Shasta Ventures’ VC Is Sounding the Alarm on Unicorn Startup Failures

• Jason Pressman is managing director of VC firm Shasta Ventures, which manages over a billion dollars.
• He does not view the rapid demise of the one-click startup, Fast, as an isolated incident.
• Pressman says most categories of startups are “overfunded and overhyped.”

An early-stage investor says the biggest war for talent he’s seen in his quarter-century working in Silicon Valley — combined with scores of overvalued, eight-figure startups — will lead to more large, venture-backed companies going out of business. 

“I think there’s overfunding and overhype in many sectors,” Jason Pressman, the managing director of Shasta Ventures, said. “It’s hard to think of a category that doesn’t feel overfunded to be quite honest.” 

Shasta Ventures is an early-stage fund with $1.4 billion under management that has invested in companies from Nest to Nextdoor.

Pressman said he doesn’t view the demise of Fast — the one-click startup once valued at a billion dollars that abruptly shut down earlier this month — as an isolated incident.

“We will see more Fasts,” Pressman predicted. “I don’t think it’s going to become super prevalent, because companies are well-capitalized and boards are adjusting, but there will definitely be more.”

After leading the development of Walmart.com as an executive at the retail giant in the early aughts, Pressman joined Shasta soon after it started, in 2005. He is unusually blunt among Silicon Valley VCs in his assessment of the tech market, but he’s also critical of peers who have been scared away from backing early-stage companies.

Pressman said VCs have not only soured on financial technology companies like Fast but also on social-media and consumer hardware ones, in the wake of Meta’s nearly 40% drop and Peloton’s 80% plunge in stock value over the past year. (Shasta invested in a Peloton competitor, Tonal, in 2020; Robert Coneybeer, Shasta’s cofounder and managing director, sits on Tonal’s board of directors.)

Pressman, who sits on the boards of the online neighborhood community site Nextdoor, human-resources software company Lattice, and subscription-management company Zuora, said he has seen a sudden and marked shift away from the grow-at-all-cost mindset that dominated much of the last decade. 

“All the boards I’m on and our firm is becoming more cognizant of the fact that the fundraising environment is more challenging, and therefore we need to moderate burn rates, have slower growth plans, and raise sooner with lower expectations,” Pressman said. 

The biggest challenge startups face is the tight labor market, especially for highly sought-after roles like engineers and UX designers, according to Pressman. He says every board discussion is dominated by concerns about turnover rates of more than 20%, which means companies have to spend big to retain and attract top employees, increasing salaries by upward of 30% a year. 

“The war for talent is nuts,” Pressman said. “I’ve been in the Valley for 25 years, and I have never seen anything like this.”

Given Pressman’s concerns about overhyped tech companies, one might expect Shasta to pause or at least slow its pace of investing, but Pressman said that would be a major mistake.

“We have a strong view about temporal diversification, which is just investing smoothly over time,” Pressman said. “What most early-stage VCs do, I think, is really stupid, which is that they react to what’s going on in the public markets. And that’s really dumb because the companies we’re investing in are five to 10 years away from

liquidity

, and it doesn’t matter what’s going on in the public markets right now.”

Uber, Airbnb,

Slack

, and Warby Parker are among the companies that famously started right before or during the last Great Recession. 

Shasta has made ten investments so far this year, according to PitchBook data, including Kubit, a product-analytics startup; Mayday Labs, which makes smart calendars; and CommerceIQ, a retail e-commerce management platform.

One thing Shasta has been doing differently for the past few years is selling some positions early, before a company goes public or gets acquired, a once-frowned-upon practice that has shed much of its stigma and has become popular with other early-stage VCs.

Pressman won’t disclose which positions Shasta has cashed out, but said when a company in his portfolio reaches a billion-dollar valuation, Shasta will sometimes sell a 10% stake to take some money off the table.

“We’re going continue to evaluate those opportunities as an early-stage fund,” Pressman said.