Welcome to Startups Weekly, a fresh human-first take on this week’s startup news and trends.
The market is down. The party is over. And Peloton of X startups aren’t too happy right now.
As tech stocks take a hit, the big question on my mind is how a dip in market performance impacts early-stage startups. There’s the obvious argument here that startups have been preparing for a re-correction, and that market highs were knowingly unsustainable, but just because expectations exist doesn’t mean that ripple effects float away.
Despite investor’s outward rationalization, the red, or millennial pink, flags are not going unnoticed, with some firms lowering revenue expectations even at the earliest stages. On Equity this week, Alex and I interviewed Bessemer growth partner Mary D’Onofrio, who admitted that her expectations for exit multiples have changed, and that the IPO window is mostly closed. The stocks may be sane, but that’s still kind of sad, right?
D’Onofrio is seeing rounds taking longer, VCs asking more questions and the return of full due diligence (which, for anyone who has been reading this newsletter, is music to my paranoid ears).
My take, after speaking to a handful of venture investors and founders, is that we’re going to see the return of the lean, green startup. In the past, stock market dips may have caused a retraction in venture capital dollars, leaving startups to crumble under lack of capitalization. In today’s market however, there’s never been more capital in the venture world.
A venture-backed early-stage startup has an elusive line to toe, because a decline in valuations isn’t a decline in capital. I expect to see founders with cash in the bank take on a leaner mindset, maybe spending more conservatively or thinking about runway again. Vernacular will change: If becoming the “Amazon of X” isn’t the smartest target, founders could instead focus on building out key capabilities that will help them survive an even bigger slowdown. It may be a while before a founder tells me that their capital is offensive, not defensive.
The return to normalcy feels foreign, but that’s because we’ve been in wonky times for an extended period of time. Going forward, I am paying attention to how startups speak about growth in the coming months. You’re raising money, but is it to hire, develop, acquire or just be able to exist?
For my full take on this topic, check out my latest TechCrunch+ column: 3 views: How should founders prepare for a decline in startup valuations and investor interest? I’d also love to know how you’re reacting to the news, so tweet me @nmasc_ and change my mind.
In the rest of this newsletter, we’ll get into education’s emotional pivot, fintech proactiveness and some insidery buzz in the VC and startup world.
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