🤫 What's keeping us up at night? The dozens of amazing founders we've met over the last month. With recent advancements in AI that lay the groundwork for future billion-dollar companies, we LOVE the current opportunities to invest. For example, synthetic data generation can advance the US beyond competing countries for geospatial data collection and labeling for sensor fusion data models -- a mouthful, I know... With that, we believe it’s never been a better time to invest in early-stage founders, so apply for our next round of investments of up to $150k.
Scale invests monetary and social capital in early-stage tech founders strengthened by struggle. We’re excited to bring you monthly updates about Scale, tech, and micro and macroeconomics. - We've filtered through thousands of sources, so you don't have to. Enjoy🥂
At the earliest stages, we're investing $50k-$150k and white glove support from a team that has built multi-$B tech companies. Apply here.
Join our talent network for founding team opportunities😎
Despite a tough period of funding in tech markets in 2022, there's been over $1 TRILLION of VC-Backed exits since 2020. More than 60% of the value of VC-Backed exits over the past decade happened in the last three years.
ChatGPT will create more companies than it kills, and OpenAI won't be the biggest company leveraging its AI. The same thing happened with Intel and semiconductors.
We recently launched the Scale Mentor Network, a collective of successful operators, builders, and subject matter experts empowering people with their knowledge. Apply here to become a Scale mentor. 🦸🏽♂️
📈 Macro Trend Report
INFLATION | Inflation continues to lag compared to the fed's expectations and target rate. Back in November, experts were predicting inflation to drop between 2.8%-3.1% in 2023, but it's looking far from that as food prices maintain their elevation. In fact, inflation rose 0.5% in January 2023.
TECH EMPLOYMENT | As new AI companies continue to grow, we can't wait to see how employees bring their creative hunger and build exciting new updates to traditional tech products as they leave their jobs (by choice or not) at well-established tech companies to these new ones.
HOUSING | According to Zillow, January had the second-lowest total of homes on the market ever (825k). Some experts predict that housing prices will remain flat while others will rise. With the current rate and economic environment, it seems hard to believe anything other than prices with decline.
VENTURE CAPITAL | Since 2010 60,000 pre-seed and seed rounds have been announced in the US. Even if this year looks bleak, in the last 23 years, investors have looked toward the Midwest and Southeast, and we love how these amazing regional data visualizations show these trends.
In 2022, the median pre-money Angel and Seed valuation increased 9.75% (to $4.9M) and 16.7% (to $10.5M), respectively. The median Seed deal value also climbed, while the median Angel deal value dropped slightly. Although early stage deals are somewhat sheltered from the market dip, growth stage valuations declined by a median of 17.1%.[Pitchbook 2022 US VC Valuations Report]
💰 Midwest Economics
Mercato Partners closed their $400M growth fund for investments into companies built in cities and states that have been underfunded. With an already impressive track record, including investment into our local friends Paytient, we're excited to see that our founding principle that great businesses can be built anywhere is spreading.
It was a grueling month for public equity investors, with red across the board. Retail investors might as well rely on high-yield savings accounts at this rate.
💰 Midwest Deals
Check out all 80 deals we tracked here for almost $1B total!
🐄 Midwest vs. National Macro Trends
🧠 This Month's Recommendations
📚 What We’re Reading
Whether exited or failed, post-startup founders are about three years ahead in seniority of their peers from the same university
Community is important, especially when building a business
We're big fans of angel investing, read more about why it's the best here
Thinking about starting a venture capital fund? Here is a tremendous article on portfolio construction and how to model your fund
🎧 What We’re Listening To
Scale's Managing Partner Willy Schlacks talks sectors and drivers of upcoming trends [9 min]
One of the best podcast episodes we've listened to is top 10 lessons of bootstrapping a $200M business with Patrick Campbell (ProfitWell) [74 min]
📅 What We’re Doing
We can't wait for Missouri Startup Weekend, taking place March 10th-12th, 2023.
Check out how the 2022 winner went from an idea to raising money from VC investors in just 7 months
InvestMidwest is returning next month on April 12th, and we are supporting the efforts at Scale as a 2023 channel partner!
Who is attending SXSW with us on March 10-19? Well we will be there virtually...
🎮 Midwest Tech of the Month
Our local friends at Healium announced an oversubscribed $3.6M seed round AND a partnership with Mayo Clinic to provide subject matter and development expertise. Their augmented and virtual reality products are already being used in education, healthcare, and military applications, and represent the largest private equity raise by a female-led business in mid-Missouri.
🚀 Scale Portfolio Company Highlight of the Month
Resource page for founders we made here 📒
Top AI tools to imbed into your workflows here 🤖
Build a financial plan for your next 24 months in under 30 minutes here 🤑
A spreadsheet to value employee compensation here 💸
Why should you angel invest? Because Venture Capital is the sexiest asset class that improves society while producing outsized returns, duh. Also, venture returns have proven to outperform public equities during a recession. -> If you are interested in angel investing, then sign up here 😇
Keep up with our Medium content here 🔖
💼 Scale job openings --> here