Great insights from David Freiberg on the state of startup fundraising. You can watch the full interview here.

"Lately, there's a real capital problem. Big projects that historically have been fundable are becoming less fundable."

"As they become less fundable, seed investors don't want to invest in them because they're afraid the Series A investors won't be there, who in turn are afraid that the Series B investors won't be there. No one wants to come and pick up the scraps of the company that's now getting priced in a down round."

"That's the other problem. So much of investors have been trained in the last 15 years to be momentum investors. You invest in stuff when it's going up; you don't invest in stuff when it's going down. In the last year, the index for growth stocks has declined by 70 to 80%. So, if you raised money at an A or B valuation of 100, are you now worth 20? And if you're worth 20 and you've raised 40 million of cash, you're now worth less than your preference stack. That's the wall that everyone's starting to hit."

"The investors that would do late-stage investing are really nervous to fund a company that's now worth less than their preference stack. You've got to go negotiate with the existing investors and recap and restructure. It doesn't mean the companies are valueless; it just means that the value now, like with all public companies, is worth less than the cash that's gone in. There's a real kind of reset that's happening right now."

"The leap of faith problem is that I'm betting on the idea that if you hit these milestones, someone will be there to fund the next round. Well, today the likelihood of that happening is down by 80 or 90%. So it's really hard to make the early-stage investment too. We're seeing a rationalization away from the kind of longer-range, harder tech problems. Everyone's rethinking their business model, their go-to-market strategy, and asking, 'How do I get customers now? How do I make money now? What can I do?' There's a lot of pivoting happening in the market right now."

"How this all shakes out could scare a lot of capital away because then you see what feels like a scary market time, and that keeps people out. I think that's the biggest fear right now for most investors and entrepreneurs."