Venture Capital Caution Grows in Austin Despite Massive First-Quarter Funding Surge

In an interview with the Austin Business Journal, Emerging Companies & Venture Capital partner Andy Smetana said, “My general sentiment from a lot of conversations in a lot of board meetings and with clients who are trying to do early-stage fundraising is that the barrier to get funding for early-stage companies is much higher than it has been in years past.”

In many cases, he added, that means startups looking to raise their first round of funding must now prove significant market traction and revenue—unlike in the recent past, when companies could often secure backing based on a great business plan.

“I even had one VC tell me that for a seed stage check, they were requiring ARR [annual recurring revenue] of a million dollars,” Smetana said. “A lot of other people say they're not requiring that, but at least for one early-stage VC, that was what they stated as their requirement.”

With respect to the recent tariff announcement, Smetana noted that many of the mergers occurring are stock trades between two VC-backed companies—adding that such deals typically do not provide significant liquidity for investors or founders.

“The long-term impact is a little bit of a wake-up call for people, for early-stage founders, that VC money is not right for everyone,” he said. “And I think that there have been plenty of people out there that have been beating that drum for a while, talking about the benefits of bootstrapping as a founder, the long-term value creation that allows you to have, as opposed to welcoming other people into your cap table too early.”

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