Jeffrey Thomas is the Executive Director of Lever and the Managing Partner of Lever’s venture fund. Lever is both an investor and a deal syndicator. They invest in companies that will benefit Western Massachusetts through job and wealth creation. Their investment portfolio spans a variety of verticals and stages of company development. Massachusetts Founders Network (MFN) is a platform for Massachusetts-based startup founders to connect with each other, access capital and educational resources, and access support and other benefits. MFN sat down with Jeffrey to discuss the trends that he sees in the venture capital ecosystem.
VIDEO TRANSCRIPT
MFN: So, Jeffrey, could you tell us a little bit about what you have noticed in the Massachusetts ecosystem over time? What are the changes that you’ve seen in the 10 years of Lever’s existence?
Jeffrey Thomas: In the 10 years that we’ve been running Lever, we’ve seen a couple of cycles I’d say driven primarily by the availability of risk capital. Basically, when the stock market’s doing well, investors are willing to tolerate more risk, and they feel like they have more money to play with. So loosely, we see the availability of capital tracking with the stock market. But then other factors come in. Early in the pandemic, you know, we saw very little investment activity, there was so much uncertainty that people were unwilling to risk, commit risk capital. But then, about a year later we saw a very high level of deal flow and capital moving into early-stage startups and the pendulum swung in the favor of the startups. And we see a lot of money chasing a relatively small number of quality deals, which favor the entrepreneurs, and the pendulum swung back about a year and a half ago, as we emerged from the pandemic, and from factors I don’t even fully understand. But now, I’d say it’s maybe a little more normal. Founders are telling us, it’s harder to raise money than it has been. But I think if you look over a longer period of time, we’re probably at about an average level relative to, you know, historical references. So that’s my answer. I hope that’s helpful.
MFN: That’s very helpful, thank you. What about the current day? Where are we right now? What trends are you seeing right now? And where do you think we’re heading?
Jeffrey Thomas: So, right now, although it’s sort of an average time in terms of availability of risk capital, we are seeing startups struggle a little bit to raise money. Interestingly, what we’re seeing is not so much the early stage investment, the industry, the convertible notes in the pre-seed stage, but more at the seed stage, where companies already raised maybe a half million or a million dollars of money from friends and family or from angel investors who have a board, but then when they go to try to raise money from venture funds, they’re struggling. So we’re essentially seeing that the bar has been raised by venture funds that are looking for less risk. That means they’re looking for companies that are in the market that got some good traction, there’s good revenue growth, maybe some profitability. And they’re also looking for what we call lower valuations. So they’re negotiating harder, for better deal terms, essentially buying a larger fraction of the company for the same amount of money, relative to say a year and a half ago.
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