Coelius Capital raised $33.3 million in 2022 before “deep freeze”

Former entrepreneur Zach Coelius raised a new $33.3 million early-stage venture fund in the first few weeks of 2022 — just in time for a year he now describes as “ice cold, like a deep freeze” for VC deals.

Why it matters: While 2022 put an end to free money and high valuations for just about any startup, Coelius argues that even the best companies held off on raising capital as the were able to stretch out their existing cash.

Looking back: “For the last 10 years, anyone with a checkbook in this job looked like a genius,” Coelius said.

• Across the 60 companies he’s backed at the pre-seed or seed rounds over the years, only one has gone bankrupt — “that’s not because I’m good, it’s just because there’s been so much capital keeping things alive even if they didn’t deserve it,” he said.

Looking forward: “2023 is going to be incredibly bloody” and full of down rounds, structured rounds, and the like unless there’s some macro-level change, Coelius predicts.

• VCs will aggressively push for lower valuations because “you can’t go to your [limited partners] and say, ‘oh look, I paid 100 times the revenue’ like last year,” he said.
• Coelius expects to spend next year helping existing portfolio companies fund-raise (and avoid the worst terms) and predicts that by the end of the year, at least half will have had layoffs since the downturn began.
• And we’ll see startup shutdowns next year too, he added.

Between the lines: Another result will be that investors with new funds like Coelius will take much longer to deploy their capital — he predicts this new fund will take him at least three years.

• And LPs are not complaining in the slightest about this change after pandemic-era VCs raised new funds at unprecedented speeds.
• Coelius is in part able to stretch out his deployment cycle because he also has a so-called rolling fund, from which he co-invests into his early-stage bets.

Details: LPs into this new fund include Industry Ventures, Chris Sacca, Nimble Ventures, Ben Nasarin and Tenacity Ventures, Karen Page, and Frederic Kerrest, among many others.

Go deeper: The curious case of 2022’s venture fundraising