Category: downturn
May 15, 2020 Crunchbase : Why Startups Should Become ‘Camels’ – Not Unicorns – During COVID-19
While head-spinning valuations make for great headlines, challenges facing the tech economy indicated a shift in this “growth at all costs” mindset for a while. With economic uncertainty looming, the shift accelerated, and it’s no surprise as startups look to how they can survive an increasingly likely drought. Soon, unicorns will become myths once more as we see the rise of the “camel.” (read more…)
CATEGORY: downturn, resilience, risk
April 23, 2020 Tech Crunch : How Deal Terms Are Changing Right Now
Meanwhile, the company that was doing so-so is being asked to accept less relaxed arrangements. Among these is taking a lower valuation or, if the company want to avoid one of these down rounds, providing more stock warrants to its investors — contractual rights that enable the investors to increase their position in the future at today’s lower price. Colla says he’s also seeing more companies in this second camp being asked to onerous terms on a more temporary basis, including year-long full-ratchet clauses that ensure that an investor’s shares aren’t diluted in later rounds if the valuation of a company drops. As for the third camp, it’s toast, he suggests. (read more…)
CATEGORY: downturn, valuation, VC
April 9, 2020 The Information : VCs Could Exhaust ‘Dry Powder’ in a Year Unless They Slow Investing
“There’s unfortunately a fear that’s settling into the entrepreneurial community that everyone is running out of money,” said Sakoda, a longtime venture capitalist whose firm, Decibel, is backed by networking giant Cisco Systems. “There are companies that have 18 months of runway that are wondering whether they are going to make it, solely because they think there might not be another venture capitalist on the other side of this.” (read more…)
April 9, 2020 James Currier, NFX : The Psychology of Founders Who Win in Downturns
In times of ambiguity and dislocation, fear can take over. Even exceptional employees get disoriented and confused. They may become paralyzed. Founders can best prevent this from happening by shifting their mindset back to the mission that got them started on this journey in the first place. They should find themselves back at the office (or the home office) recommitting to their mission — even if there is only one week of money left in the bank. Because it’s what they want to be doing no matter what, regardless of the money. Lead with that spirit, and the team and board will follow. (read more…)
CATEGORY: downturn, leadership, resilience
April 7, 2020 Azeem Azhar : For Startups, Relevance Matters
And in the bottom right will be a large number of firms whose flourishing was predicated on an open venture capital market and on consumers and businesses behaving the way they did over the past five years. Their raison d’etre may have been whacked by Covid. They may be betting on the bounce after the epidemic to simply delay their plans, startup turntablism. That is quite some bet. (read more…)
April 6, 2020 Madison Wright via Medium : Company Building and Venture Investing in a Downturn
Most asset classes struggle during economic downturns, but the impact is far more nuanced than that. Private markets have proven resilient as the venture, private equity and startup lifecycle are long term, and as such, downturns tend to be more of a short term consideration. It is during these times that the perception of the illiquidity of private markets shifts from a disadvantage to a feature. That being said, certain effects will be felt more acutely, such as revenue decline, supply chain disruptions (in the case of the virus), and lengthened fundraising duration (read more…)
CATEGORY: downturn, resilience, VC
April 4, 2020 The Economist : Technology Startups are Headed for a Fall
On the surface, DoorDash stands to benefit from the pandemic, and Lime to suffer. In fact, the coronavirus may prove more indiscriminate than that. It strikes at a time when many of the world’s 450-odd unicorns were looking ropy. Their perpetually loss-making business models—only a small proportion are in the black—were increasingly being questioned. So were their exuberant valuations, which added up to perhaps $1.3trn globally. A reckoning was afoot; some unicorns would “go under”, Dara Khosrowshahi, boss of Uber, a ride-hailing giant which relinquished its unicorn status by going public last year, told The Economist on March 2nd. (read more…)
CATEGORY: downturn, profitability, resilience
April 1, 2020 New York Times : Start-Ups Are Pummeled in the ‘Great Unwinding’
Bill Gurley, an investor at the venture capital firm Benchmark, said that over the past 10 years of the start-up boom, investors had taken on more and more risk. That has changed, leaving many of the riskiest start-ups exposed. “‘Risk on’ happens slowly,” he said. “‘Risk off’ happens overnight.” (read more…)
March 25, 2020 Tech Crunch : Market players won’t find buyers on the secondary market — yet
Chris Douvos, a longtime investor in venture funds, observes that there’s an “immense amount of capital looking for fund stakes,” meaning from outfits like Industry Ventures and roughly 75 other players in the market. “If I’m a VC right now, I’m wondering when [these] investors — folks who have billions of dollars in committed capital and love to buy fund stakes at 65 cents on the dollar — start capitulating, but that’s like six to nine months out when you really see [these transactions] happen.” (read more…)
CATEGORY: downturn, secondaries, valuation
February 13, 2020 Vanity Fair : “No Longer Tethered to the Fundamentals”: A Nassim Taleb Protege On How To Prepare For The Coming Market Crash
What do you do when the bond market is basically uninvestable and the stock market keeps hitting all-time highs and you know in your gut that none of this will end well? What do investors—big and small—do in such unfortunate circumstances, like the ones we collectively find ourselves in now? (read more…)