Each quarter, Startup Success sits down with Steve Lord, COO and Chief Knowledge Officer at Burkland, for a candid read on the market founders are operating in. Steve’s quarterly check-ins have become some of the show’s most popular episodes. He covers everything from fundraising and IPOs to interest rates and the broader economy, always with an eye on what founders should have on their radar next. Recorded on July 1 as Q2 wrapped, here’s his take on where the startup ecosystem stands heading into the back half of the year.
The Power Law, on Full Display
If there’s one concept Steve wants founders to internalize this quarter, it’s the power law of venture capital. A fund writes checks into a hundred companies knowing most won’t work, betting that a couple will return 100x and carry the whole portfolio.
The recent wave of mega-IPOs is that power law made visible. SpaceX has already gone public at a trillion-dollar valuation, with OpenAI and Anthropic potentially close behind. Liquidity has been tightly metered for a couple of years, and then, all at once, outcomes like these arrive.
“These three IPOs, if they happen this year, will create more value than all of the VC-backed IPOs this century.”
~ Steven Lord
Those returns don’t just sit still. They get recycled back into startups. And you can already see the largest firms front-running the cycle. Steve notes that a single top-tier fund has been writing roughly two checks a week, deploying capital as early as possible across seed, Series A, and Series B, so the power law can play out across as many bets as possible. For founders, that means very large VCs are sitting on a lot of capital and actively putting it to work at the earliest stages.
AI Still Owns the Headlines, But the Tide Is Turning
None of this changes the fact that AI remains the dominant story. But Steve is sticking to his prediction that the momentum will spill over into a rising tide that lifts the rest of the ecosystem in the back half of the year.
The data is starting to agree. Sources like Crunchbase and PitchBook show 2026 tracking toward a record year for first financings, meaning the first institutional capital going into a startup. Steve points to a company that just closed a $30M seed round, the kind of deal that barely used to exist. If the pace holds, the market could see six or seven thousand of these first financings this year. The money is beginning to move, and the job now is to keep it moving.
Where the Capital Is Flowing, and Where It Isn’t
That said, the flow isn’t even. Fresh LP capital is going almost exclusively to the top five or ten VCs, and those firms are absorbing the largest, splashiest rounds. It’s a clubby environment at the top, since people like to invest alongside people they know, and that can crowd out smaller funds that are having a harder time raising right now.
The flip side is opportunity. Because so much attention is concentrated on the hottest AI deals, a lot of room opens up everywhere else. Steve points to a sector like biotech. Unless a company has an AI angle, the mega-funds mostly aren’t chasing it, which leaves more space for the specialist investors who focus there.
“Don’t think you’re going to just toss your deck into the fray over at a16z, unless you’ve already had some of those conversations. But in terms of the specialist funds that are really focused on your particular niche, it’s probably pretty open.”
~Steven Lord
The message for founders is simple. Don’t just toss your deck into the fray at a marquee firm unless you’ve already had those conversations. But if there’s a niche fund built around your particular space, that door is probably more open than the headlines suggest.
Does the Stock Market Move VC Cycles?
A founder wrote in with a sharp question. “Does the stock market impact VC cycles?” Steve’s answer is yes, but not as directly as you’d think.
The stock market is a discounting mechanism. It isn’t pricing what happened last week. It’s pricing what it expects to happen by year-end and beyond. Venture capital, meanwhile, is a deeply cyclical industry, even more cyclical than the broad equity market, because it competes with every other asset class for investor capital. When bond yields are high and a recession looms, LPs pull in their horns. When capital is cheap, money floods in.
Where the two really intersect is on the exit. IPOs are the dream outcome, and a healthy IPO market is very much a function of the stock market’s overall mood. The other link is valuation. When public companies in a sector trade at a premium, VCs tend to want that same premium reflected in private rounds.
The practical takeaway for founders is that one bad day on the market won’t sink next week’s round. A six-month bear market is a different story, since that kind of sustained pressure creates a vibe that flows through every fundraising conversation. Isolated headlines rarely reach your term sheet.
A Quieter News Cycle, and Why It Matters to Founders
When Steve recorded this in early July, the biggest cross-current of the quarter looked to be easing. The conflict in the Middle East appeared to be settling, and with it, the daily whipsawing of the news cycle and the markets.
Steve was careful not to overstate it, and events since the recording have proven that caution warranted. His durable point has nothing to do with any single headline. Lower volatility, whenever it comes, means fewer distractions and a steadier backdrop for building a business. And when volatility returns, the same discipline applies. Steve’s advice is to keep founders from getting distracted by all of the thrash out there, whichever direction it happens to be moving.
Don’t Bank on Rate Cuts
Markets, as the saying goes, climb walls of worry. Beneath the hand-wringing over inflation and geopolitics, the underlying economic data keeps chugging along. Consumer spending is the metric Steve watches most closely.
On interest rates, he’s tempered his expectations. With inflation still elevated and the reasons for it fairly well understood, the string of cuts founders may have been counting on in prior quarters looks off the table. A token quarter-point cut around the midterms is possible, but Steve is no longer expecting a sustained easing cycle.
Here’s the part founders should hold onto. Even a cut wouldn’t change your day-to-day reality, because rate moves take 12 to 18 months to percolate through the economy.
“Even if the Fed cut rates today, a founder trying to build a startup wouldn’t really feel it for a year.”
~Steven Lord
The macro backdrop is important, since it shapes the whole funding environment, but it’s not a tactical lever for your company. Stay focused on building.
Get Your Ducks in a Row Before the Call Comes
If Steve is right and capital keeps working its way outward, deals will start closing faster. In favored sectors, that can mean going from term sheet to close in three weeks. The window to get ready is before that happens, not after.
“The time to make sure your financials are in shape, your hiring plan is in place, and your accounting is squared away is not when the money starts to unlock. It’s before that.”
~Steven Lord
The scenario to avoid is the one where a VC reaches out asking if you’re raising, you say yes, and then you admit you haven’t balanced your books in six months. When there are a lot of hands in the air for the same capital, investors don’t wait. Whether you get ready with Burkland, another partner, or on your own, the point is to be ready to respond the moment the call comes.
And Don’t Let AI Pitch for You
Steve’s last piece of advice is the most pointed. Don’t mistake AI for a fundraising shortcut. Investors at top firms can already spot a deck generated by AI, and if they sense a founder trying to shortcut one of the most important conversations of their company’s life, it works against them.
Even on the CFO side, Steve notes, when a diligence question comes back with an AI-generated answer, the response is the same. They need to hear it from you.
Use AI as a tool, or a place to think from. But the story still has to be yours, because at the early stage, investors aren’t buying the deck.
“VCs at an early stage invest in people. Everything else is just part of the story.”
~Steven Lord
No model can replicate the reason you founded this company, the need you saw in the market and the drive to go fill it. That’s what investors are backing.
Thanks Steve for another sharp, candid quarterly read. We’re already looking forward to having you back in the fall for a full Q3 recap.
Brenda Hernández Jaimes: Podcast Producer & Talent Coordinator, Ellas Media
Angela R. Chong: Audio Editor & Post-Production Producer, Amplify Podcasts
Intro 00:00
Welcome to Startup Success, the podcast for startup founders and investors. Here you’ll find stories of success from others in the trenches as they work to scale some of the fastest growing startups in the world. Stories that will help you in your own journey. Startup Success starts now.
Kate 00:18
Welcome to Startup Success. Today we have Steve Lord in studio. Steve Lord is the COO and Chief Knowledge Officer at Birkland. He joins us at the end of every quarter to talk about what happened during the quarter and his predictions on what’s ahead. Steve covers everything from fundraising to the economy and to what founders should have on their radar. These episodes are always extremely popular. Please join me in welcoming Steve Lord. Steve, it’s so great to see you. Thanks for joining us again.
Steven Lord 00:56
Thank you. Thanks for having me. Great to see you too.
Kate 00:58
We love these episodes, they’re super popular with our listeners. I can’t believe we’re wrapping up Q2. Can you?
Steven Lord 01:06
It was just the holidays, my God. I know, I know. Same here, like, wait, what? Hold on.
Kate 01:12
I know time is flying. It’s July 1 for everybody listening when we’re recording this, which is insane. So, tell us, what was your take on Q2?
Steven Lord 01:23
So, I think the broad messaging there is we had a lot going on in Q2, a lot of cross currents. We still have some sort of like a hangover on them, but it seems at least like there’s a viable pathway to the conflict in the Middle East, at least simmering down a little bit. I don’t know if we’re going to get to the sort of peace in our time kind of thing that a lot of folks are talking about, but it does seem to be on its way toward at least a less impactful situation there, where we were getting whipsawed literally every day, you know. You know, the Iranians have agreed to this peace, and then the Iranians are like, no, we didn’t. So I feel like that’s going to help keep the volatility down, both in the news cycle and in the markets, which is great for what we do, and for founders out there trying to build a business and stop getting, you know, distracted from all of the thrash that’s out there. That’s a good thing.
Kate 02:15
That’s a great thing, you know. That leads me to something. We had a question come in from a listener for you, and it kind of relates to what you just said. It was a founder, and the founder, he asked, Does the stock market impact VC cycles?
Steven Lord 02:32
It’s a great question.
Kate 02:33
I know,
Steven Lord 02:34
Yes, it does, but it isn’t as linear as you would think. So, what you have to think about is the stock market is a discounting mechanism. It is trying to price today what it thinks is going to happen down the road. That’s why things like interest rates and inflation and bond yields and all that sort of stuff is dollar, right? That’s all very important because it impacts corporate profits down the road. The stock market’s not pricing what happened last week, it’s pricing what it thinks is going to happen at the end of this year, okay. So it brings a lot of valuation forward. VC is a cyclical industry, so that means it’s very prone to big, wide like swoops and dives around primarily the cost of capital, because VC competes with other markets for investor capital. Let’s just be honest. Right, so when bond yields are really high and recession is looming, you know, LPs and VC funds tend to pull in their horns, and vice versa. When we had zero interest rates a few years ago, capital was free, money was flooding into the VC ecosystem, right. So it is now. So it’s a very cyclical, much more cyclical than the broader stock market. There are sectors within the stock market, like industrials, that are also very cyclical, but broadly the VC market is more cyclical than the equity market. Now, where they do intersect, though, is returns, right? And you know everybody just saw the SpaceX IPO, right? That was a gigantic return for the VCs that were involved in that. So when the VC exit pathway is IPOs, which is very often the dream outcome, right? That is very much a function of the stock market’s broad sort of like mood. When IPOs are doing really, really well, VCs are doing very, very well too, because the returns are there when the IPO market is dead on its feet, like it was the last couple years. Then VC doesn’t really have the exit mechanism for the LPs to realize returns on their investment, and it gets harder. So they are tied together in that sense, through the exit ability. The last thing I’ll say, too, is they are also tied together in terms of valuation. So, when VC sees a sector or public companies valued with a certain premium in the equity market, then they tend to want to see that same premium reflected in VC fundraising valuations, so there’s a connection there as well.
Kate 05:03
Okay, that makes a lot of sense, and I think that’s helpful. So, founders shouldn’t feel like if there’s a bad day on the stock market, that’s going to then impact their round, their pitch next week?
Steven Lord 05:14
Not in isolation. If the stock market entered a six month bear market, then yeah, you’re going to feel that pressuring your fundraising valuation, because everybody looks at that and it just creates a vibe over the entire question. But one bad day, because you know, I don’t know, Anthropic sneezed, or you know something…
Kate 05:35
or like what we’re talking about, Iran, exactly, yeah.
Steven Lord 05:38
That broadly one incident like that will not tend to flow through.
Kate 05:43
Okay. And then I think you brought up a really good point about IPOs, you know. For a while there, there were so many IPOs, successful, huge.
Steven Lord 05:54
Oh yeah, you know, and there’s more coming. So we had SpaceX, a trillion.
Kate 05:59
Right, but before that, we didn’t have any for a while, but now we had SpaceX, we had more coming. Well, how will that play a role in, you know, the health of the VC?
Steven Lord 06:10
It’s really important.
Kate 06:11
Yeah.
Steven Lord 06:11
I think something that we haven’t talked about a lot here, and I think a lot of founders don’t really have front of mind is what we used to call the power law of VC, right. And the power law, for everybody who doesn’t know what I’m talking about, the power law is basically the theory that a VC fund is going to go write checks into 100 different companies, fully knowing that 98 of them are not going to work, but two of them are going to give them 100x returns, okay? What we just saw with SpaceX is the power law on display. Yeah, right. That’s a trillion dollar IPO, right. We have OpenAI coming, we have Anthropic coming, also trillion dollar IPOs. Right, so liquidity is broadly kind of been metered lately. It hasn’t really been that available, and then all of a sudden we get these three, right. These three IPOs, if they happen this year, will create more value, okay, then all of the VC-backed IPOs this century.
Kate 07:15
Wow, wow! What a stat.
Steven Lord 07:18
Pause on that for a minute. What a stat, right? So, a lot of news and a lot of thrash around the fear that that will drain liquidity, but for what we’re talking about, it’s actually providing liquidity. Those yields, those returns that are going to go back to the VCs that back these three companies are going to dwarf the entire AUM under whole firms under management, AUM is assets under management, of whole companies, whole VCs that are out there. That will get recycled into startups. The other thing that it does is, you know, you see a16z with, you know, a $15 billion fund, right? They have already made 75 investments through the end of May, right? If you add General Catalyst and Khosla, and a couple others, they have another 100 and some odd, right? So, just a16z alone, they’re writing two checks a week. (Wow.) What they’re doing is because of that power law, which we’re now seeing actually unlocking returns for them, they are going to put as much capital at work as early in the VC cycle as they can, the funding seed, A, B, so that that power law can be as widely distributed as humanly possible. So we are sort of seeing finally this cycle. I didn’t think it was going to be concentrated in three IPOs, but we are now finally getting to a place where that wheel is starting to turn around again, which is great. For founders listening here, you do have very large VCs that have a lot of capital that they are putting to work in, primarily seed and series A startups.
Kate 08:56
That is great news for founders listening.
Steven Lord 08:59
AI is still the story, though, so we haven’t gotten entirely out of the jam we’ve been talking about for the last several calls, because it is still heavily an AI story, but I’m going to stick to my prediction that that will spill over. There’s a rising tide lifts all boats here a little bit, and I do think we’re going to see it across the board in the back half of this year.
Kate 09:22
Good. Okay, that’s good news for other startups and other sectors.
Steven Lord 09:26
We’re already seeing it, you know.
Kate 09:28
Are you?
Steven Lord 09:29
Yeah, you, you’re starting to see like some of the statistics coming out of Crunchbase and Pitchbook, is that this year is on track to be either close or a record year in first financings for startups, okay. Now they’re being very deliberate in how they describe that, because they’re not declaring it by stage, and the reason they’re doing that is, I mean, we were talking to a company last week that just did a $30 million Seed.
Kate 09:52
Wow, that’s incredible.
Steven Lord 09:54
Didn’t used to happen, but it’s the first institutional capital going into these startups, so if you look at it on that basis, you know we may end up having six or 7000 of them this year, if things stay on track, which would be a record. So the money is beginning to move, and we just, you know, we got to keep our fingers crossed that it continues.
Kate 10:16
Excellent. What about the smaller VC firms, are they writing checks and moving money?
Steven Lord 10:24
I think they’re trying to.
Kate 10:25
Okay.
Steven Lord 10:26
The AI is still the story, though, creates kind of like this giant like vacuum in the in the marketplace where the really, really large firms that have a lot of name cred and a lot of, you know, sort of like market ability to move things, they’re taking up a lot of the really large rounds, and that’s not leaving a ton of room for people to get in on the edges. The other thing I’ll say is that fresh LP capital is going almost exclusively to the top five or 10 VCs, so smaller funds are having a hard time raising additional capital right now. Now I do think that starts to unlock if we’re talking about continues to happen, but for right now it’s pretty hard. This is at the upper echelons, a pretty clubby thing, so people like to invest along people they know, and that tends to shut out a lot of folks that would otherwise have been involved. But when you’re, when you’re doing … Anthropic just closed a round, I can’t get it quickly at some incredibly high valuation, right?
Kate 11:25
I saw that.
Steven Lord 11:26
And the reason they’re able to do that is because they’ve got five or six people on speed dial that they call and they’re like, Yeah, of course, because they’re in the same boat. But when most of the new funding is going to the top five VCs, it tends to crowd out, frankly, a lot of the other ones.
Kate 11:41
But you said you feel like that will unlock if things continue to move in this direction.
Steven Lord 11:48
Yeah, because the sort of like reverse liquidity that we’re talking about will begin to flow outward. The other thing to call out is that what it does do for everything but the hottest AI whatever, is open up a bunch of space for kind of everyone else, right? Like a good example is potentially the biotech space, right? None of these firms, unless they have an AI application, are really looking closely or heavily, at least not getting a lot of the headlines, so what that does is mean, okay, that means this capital is not chasing the next cure for cancer. So that might open up a lot of space for VCs that do focus on that to have a piece of those rules.
Kate 12:32
Okay. That makes sense.
Steven Lord 12:33
So, the founders, like, don’t, don’t, don’t think you’re going to just toss your deck into the fray over at a16z, unless you’ve already probably had some of those conversations. But in terms of the specialist funds that are really focused on your particular niche, it’s probably pretty open, so that’s a thread to spin as well.
Kate 12:50
Okay, good, good. So that’s pretty positive. What about the economy as a whole?
Steven Lord 12:55
It’s really fascinating, right, because there’s an old saying that, like, markets climb walls of worry. And so, while we’re all wringing our hands around the war in Iran and inflation, you’re actually seeing the underlying economic data chugging along. The one thing I worry a lot about is consumer spending. I watch interest rates pretty closely. We’ve been on this podcast several times talking about interest rate cuts. Frankly, I think they’re sort of out of the window as long as inflation remains elevated, and inflation is elevated, right? The key factor there, though, is we kind of all know why, right? So the Fed is going to be watching very closely to see whether the higher inflation that we’re beginning to feel is systemic in nature or you know, more episodic, because of the spike in gas and some of the other follow-throughs that we saw from the conflict in the Middle East. So now you’re kind of in this jam where the Fed is like looking at this whole thing. We also have a new Fed governor, right, who is handpicked by somebody who is addicted to lower interest rates.
Kate 13:57
Yes.
Steven Lord 13:58
So we’re going to see what happens. They’re going to be in a, in a bit of a pickle, I think, going into the back half of the year, but I’m personally kind of no longer expecting a lot of cuts. We might get a token one, I don’t know, maybe around the midterms, just to…
Kate 14:15
I feel like there’s got to be a lot of pressure, right?
Steven Lord 14:18
Tons. Right. Even if it’s a quarter point it would put a stamp on sort of the tenure of of the Fed, but I wouldn’t expect, and I wouldn’t, I think it’s important for founders not to expect what we were sort of thinking might happen in the last two or three calls ago, where we might get a strategy of lower interest rates, you know, 2, 3, 4, 5, cuts over a 12 or 18 month period. I think that’s out the window. Maybe we get one. That said, though, they’re able to do that because I think they kind of know inflation is probably capped, because it is, we know why it’s happening. And the economy continues to kind of show this incredible underlying resilience. So as long as those two things are in place, I don’t think we’re going to need to see interest rate hikes. We may see a little bit of a cut, and I think the important thing for founders is, as long as the economy is chugging along, startups are being founded, people are working on really cool stuff, there’s money to put at work, right? The whole side of cycle that we talked about earlier is still in. And I hope I’m right. For the founders out there that are not macroeconomically like interested or a lot of experience with it, interest rate cuts and interest rate hikes, interest rate moves need 12 to 18 months to percolate their way through the economy. So even if the Fed cut interest rates today, for a founder out there trying to build a startup, it’s not really going to be visible, or you’re not going to feel it. You’re going to read a lot about it, but you’re not going to really feel it for a year. So it isn’t, not, I don’t want to say it’s not important, of course it’s important, but it isn’t going to be felt by any startup listening to this, even if it did happen. So be focused on your startup and the funding and running and building your company. The macroeconomic backdrop is super important, and it plays a big role in this stuff, but it’s not a tactical influence on your company really. It needs a while to percolate through the economy, even if we get a token cut in the fall, it doesn’t really change the ground truth for your startup – not yet.
Kate 16:33
I’m glad you noted that again, because we all forget that at times. Because we, you know, the world’s moving so fast, so you just forget that it, there’s that time. We’re wrapping up here. Thank you again for joining us. You know, you’ve mentioned on previous shows that founders should just keep, you know, due diligence, get their metrics in place, keep their focus on their company, not get too distracted. Anything else you want to add as we go into the second half of the year?
Steven Lord 17:09
I mean, that’s pretty good advice. I want to maybe reiterate or reinforce the value of having kind of your ducks in a row. Like if we’re right on that capital beginning to work its way outward into more deals and more VCs and more startups, it’s more likely that some of this begins to happen at a faster clip. So you know, unless you’re in this very favored sector, which a lot of our startups are, so great. You know, you may go from term sheet to close in three weeks. But for everybody else, the time to make sure you’ve got everything figured out, your financials are in shape, your hiring plan is in place, your budget’s done, your accounting squared away is not when all of this money starts to unlock, if we’re right, right? It’s actually before that. So I just want to reiterate again, whether it’s with us or somebody else or yourself, just make sure you’re ready, because if you’re not ready and I’m right and that capital begins to move, there’s going to be a lot of hands in the air for that money, and so you want to make sure that you’re able to respond quickly, you know, when the call comes, because it’s not going to happen probably again, like a VC reaches out to you, and hey, are you guys looking to raise money? Yes, we are, but gosh, we haven’t balanced our books in six months. They’re, they’re gone. They are not going to wait for you.
Kate 18:29
No.
Steven Lord 18:30
So just be sure you’re ready, and there’s tons and tons of information out there on how to become ready, you know, from us and from everybody else. So just be aware of it. Read it. Then I think the other thing I will say is don’t get too distracted. It’s so easy,
Kate 18:47
So easy.
Steven Lord 18:48
So easy. And part of that distraction is don’t think AI is going to raise the money for you, right? We are already seeing, I met with some of the a16z guys last week, they can spot a deck made by Claude.
Kate 19:02
Really, I could see that, because in marketing I can spot something written by Claude, so that makes sense. Good point. I’m glad you brought that up.
Steven Lord 19:10
Maybe use it as a shell, but it’s not a cheat code for fundraising. Okay, everybody, don’t think it’s a hack. It isn’t. If anything, it’ll work against you, because they’ll sense a founder trying to shortcut, probably one of the most key conversations you’re going to have in your, in your company’s gestation. So, maybe a tool, maybe as a way to kind of like a place to think from, but don’t just create a deck and ship it off to the partner at the VC firm you’re speaking to, because it might actually hurt you.
Kate 19:41
I’m so glad you brought that up. What a great point. Yeah.
Steven Lord 19:46
And we’re seeing it. We even see it on our end when we’re asking questions from a CFO perspective, and we get an AI reply, and we’re like, no, no, no, no, we need you to answer this stuff, not. Claude. Like Claude’s great, but it’s not you, right?
Kate 20:02
Exactly. Yep, the pendulum is finding the right place for AI use. Yeah,
Steven Lord 20:06
VCs at an early stage invest in people, right? Yeah, everybody remember that they are investing in you as the founder. Everything else is just part of the story.
Kate 20:17
That is so true. Steve, that is said by every VC on this show over and over again. We are investing in the founder and that first team.
Steven Lord 20:27
That’s right. So, if you created your pitch deck using Claude, what does that tell the VC?
Kate 20:33
Yeah.
Steven Lord 20:33
Use it as a tool, but it should still be you communicating and crafting and telling that story, because obviously no AI is going to tell the story like you, because you’re the founder, right? You have the idea, you’ve got the passion, you’ve got the skills, the experience, whatever it is that led you to found this business, because you see a need in the marketplace and you want to go fulfill it, right? Claude can’t replicate that.
Kate 20:58
Never, never. So true.
Steven Lord 21:00
Just keep it in mind.
Kate 21:02
Great advice to conclude the show. Always love chatting with you.
Steven Lord 21:06
Yeah, me too. These are fun.
Kate 21:07
Crazy to say I will see you in the fall, or you’ll be back then.
Steven Lord 21:10
Awesome.
Kate 21:11
All right. Thank you, Steve.
Steven Lord 21:12
Thanks for having me. Cheers.
Outro 21:15
You’ve been listening to Startup Success. To make sure you don’t miss out on future episodes. Subscribe to the show in your favorite podcast player. Like what you hear? Tap the number of stars you think the show deserves in Apple Podcasts. For more tools and resources for your own startup success, check out Birkeland associates.com Thank you so much for listening. Until next time.