Chris Farmer, CEO of SignalFire, felt that startup valuations were becoming unsustainable several years before they finally crashed.
Farmer He repositioned his VC firm to invest in pre-seed and seed-stage startups and pared down deals in the most overheated areas: fintech and crypto.
"We were very fortunate that we had been conservative on valuation," said Farmer. "It hurt us on the way up, but helped us a lot on the way down."
SignalFire, which was the first VC to use a proprietary AI model to make investment decisions and help portfolio companies scale, announced Wednesday that it raised over $900 million for a set of new funds—nearly double the $500 million it closed in 2019.
While such a large fund shows that there was significant LP demand for SignalFire's strategy, Farmer admits that it took the firm more time to raise these vehicles than he anticipated.
“We were [initially] closing in Q1 2022, which turned out to be awful timing," Farmer said. "A lot of LPs just shut down shop and froze for some period of time."
He doesn't regret not having more dry powder in 2022, though. At the time, the market was too uncertain to commit to a lot of investments, Farmer said.
But a year into the downturn, conditions are becoming clearer, and he's seeing more attractive investment opportunities now.Prices have decreased across the board, and most companies have adjusted their projections to the new market environment.
"We now have enough visibility that we're getting quite active again," Farmer said. "We were on defense coming into the top of the market, and now we're going on offense."
For this new set of funds, SignalFire plans to continue backing primarily pre-seed and seed startups, investing in developer tools and applying AI to verticals ranging from healthtech to cybersecurity and SaaS.
The firm is also introducing a new executive-in-residence program, which pairs the former CEOs of successful companies such as Splunk and Evolent Health with startups that have a strong product and $5 million to $10 million in revenue, but need help scaling the business.
"We are well positioned for this next cycle," Farmer said. "I'm thrilled that we have the support of LPs to do that."
Related listen: On the podcast: Venture’s gravity check
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This article originally appeared on PitchBook News