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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
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 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)
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)
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”
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 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
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
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?
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
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
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
6. Expect more “cleaning up mission and culture at work” moments

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
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
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

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