Ashraf Hebela, J.P. Morgan’s Head of Startup Banking, may sit on the finance side of startups these days. But he once sat in the founder seat. It’s been his experience in these two worlds — as a founder and in his decades-long finance career, including a 13-year stint at Silicon Valley Bank — that informs his insights today.
Hebela joined the Equity podcast to discuss his recent Startup Insights report, specifically wading through data that reveals the latest early-stage investment trends, emerging sectors, and startup hubs beyond the Bay Area (Austin and Miami are two of them). Taken as a whole, Hebela explained, founders can gain insights on how to build the next unicorn.
Of course, to understand the investment landscape today, Hebela and host Kirsten Korosec looked back at 2021, a year in which “ample liquidity” helped spur the highest level of unicorn creation to date. Since then, the rate of unicorn births has declined 88% compared to 21% for first financings.
That decline isn’t all bad news, though, Hebela said.
“You see some healthy years pre-2021 and some healthy years post 2021,” Hebela said. “Even this year where you hear some folks feeling not so great about the innovation economy environment, it’s still trending towards a $180 billion year with deals trending towards that 15,000, 16,000 deal mark. Those are numbers that are above historical ranges, number one. And they rival the top-five years in the innovation economy historically.”
Hebela furthered his point, noting that taking out the 2021 macro factors, we still have great entrepreneurs and the rise of consequential tech like quantum computing, auto tech, space tech, biopharma, life sciences, and climate tech.
Hebela is cognizant there are challenges for founders today.
“It’s a little bit of a have and have not environment right now,” he said, pointing specifically to the startups with core AI products and those that are not focused on that. “I do think that it’s a different experience depending on the type of company that you’re trying to bring online. There are plenty of successful artificial intelligence companies that are not having a problem raising. In fact, there is so much capital available to them that they’re looking for things like private placements to get to those dollars because they’re raising $300 million or $400 million at a Series C; those were unheard of numbers back in the day.”
Regardless of whether AI is at the center of a startup, Hebela said he “would never count the entrepreneurial spirit out in the innovation economy,” later noting growth in areas like fintech, robotics, and clean tech.
So how does a founder hit the right mark when seeking funding?
Hebela’s recent Startup Insights report points to different traits that investors are looking for today, such as a founder coming from a top-tier university. But Hebela cautioned that it varies and is dependent on the sector and product the startup is building.
In other words, you do not need to go to Harvard or Stanford to raise dollars. Technical expertise may matter more in certain sectors like robotics, he noted.
“There are multiple vectors in which you can play your hand towards looking attractive,” he said, adding that having a great idea you’re passionate about and being resilient are just as important.
And to lean in on one recent discussion, we asked Hebela if leadership style such as “founder mode” matters.
Hebela said the “founder mode” column by Paul Graham contained a lot of valuable ideas, but he believes it’s important to focus less on the specifics of founder mode and more on the philosophy of it.
“To me that’s resilience and passion and commitment to the idea,” he said, adding how that looks and how that tactically feels from one entrepreneur to another should be different.
He cautioned against creating a monolithic set of attributes because that can be exclusionary.
“Those attributes can work really, really well for a specific gender or for a specific socioeconomic background, or for specific folks that have been fortunate enough to be part of the “inside crowd,” whether it be the universities or the former successful companies. So I think we need to be welcoming of the fact that those tactics will look different, and that should be a great thing. And that’s why I think, for me, it really comes down to the founders’ values: resilience, enterprising, innovative, [and] the ability to get out there and network to the best of their ability, create circles of trust, create advisorship, build off great ideas that are solving real problems.”
He added that he prefers these value-based attributes over culture. “There’s a little bit of some of that stuff where the culture can get a little dangerous and exclusionary,” he said.
Equity will be back with our weekly news roundup on Friday, so don’t miss it.
Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Wednesday and Friday.
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