Overheard

• Facing hate in Atlanta. This week was difficult for many who were directly or indirectly affected by the events in Atlanta. A number of venture firms posted statements about the shooting. And some venture investors such as GGV Capital and Lightspeed's Jeremy Liew, are seeking matching donations for AAPI groups that are involved in anti-hate crime or other related work. We know that Asian Americans make up a sizable proportion of staff at tech companies. Are you working on other ways that VCs or the tech industry can work on these issues? Send me a note.
  
• Dilution issues. "Thesis: seed funds and 'accelerators' basically can no longer work together. Choose one path and you self-select out of the other." —Gil Dibner of Angular Ventures.
• YC effect or general bubble? "I've now talked to half a dozen founders who recently raised seed rounds at $20-40M pre - with just a demo." —Karn Saroya, CEO of Cover.
• Associates versus partners. "I believe non-partner VCs are just as important as partners when it comes to deal flow and adding value. I have strong relationships with many associates at other funds — they are rockstars." —Gale Wilkinson at Vitalize.

The Big Story

Hope springs for reopening plans

In Silicon Valley, after a year of lockdowns, venture firms are cautiously optimistic about soon reopening their offices — though they may come back to a different location or office set-up.

Venture firms are quietly discussing these plans. Some are looking at July 4 or Labor Day as targets or goals for gradual re-openings — assuming the vaccine rollout continues to gain momentum. (More than 20% of California's population has received at least one dose, according to CDC data.)

There are a lot of caveats. Most firms' plans are still in the early stages.

• Reopening discussions generally don't include offices in New York or other places that still have high case rates. But in California and the Bay Area in particular, there are signs of hope.
  
• Only staff who feel safe doing so should come to the office, keeping their own health conditions and other factors in mind. "First and foremost is everyone's safety," said Battery Ventures' Roger Lee. "And making sure people feel comfortable."
  
• Tech will play a role. Envoy check-in kiosks were a common sight in startup offices pre-pandemic. Matt Murphy of Menlo Ventures, which invested in Envoy, said the firm will likely use it to ask employees health questions and check them in. Apps to do health checks, book space and control numbers will be common, he said. (Forget those tablets, though: To avoid asking people to touch a shared surface, Envoy has switched to mobile check-ins.)
  
• Some firms will change when they expect people to be in the office. Pre-COVID, Menlo had two in-office days a week for investors in Menlo Park, and two days in San Francisco, with one "flex day." Those flex days could increase to two a week post-COVID, Murphy said.

Why not just wait? Investors want to meet founders face to face. Venture investments are years-long relationships, after all.

• Many VCs have changed their investing process during the pandemic. Before, few firms would invest without meeting a founder; now, many have invested over Zoom. That will continue post-pandemic, some say. "Generally, this has been great for VC to be decentralized," said Shasta Ventures' Jacob Mullins. (Disclosure: I previously worked for Mullins at a different firm.)
  
• "Everybody's making it work, but the reality is it just isn't the same depth of relationship being forged with people," Murphy said. "In our business, relationships have always been an advantage. If you're someone closer to that entrepreneur, you have a higher likelihood of winning" a deal.

Sand Hill Road doesn't have the same allure. The stretch of office parks near Stanford University in Menlo Park once provided one-stop shopping for founders marketing deals. But its centrality was already eroding before the pandemic.

• Benchmark moved out of Sand Hill Road years ago. It now has offices in Woodside, California, and San Francisco.
• Menlo gave up its Sand Hill Road office during the pandemic and is looking for a Palo Alto or Menlo Park office, Murphy said.
• General Catalyst has given up its Palo Alto space — a house that served as an office — sources say, and hasn't made firm plans yet on a new Silicon Valley presence.
• Shasta is keeping its Menlo Park office but let its lease expire in San Francisco. It's waiting for the city's real estate market to shake out before opening a new office there, Mullins said.
• Coronavirus safety concerns have made San Francisco more attractive because of the open floor plans found there, compared to Sand Hill's traditional, office-heavy spaces.
• One possibility: More firms might make San Francisco their primary office and maintain a smaller office closer to the South Bay.

Much depends on the course of the pandemic. No re-openings will happen until local rules allow it.

• San Francisco is progressing through California's color-coded tier system. Under the orange tier, non-essential offices could reopen with limited capacity as soon as next week.
• San Mateo County, where Sand Hill Road lies, is already in the orange tier.
• Santa Clara County is also close to moving to the orange tier.

Questions linger. As health orders are lifted, work culture will take a central role. Will founders and fellow investors want to meet in person? Or will the convenience of reviewing decks on Zoom — and the opportunity to invest without regard to geography — prevail?

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Inside Track

• The U.S. can address the AI revolution — and make it "less divisive" — by taxing land and companies and creating an American Equity Fund, according to Sam Altman.
• To start your own venture fund, you need to start years before by building your edge, developing your tribe and honing your access to capital, David Beisel and Rob Go write.
• A year ago, Sequoia Capital published its "Black Swan" memo, warning of the dangers in the pandemic. Now, in a new memo, it is advising startups to "carefully" step on the gas with growth looking to pick up this year, while preparing for more volatility ahead.
• VC associates' to-do: get super organized, get comfortable with known unknowns, have an opinion and be willing to change it and make sales and customer service a priority, according to Sarah Holmes at Unshackled Ventures, who reviewed 1,670 startups over the past year.

Need to Know

• A pretty good year (pandemic notwithstanding). Sequoia's Roelof Botha on team culture, IPO distributions and venture performance.
• Another outsider political bet. Peter Thiel has put $10 million into a super PAC for J.D. Vance, the Hillbilly Elegy author who may run for an Ohio Senate seat.
• Gen Z investors. With loosening accredited investor rules, more Gen Z investors are getting into angel and VC investing.
• Startup visa redux? The NVCA published a report on immigrant entrepreneurs, part of its support for a startup visa, H-1B visa reform and an International Entrepreneur Rule. (PDF download.)
• Fund-finding. Former First Republic banker Samir Kaji has founded a startup to match LPs with venture funds and expand access to venture fund investing.
• From Protocol: Dan Macklin, a SoFi co-founder, is taking on a new challenge at Salary Finance.
• Also on Protocol: Gumroad raised capital under the Reg CF rule.
• This week in VC history: In 2008, TechCrunch smelled trouble behind AOL's $850 million Bebo deal. Sure enough, AOL later sold Bebo back to its founders for $1 million.
• Your weekend reading: How Clearview AI scraped the internet to build a facial-recognition tool and blew the future of privacy in America wide open.

Five Questions With...

Storm Ventures' Pascale Diaine

Pascale Diaine is a partner at Storm Ventures, which raised a $150 million fund in 2019. Previously, she founded Orange Fab, an accelerator for the European telecommunications firm Orange, which had companies including Talkdesk, Wonolo and Rallyteam. She invests in sales and marketing automation, AI/ML, computer vision and retail tech. Her investments include Sendoso, InEvent, German Bionic, Cloudwords and Passage AI, which was acquired by ServiceNow.

What are your partners most talking about at your Monday partner meeting?

The mixed (read: crazy) market environment we currently live in. Valuations are out of control even for companies that haven't yet found product-market fit and a repeatable sale process. We have never seen so many series A rounds reaching $20 million-plus and pushing pre-money valuations north of $80 to $100 million. It wasn't too long ago that series A rounds would average $3 million to $6 million for companies with revenues accelerating across $1 million in ARR. But these are becoming more of an exception than the norm.

What's a secret obsession of yours that most people don't know about?

I am totally obsessed with beach volleyball, I play as much as I can. It is a fantastic workout that isn't too hard on the body thanks to the sand. The mental part is fascinating. It includes trust (in your partner), ability to move on (after a bad action), resilience (if you are led by many points but still fight hard to come back), discipline (you gotta be in shape to move in that sand!!).

What is your favorite pandemic food?

Takeout: sushi; cooking: peanut butter sandwich. I really envy people who are able to find the time to make their own bread during the pandemic. I barely have enough time to shower every day. Oh wait, they probably don't have a 2-year-old toddler running around!

What company, outside of your portfolio, have you been most impressed to watch this year?

DoorDash: Even pre-pandemic and after losing $667 million in 2019, Doordash had already planned to go public in 2020. The COVID crisis obviously skyrocketed the demand for food delivery and they managed to reach a $55 billion-plus valuation on the public market.

Now that we seem to have a line of sight on the post-COVID world, we may wonder what will happen to the stock price when everybody rushes back out to restaurants to make up for the lack of dine-in experiences during the past 12 months.

What company or startup sector is the most underrated right now?

Air travel and hospitality — as the world gets vaccinated and gathering and traveling restrictions get lifted, everybody is going to run to book vacations and flights to make up for the year-long lockdown and to reconnect with friends and family. The travel and hospitality space is going to blow up within the next 10 to 18 months.