Venture & Startup Strategies During a Downturn Pt 2

Venture strategies during a market downturn

  • secondaries for later stage companies

  • investing more in later stage companies in general

  • companies that have not raised in the last 12 months - reapproach with lower valuation

    • companies with 2 years of runway will just buckle down

    • hot companies will still be able to raise

  • lower valuations/multiples, more deal structure

    • throw out much lower multiples see how they react

  • use reserves for portcos

  • consider investing in other geographic locations (Europe 50 years behind US and more pessimistic?)

  • look for more traction in earlier stages

  • look for lower burn / better cash management

  • adjust and create the "new norm"

Market downturn effects

  • trickle down effect from public to growth to venture in slow down

    • looking for payoff in the high prices paid during a bull run

    • irrespective of how much money funds have raised

  • lower capital deployment

  • cheap capital gone

  • 4 types of funds that find their niches and value adds

    • scale - Sequoia, A16z, Insight

    • non-consensus alpha - First Round, benchmark. Seed specialists

    • late stage generalist - big check writers. Tiger, SilverLake

    • angels / solos - Elad, Naval

things startups should keep in mind

  • raise as much as you can NOW if you haven't already

    • down round to stay alive if you must

    • consider funds that invest in venture and growth as capital will be thus available through cycles

    • consider specialist investors with industry specific resources

  • consider M&A

    • consider all corporate partners a potential investor

  • reduce burn

    • lay off people as needed / cut costs as much as possible

  • optimize for profitability if possible

  • internet / social media has democratized the playbook of starting a company. of course execution is another story but it was very easy to start a company before. a lot of founders have not seen a down market and it is important to totally adjust your strategy and be humble

  • see this as an opportunity! all amazing companies today survived downturns (PYPL, GOOG, AMZN)

    • carefully hire and build

    • differentiation happens in bear markets


#other tech#investing