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The great VC pullback of 2022

mattturck.com

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Re: The great VC pullback of 2022

#21

Post by electric_muse »

daveed wrote: post #16
electric_muse wrote: post #10

VCs love to tell everyone the market is moving in their favor (lower valuations, fewer deals, etc). It’s like car salespeople telling you this car won’t last long. Some of it may indeed be true, but it’s in their favor to give founders anxiety. It’s a negotiating tactic, not a public service announcement.

I don't really agree with this, with what I've seen. Or maybe we're just interpreting tea leaves differently. I think in a lot of cases, "market is moving in their favor" is not lower valuations, but higher valuations in the verticals that the VC is themselves investing in. Some of that might be signalling for later-stage VCs to invest at later rounds. But I think, other than the onset of Covid, and the last 6 months…

That's a great nuance. I was referring to it being in their favor for dealmaking.

Here's another one from 1 month ago: https://www.linkedin.com/posts/darian314_founders-activity-6...

Re: The great VC pullback of 2022

#22

Post by davidkuennen »

papito wrote: post #14
davidkuennen wrote: post #12

Having bootstrapped my own app I can't fathom how some other apps with millions of VC money will every turn a profit. My app provides me a nice income, but it's far from anything able sustaining teams of dozens of people. And I'm pretty sure throwing money on ads wouldn't change that.

Your app is making money? That's very nice. But have you tried selling the PROMISE of more moneys sometime in the future? Lots and lots of moneys. Just say things like "We are trying to elevate the world's consciousness" and "community-based EBITA!"

Sounds a lot like crypto to me.

Re: The great VC pullback of 2022

#23

Post by scarface74 »

seibelj wrote: post #17
davidkuennen wrote: post #12

Having bootstrapped my own app I can't fathom how some other apps with millions of VC money will every turn a profit. My app provides me a nice income, but it's far from anything able sustaining teams of dozens of people. And I'm pretty sure throwing money on ads wouldn't change that.

You are thinking small and that’s fine. It is wonderful to bootstrap an app and make income. However some ideas are much larger and need a big team and years of effort before the big payoff.

And then only 10% “payoff” for the investors, even fewer payoff for the employees.

Re: The great VC pullback of 2022

#24

Post by imjk »

weatherlite wrote: post #5

Can have serious consequences for headcount and salaries if we are entering a bear market. I also hope this article doesn't age well but it is definitely worrying.

This is literally the policy aim of the Fed right now. Unemployment is at historical lows with inflation running rampant. The ostensible aim of interest rate hikes is slowing inflation, but the byproduct is a cooling in the broader markets and economy, which in turn, affects the labor market.

Re: The great VC pullback of 2022

#25

Post by dustingetz »

How exactly does the fed funds rate flow through categories of financial entities that end up inflating growth equities and therefore VC returns? I understand the total cash in the system is vaguely leveraged/multiplied by borrowing, but this borrowed money flows through which parties specifically and how do these vaguely spoken of economic forces actually interact?

Re: The great VC pullback of 2022

#26

Post by rdtwo »

imjk wrote: post #24
weatherlite wrote: post #5

Can have serious consequences for headcount and salaries if we are entering a bear market. I also hope this article doesn't age well but it is definitely worrying.

This is literally the policy aim of the Fed right now. Unemployment is at historical lows with inflation running rampant. The ostensible aim of interest rate hikes is slowing inflation, but the byproduct is a cooling in the broader markets and economy, which in turn, affects the labor market.

Yeah the idea is to burn labors and wages to the ground and finish off get middle class.

Re: The great VC pullback of 2022

#27

Post by lumost »

Having been at a series C+ company that ran out of money. There are a few things to keep in mind if you are working at a non-profitable startup.

1) Investors need to invest in something, not continuing operations. Companies who are about to run out of money will often claim to pivot in a different direction, launch new products, or go on hiring binges. A good sign that something is amiss is when all of this isn't backed by any customer interest, the internal story is meh, and leadership is steadfast that this is the direction.

2) At some point all of the senior leadership needs to focus on getting VC money, or selling the business. You may have high pressure dates one month, and then an erie calm where no one seems to care about anything. Because frankly, leadership has stopped caring about the business and it no longer matters to the company.

3) A debt round shows up, these are usually life support rounds for companies missing their metrics. The company doesn't want to lose valuation, but they don't have any deals lined up yet. The debt is to keep the show going while they figure things out. Caveat: Debt rounds because the company aims to be profitable, aren't that bad.

4) Implosion, if the company has a high burn and no offers - then something has to give. The thing to give is the $NewIdea, not the core product - however if the core product is shrinking/mature the core product team may see layoffs as well.

At this point, if I consider a startup - I look to join just after a funding round has closed. This means that the money to build your product is there, the work will be new, and the company doesn't have to go through hijinks. The worst time to join a company is when they say they are working on a funding round.

Re: The great VC pullback of 2022

#29

Post by jasfi »

davidkuennen wrote: post #12

Having bootstrapped my own app I can't fathom how some other apps with millions of VC money will every turn a profit. My app provides me a nice income, but it's far from anything able sustaining teams of dozens of people. And I'm pretty sure throwing money on ads wouldn't change that.

Wouldn't more money allow you to spend more on marketing and sales, which in theory could drive more profit? I think that's part of the bet.

Re: The great VC pullback of 2022

#30

Post by tehlike »

electric_muse wrote: post #21
daveed wrote: post #16

Earlier quoted context omitted.

I don't really agree with this, with what I've seen. Or maybe we're just interpreting tea leaves differently. I think in a lot of cases, "market is moving in their favor" is not lower valuations, but higher valuations in the verticals that the VC is themselves investing in. Some of that might be signalling for later-stage VCs to invest at later rounds. But I think, other than the onset of Covid, and the last 6 months…

That's a great nuance. I was referring to it being in their favor for dealmaking. Here's another one from 1 month ago: https://www.linkedin.com/posts/darian314_founders-activity-6...

I read this in a more friendlier way...
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