Rebecca Kaden, Nicole Quinn and Eurie Kim Debate Venture Pricing and AI

Harry Stebbings hosts a live discussion with investors Eurie Kim of Forerunner Ventures, Rebecca Kaden of Union Square Ventures and Nicole Quinn of Lightspeed. They introduce their firms and debate seed pricing, venture fund strategies, AI and the difficulties of later-stage financing in 2023.

Quinn explains that Lightspeed has added growth and opportunity funds as it scaled, allowing it to continue investing in companies it backed early. She says the opportunity fund mainly invests in existing portfolio companies at later stages. Each participant speaks from the perspective and interests of her own investment firm.

Stebbings asks whether traditional seed funds can still compete when multistage firms write large early checks. Kaden disagrees with the premise: a dedicated seed investor can meet founders before an opportunity is obvious and develop a distinctive view, while larger platforms have many other demands on their attention.

Kim says some founders choose a lower valuation in exchange for the right long-term partner and specialized support. Quinn says Lightspeed often collaborates with seed funds, sharing early rounds or investing at Series A. She and Stebbings disclose that they have worked together on deals.

Kaden adds that the best opportunities need not be the hottest or most crowded. A seed investor can build a thesis in an overlooked area and find a non-consensus founder rather than compete solely for deals attracting everyone else's attention.

Asked whether seed is immune to the macro cycle, Quinn cites an internal look at historical data suggesting seed valuations had not fallen at the time. She attributes this partly to the lag between public-market changes and earlier funding stages, and partly to the amount of capital seeking seed investments.

Kaden takes the other side and predicts seed valuations will fall. She expects disappointing fund vintages, constrained fundraising and difficult follow-on rounds to reduce the capital pursuing seed deals. Her thesis depends on funds changing behavior over time; it is a 2023 prediction, not an observed conclusion.

Stebbings questions whether large firms will retreat when institutions value their brands. Kim says the long return cycle and successive fund vintages can obscure poor performance, and a small early check may still be attractive to a larger fund if it earns access to a later investment. The participants differ on how quickly incentives will change.

Kim asks how Lightspeed organizes its investing. Quinn says partners specialize by stage and sector and insists the firm focuses on investment carry rather than simply increasing assets under management. Stebbings challenges that claim in light of the firm's $7 billion funds; Quinn says partner headcount and global offices have also grown.

Kaden sees venture increasingly splitting into different kinds of capital and platforms, as other asset classes have done. Quinn describes Lightspeed expanding into practices such as healthcare. Kim contrasts that with Forerunner's shared portfolio and economics, which she says makes decisions about limited reserves a partnership-wide choice.

On Series A, Kaden describes a divided market. Businesses with strong momentum, AI exposure or experienced teams can still command high multiples, while companies with complicated stories or slower early progress may struggle to raise. She sees an opportunity for specialists who understand those harder markets before later investors do.

Kim cites figures from a recent internal presentation: an average Series A valuation of about $35 million in 2021, $40 million in 2022 and $35 million during much of 2023. She contrasts this with a larger decline at Series D. These are the figures and definitions cited in the discussion, not a complete market survey.

Quinn says price depends on what investors believe a company may ultimately be worth and argues some premium for AI can be justified by its potential. She says Lightspeed had invested over $1 billion across 54 AI companies over several years, not solely in generative AI that year. Her enthusiasm should be read alongside those existing investments.

Kaden says some of the strongest AI effects in her firm's portfolio came from existing companies applying new tools, not only from new AI-first investments. She believes accessible tools can change the trajectory of a business that already has a platform and customers; this is an investor's assessment of her portfolio.

Kim resists the idea that AI is uninvestable because foundation-model pricing is high. She distinguishes the expensive competition to build core models from a wide range of applications. Forerunner looks for a real consumer problem and asks whether AI can make a solution cheaper, faster or more scalable.

Quinn calls AI a potential 'lottery of time': if tools reduce time spent on writing, support and administration, people could use the hours elsewhere. This is a vision of possible productivity gains, not a measured promise. Kaden adds that application value should come from solving real problems, not simply from using the AI label.

Stebbings sees seed rounds priced at $40 million or $50 million valuations. Kim says such a round can resemble seed and Series A financing combined, but the company still needs enough progress to justify its next round; otherwise the following valuation may not increase. The required business metrics eventually matter.

Discussing a tougher Series B and C market, Quinn points to Daybreak, a company where she says she is on the board and Kaden invested in the B round. She believes strong teams with rapid growth can still raise, although valuations have compressed. The shared investment is relevant to their assessment.

Kaden says strong momentum alone is no longer enough for the best rounds: investors also want an attractive market and sound underlying economics. She describes another group of interesting businesses whose earlier high valuations make a new financing difficult despite a promising product.

The investors discuss reluctance to reprice companies because down rounds involve difficult capitalization and anti-dilution questions. Kim says a clean, reasoned reset can be preferable to delaying the problem. Quinn likewise prefers a down round with simple terms to financing with complicated structure that persists into later rounds.

Quinn raises the effect on employees whose shares or options may fall underwater, potentially prompting departures. The others acknowledge that repricing is hard but argue that preserving an artificial headline valuation with complex terms can defer the problem for founders, employees and investors alike.

Kim expects more companies to fail to graduate to the next funding stage and says seed investors need to understand what downstream backers will require. Quinn argues that a correction can prevent more money going into companies that have not found product-market fit. These are expectations at the time, not measured future mortality rates.

On acquisitions, Kaden expects some acqui-hires and small deals but thinks many struggling companies may close because potential buyers are conserving cash and concentrating on core operations. Kim says corporate development teams she has spoken to are analyzing companies, though many are not yet making purchases.

Kaden expects some venture firms to face consequences from weak vintages as limited partners confront over-allocation and a lack of liquidity. Kim says emerging managers whose first funds were raised around the recent cycle may be particularly exposed, while firms with more vintages have more chances to demonstrate performance.

Quinn says liquidity is a central problem when IPO markets are difficult. She mentions that her brother works at a firm buying older fund positions as a possible route to liquidity. The family connection is part of the context for that example, not evidence of a particular outcome.

For a closing prediction, Kaden says venture investing will move away from consensus and hot deals toward differentiated ideas. Kim emphasizes building businesses that solve tangible problems, citing an investment by a colleague in a technology-enabled auto-body chain. Both frame these as investment theses.

Quinn predicts multistage funds will increasingly share rounds with other investors rather than end up alone on a capitalization table. Kaden adds her prediction that consumer applications may use crypto infrastructure behind the scenes, potentially reviving the sector. Their upbeat crypto outlook reflects their investment perspective at the time.