Q4 2024 Venture Financing Report – Interview With Alexa von Tobel

Key insights from Alexa von Tobel

On investing in companies driving industry disruption: “We believe that venture capital – when properly deployed – is the most powerful economic engine that the world has ever seen. … Economic value truly arises when big risks are solved, and when companies create innovative products and business models – often those that couldn’t have existed previously.”

On the best way investors can add value to startups: “One of our main objectives as a team is to be our founders’ first call. We strive to build relationships with our founders that give them space to not only share their wins, but also be open about their stickiest problems.”

On key trends from this quarter’s VC data: “The recent pullback in later-stage valuations may reflect a recalibration of expectations following years of inflated valuations. We are seeing continued conviction in early-stage investing, with seed-stage valuations remaining unchanged, while investors are adopting a more cautious approach in later rounds where the risks of overvaluation are more pronounced.”

Questions

With the firm’s growth from Fund I to Fund III, how have your investment goals or philosophy evolved? What are some of the ways you have managed maintaining hands-on time with founders?

We built Inspired to be the venture firm we wished existed during our own journeys as founders and operators. With each fund, our ambition has grown, but our core philosophy remains steadfast: We back early-stage founders with transformative ideas, brilliant teams and relentless determination.

We have an incredibly focused and consistent fund model, leading early-stage rounds with checks from $500,000 to $20 million. Because of our focus, hands-on time with founders is essential to how we operate. I think that comes uniquely to our team, as we are a team of entrepreneurs and operators ourselves. I founded LearnVest (acquired by Northwestern Mutual), where I worked closely with Mark Batsiyan. Penny Pritzker has started numerous businesses and served as US secretary of commerce, and Lucy Deland co-founded Paperless Post. We know what it takes to build a generational business, and from the moment we sign a term sheet, our entire team is committed to the marathon ahead.

When looking at some of your publications, like “Rebel Girls Money Matters: A Guide to Saving, Spending, and Everything in Between,” you emphasize the importance of speaking about money positively. How does this mindset translate in your approach to investing and advising your portfolio companies?

It’s a great question. When I founded LearnVest, our mission was to make financial planning accessible to millions across the country. A good financial plan means you know where you want to go and you know how money can help you get there. 

It’s a clear parallel to being a founder: The most successful entrepreneurs are those who can clearly articulate their vision and have established a five-year roadmap. Achieving that roadmap is a game of investment, and when you clear out the noise, the core of the job of a founder is capital allocation. As founders think about setting strategy and where to spend their time, they need to ask themselves: Am I investing company dollars into places with the best returns?

Lasting startups will live through different market cycles, and when capital is abundant, it’s even more important to have a strong muscle of capital allocation. Each year that you are ruthless about investing capital, the better you get.

As an investor in companies driving industry disruption, do you find the potential for a company’s growth or the transformative effect of new technologies more compelling? How do you personally define the success of a venture?

Alongside our incredible team, I come to work every day to back businesses that are solving the world’s most pressing problems. We believe that venture capital – when properly deployed – is the most powerful economic engine that the world has ever seen. We strive to push the limits of possibility, because in doing so we create the greatest reward for our founders, investors, teammates and the world. 

We believe that the only way for companies to generate outsized long-term economic value is to embrace big risks. Economic value truly arises when big risks are solved, and when companies create innovative products and business models – often those that couldn’t have existed previously. So, said differently: When a company can deploy technology in new ways, the potential for growth is incredibly high.

As a former founder and now a venture capitalist, how do you think the VC landscape has evolved most in recent years, and what trends are you seeing today that could make the biggest impact on the future of investing?

Sometime during the zero interest-rate policy (ZIRP) period, the VC model broke. While VC dollars should have been seeking high-risk companies – those with a high probability of failure but the potential to transform giant industries – they were instead chasing “safer” companies. These businesses may have looked strong in the short term, but they weren’t driving the kind of breakthrough innovation that builds enduring competitive advantage. I think the bar for what defines a good venture deal will continue to rise. 

This has been said time and again, but for too long, New York was underestimated as a venture capital hub, and I think we’ve seen and will continue to see the East Coast venture ecosystem grow. New York has always had a unique edge in certain industries (it made perfect sense to me to start a fintech company in the financial capital of the world), and I do think the talent landscape here is incredibly strong.

From the perspective of someone who’s been on both sides of the table, what’s the best way investors can add value to startups beyond just providing capital?

One of our main objectives as a team is to be our founders’ first call. We strive to build relationships with our founders that give them space to not only share their wins, but also be open about their stickiest problems. 

Because of our authentic operator DNA, we know firsthand that being a founder can be an incredibly lonely road. I think we provide the most value as strategic sounding boards, who can get in the weeds to problem-solve. 

Something that’s a bit unique about Inspired is that our team has more than 80 years of experience working together, so we take a whole-firm approach to collaboration. That means we’re able to bring in a huge mix of operational expertise – be it in tech, product, marketing, you name it – in direct service of our portfolio companies.

Given that 96% of our deals reported in Q4 2024 show that liquidation terms continue to favor companies, what advice would you offer to investors navigating these terms? Additionally, do you believe this trend will persist?

Investors should see “1x” liquidation terms as a fundamental aspect of backing top-tier founders at the earliest stages. Where Inspired invests at seed and Series A, liquidation terms are usually table stakes – we’re focused on backing visionary founders and their transformative ideas rather than on mitigating downside risk. Given the highly competitive nature of the venture market today, we expect these company-favorable liquidation terms to persist. For investors leading medium-to-later-stage deals, liquidation terms will likely stay competitive but are more of a function of broader market conditions.

Are there any other key trends or notable insights from this quarter’s VC data that you think are important to highlight?

The recent pullback in later-stage valuations may reflect a recalibration of expectations following years of inflated valuations. We are seeing continued conviction in early-stage investing, with seed-stage valuations remaining unchanged, while investors are adopting a more cautious approach in later rounds where the risks of overvaluation are more pronounced.

About Alexa von Tobel

Alexa von Tobel, CFP®, is the founder and managing partner of Inspired Capital, a $900 million pre-seed to Series A venture fund backing fearless founders solving the hardest challenges facing humanity. In addition, Alexa is the New York Times bestselling author of “Financially Fearless and Financially Forward,” and she hosts Inc.’s weekly entrepreneurship podcast, “For Starters with Alexa von Tobel.”

About Inspired Capital

We believe venture capital – when properly deployed – is the most powerful economic engine that the world has ever seen. At Inspired Capital, we back exceptional founders building an ‘Inspired Future.’ With nearly $900 million in assets under management across three funds, we take a generalist approach – leading early-stage rounds with checks from $500,000 to $20 million. Headquartered in New York City, Inspired was founded by Alexa von Tobel and Penny Pritzker in 2019. To learn more, visit www.inspiredcapital.com.