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Some potential things likely to happen in next 3-18 months for tech startup world
Likely does not mean “100% certainty” but base case seems to be in motion today
Likely does not mean “100% certainty” but base case seems to be in motion today
1. Valuations will continue to drop & are not stable yet
Series D/later have come down and closer to public comps. Rounds started 3 months ago pricing much higher than round kicked off now. “Sliding knife” market
Series D/later have come down and closer to public comps. Rounds started 3 months ago pricing much higher than round kicked off now. “Sliding knife” market
Series B, C still repricing - valuations anecdotally have dropped 30-70% - but not fully adjusted yet
Pre-seeds/seeds/series A still going strong but trending down. Most likely will reset in 1-4 months as market sees tough series Bs happen (and fail to happen)
Pre-seeds/seeds/series A still going strong but trending down. Most likely will reset in 1-4 months as market sees tough series Bs happen (and fail to happen)
Private market lags publics by 3-6 months, so as publics move privates will continue to adjust
In next few quarters private tech should all hit a new stable point (barring recession)
In next few quarters private tech should all hit a new stable point (barring recession)
Lots of companies doing a quick “top up” round right now to extend runway an extra 6-18 months. Top ups increasingly flat with last round
“Flat is the new 2-3X”
“Flat is the new 2-3X”
2. Downrounds/structured rounds will start more 2-9 months. These will accelerate as # of companies get low on cash & need $
Many unicorns reprice if they can not get to high enough ARR, w strong unit economics/burn multiple
Others will reprice for employee options
Many unicorns reprice if they can not get to high enough ARR, w strong unit economics/burn multiple
Others will reprice for employee options
Many unicorns have yet to realize they are stuck for now w too high valuations that may never hit current levels again
Lots of “zombie” companies do not quite realize they are stuck yet
Lots of companies will take 2-3 years until next round to catch up on Q4 2021 valuation
Lots of “zombie” companies do not quite realize they are stuck yet
Lots of companies will take 2-3 years until next round to catch up on Q4 2021 valuation
3. Layoffs are just beginning. Many companies are planning them now but have not pulled trigger
We will see more layoffs in the next 1-3 months and then again in 6-9 months.
Many will not cut enough and will need to do a second layoff 6 months later
We will see more layoffs in the next 1-3 months and then again in 6-9 months.
Many will not cut enough and will need to do a second layoff 6 months later
Others have not seen business drop or are not conserving cash. “We will grow our way out of it”. They will do layoffs 3-6 months from now when they realize burn multiple too high
A minority of companies may cut when they shouldn't, as their business is doing great. Context matters. Create a revenue and burn plan versus just blindly cutting
Maybe you should invest in growth within burn multiples?
Maybe you should invest in growth within burn multiples?
In the words of @DavidSacks get to “default investable” or per @paulg “default alive”
4. More M&A will happen
Founders finally talking about selling when before no incentive to do so with ever rising valuations and secondary
In a tougher capital environment, will become more of a buyers market. Lots of exits or attempts to exit in 6-18 months
Founders finally talking about selling when before no incentive to do so with ever rising valuations and secondary
In a tougher capital environment, will become more of a buyers market. Lots of exits or attempts to exit in 6-18 months
If you have the market cap and stability and are later stage, this might be a great opportunity for you to buy great products and teams
Great M&A and expansions can happen in down times
Great M&A and expansions can happen in down times
5. Some CEOs may "move to Chairperson" in 6-12 months
In many cases will be legitimate business transition.
Also been exhausting few years for everyone
In others, CEOs will realize company is stuck - too high valuation, too little revenue growth, no clear path to outcome
In many cases will be legitimate business transition.
Also been exhausting few years for everyone
In others, CEOs will realize company is stuck - too high valuation, too little revenue growth, no clear path to outcome
6. Expect more “cleaning up mission and culture at work” moments
CEOs realize maybe focus should be on customers, business building, and core mission
CEOs realize maybe focus should be on customers, business building, and core mission
Aside: Changes in (6) may in part be countermanded by big tech
Meta, Apple, Microsoft, Amazon, Alphabet (MAMAA companies) which are a giant talent and entitlement sink for the industry.
Unless they make changes some things won’t change completely industry-wide
Meta, Apple, Microsoft, Amazon, Alphabet (MAMAA companies) which are a giant talent and entitlement sink for the industry.
Unless they make changes some things won’t change completely industry-wide
7. Recession (if it happens) likely to hit startups selling to other startups first
Recession drops revenue and earnings growth which slows everything down for affected companies
If earnings and revenues drop so will growth rates and valuation multiples
Recession drops revenue and earnings growth which slows everything down for affected companies
If earnings and revenues drop so will growth rates and valuation multiples
8. A number of great companies will be built in this period
Apple, Microsoft started in 70s stagflation. Cisco started after “black Monday”
Multiple great companies emerged & grew post financial crisis (Uber, Airbnb, Stripe, Square etc)
Its still a great time to build
Apple, Microsoft started in 70s stagflation. Cisco started after “black Monday”
Multiple great companies emerged & grew post financial crisis (Uber, Airbnb, Stripe, Square etc)
Its still a great time to build
