After years of driving the big ambitions of startups, Silicon Valley investors are engaging in the dark ritual of offering survival recommendations to their portfolio companies.
In recent online slideshows, blog posts, and social media threads, venture capitalists who added Lightspeed Venture Partners, Craft Ventures, Sequoia Capital and Y Combinator told founders they needed to take emergency action for what could be the sharpest change in more than a decade. His recommendation includes cutting costs, preserving liquidity, and giving up hopes that the hedge budget or other investors will rush in with big checks.
“The boom periods of the last decade have ended unambiguously,” wrote Lightspeed, which has subsidized corporations such as the social network Snap Inc. and cryptocurrency exchange FTX, in a dispatch to startup executives published on Medium, a publishing platform, this month.
Investor warnings deviate from the expansion mantra first and foremost for startups in recent years, and are presented as symptoms of pulverizing the venture capital market.
Funding for global startups (about $58 billion in commitments in the middle of the current quarter) is expected to decline about a fifth in the era through the last quarter, according to analytics firm CB Insights. The Nasdaq heavy technology composite index is down about 25% from its all-time high in November, and SoftBank Group Corp. , which has invested more than $100 billion in investments, reported a loss of $26. 2 billion in the first quarter of this month due to falling valuations in its portfolio of technology companies.
Emerging investors have sounded the alarm beyond the moments of monetary and economic turbulence, adding the onset of the Covid-19 pandemic. But venture capital fund partners say the existing scenario is different. Beyond recessions, the Federal Reserve cut rates and pumped cash into markets to help the economy, offering liquidity and reasonable capital. This time, the central bank raised rates and withdrew cash from the formula in an effort to control inflation.
The Fed’s measures are generating more capital and increasing pressure on corporations to maintain their money flow. Early backers from Inc. and fintech startup Stripe, in a blog post last weekend titled “How It Ends. “
Sequoia, one of Silicon Valley’s most reputable companies, warned founders and CEOs in a March 2020 note about the dangers to businesses of closing the global fitness crisis, adding chain issues and canceling trips.
The existing ones look more like the 2008 currency crisis or the 2000 dot-com market collapse, said Sequoia, known for its early investments in Apple Inc. and Airbnb Inc. , among others, in a 52-page slideshow for about 250 founders about two weeks ago.
“We don’t think this is another abrupt correction followed by a V-shaped recovery as rapid as we saw at the beginning of the pandemic,” Sequoia said in the presentation, which was reported by the news site The Information. The slideshow, titled “Adapting to Hold On,” called it a “Pivotal Moment” and urged corporations to temporarily reduce expenses and maintain liquidity, noting that “it will be a longer recovery. “
The latest presentation reflects the message of a 50-slide presentation Sequoia sent to founders in October 2008, saying that the housing-related recession and over-indebtedness of finance — which it illustrated with a fallen corpse and a tombstone — meant corporations had to spend, focus on quality and reduce risk.
Bill Gurley, a landmark capital spouse known for his successful investments and for speaking out against venture capital excesses, has taken to Twitter in recent weeks for advice. as they were, then you head to a precipice like Thelma and Louise,” he said this month.
Some large cases are still ongoing. Space Exploration Technologies Corp. , or SpaceX, Elon Musk’s rocket company, just raised a new investment of more than $1500 million, for example.
And many startups have accumulated enough money thanks to last year’s fundraiser to continue operating for several years with existing funds, said Neeraj Agrawal, general spouse of Boston-based Battery Ventures. he said.
“Before you thrive, you have to survive,” Michael Seibel, managing director of Y Combinator, said in a startup video posted on YouTube this month. Airbnb is urging founders to reduce size, reduce ad spend and raise prices.
Venture capitalists also try to evaluate incentive ratings for sellers they have supported.
The emphasis on quality that quantity can have benefits, they said, noting that some of the most well-known players of the current generation, including Uber Technologies Inc. and Airbnb, were founded against a backdrop of economic weakness in the United States.
The war for skill may subside as job cuts spread across the tech sector, according to venture capitalists. disappear without access to reasonable money, they added.
Lightspeed titled his recent article on Medium, “The Benefits of Slowing Down. “While he emphasized that startups want to reduce hiring and non-essential activities, among other measures, to survive, he also suggested founders stay optimistic.
“History has taught us that CEOs who are decisive now and make adjustments to their businesses will emerge in a more powerful position when markets normalize again,” Lightspeed said.
This story published from a feed from a news company with no adjustments to the text.
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