In the last week, I’ve been invited to invest in two hot deals on AngelList.
Both companies are doing well because of changes caused by COVID-19. One is in telehealth. The other is in food delivery.
But when I checked the valuation on these deals, I was shocked. They were expensive. Both had extremely high valuations based on their current traction.
It’s clear that these startups have promise. But I decided not to invest in either of them. They’re just too unproven for the price they’re asking.
On top of that, there is going to be an incredible amount of competition in newly hot areas like telehealth and food delivery. Food delivery is an especially tough market to make money in. As far as I know, there are only a handful of profitable companies in the space.
I believe the long-term case for telehealth is extremely strong. And I’m looking for promising deals in this area. But I’m not going to overpay by 2x to 3x to get access to a pre-revenue startup. I recommend keeping your standards high, no matter how “hot” the sector is.