Venture capital will soon be overflowing with ghosts
Welcome to Startups Weekly, a nuanced look at this week’s startup news and trends by Senior Reporter and co-host of Equity Natasha Mascarenhas. To get this in your inbox, subscribe here.
“There is more dry powder than ever before.”
“There’s never been a better time to start a startup.”
“Discipline is the new scale.” (OK, OK, I made that last one up, but didn’t you kinda believe it?).
The tech industry likes generalizations – and don’t worry, I enjoy my share too – but as the downturn continues, it becomes increasingly important to think about the structural changes that may occur in the venture capital landscape. Daring firms, unlike unicorns, often don’t have hundreds of workers to cut. Instead, risk companies are cutting costs in quieter ways.
At TBEN Disrupt last week, General Catalyst’s Niko Bonatsus said venture companies must go through natural selection cycles and it will be “survival of the fittest.”
“It’s a very painful activity for anyone who has gone through that sort of thing,” Bonatsos said on stage with Coatue’s Caryn Marooney. He spoke of how the hundreds of new venture capital firms will either decide to merge with each other to “build a more sustainable franchise”, saying that some will leave the venture capital profession and others will lose senior partners in retirement and need to figure out what to do next. the future will be. of their companies will look like.
Tracking personnel activities in high-risk countries provides a few examples. For example, Initialized Capital co-founder Garry Tan is leaving the company to join Y Combinator as president. Tan’s departure shakes up the firm he helped found. He kept the fortress going after the company’s other co-founder, Alexis Ohanian of Reddit, left in 2020.
Another team that has had quite a bit of internal changes during the pandemic is Backstage Capital. The company laid off most of its staff four months ago, affecting nine of its 12-man team. The resignation comes nearly three months after Backstage Capital narrowed its investment strategy to only participate in follow-up rounds of existing portfolios. This staff reduction underscores once again that the venture capital firm is struggling to grow, both externally due to the lack of dry powder and internally.
Marooney, a GP in Coatue, says businesses must “earn the right” to survive. “There was the path where you made some investments and made money. It’s like, no, you have to earn the right and not everyone is going to earn that right…and I think that’s healthy,” the investor said.
I’ll end with a term we’ve been dancing around all through the intro, which is ‘quiet stop’. Bloomberg Beta investor Roy E. Bahat posted a thread describing how seasoned venture capitalists are quietly in “easy mode,” that is, becoming a less active, minimally viable player on the team. Maybe their name helps the company close new funds with LPs, and maybe their agenda doesn’t have to be busy with a lot of introductory talks, just annual investor meetings.
When we combine quiet quitting with natural selection cycles and the difficulty of tracking how active a venture capitalist is, we experience a confusing, fragmented landscape. No one is encouraged to say they are not doing business as usual, which creates a landscape of extremes.
Sure there are natural career cycles, but I imagine it’s getting harder and harder to keep track of who does what and how many times in a remote world where a partner at a VC firm has diluted to mean many, many things. Today there are the investors who do the ghosting because of the sheer deal flow out there, and there are the investors who become ghosts themselves. haha.
Just something to keep in mind. In the rest of this newsletter, we’ll talk about Clubhouse, the latest on tech layoffs, and why $1 billion in capital can’t save AV technology.
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Clubhouse and the bird app
One of my favorite interviews of TBEN Disrupt last week was with Clubhouse CEO and co-founder Paul Davison. We jumped on the TC+ stage to talk about competition and, of course, what happens when the start of your business is defined by hype and celebrities.
Here’s why it’s important: Davison addressed his competition, namely Twitter Spaces, and how Clubhouse views its differentiation over the long term. As you’ll read in the piece, he’s optimistic about a more private version of social audio — a space he believes will only be won by an app dedicated solely to the medium rather than a range of different services.
The tide is shifting on technology layoffs. Kind of.
According to data tracker layoffs.fyi, more than 780 companies have cut some of their workforce this year. The staff reductions have affected at least 92,558 known individuals. The actual figure is likely higher given the delays in reporting.
Here’s why it’s important: The same data source suggests the tide is shifting somewhat in the cadence of tech layoffs. Nearly 70% of those laid off this year lost their jobs in May, June, July and August.
Since the summer of sadness, staff cuts have eased. September had half the number of layoffs than August, and new layoffs slowed in October, while people rose slightly from August. Learn more about how the tide is shifting in my latest for TBEN.
Argo AI Says Goodbye
Transport editor and one of my favorites Kirsten Korosec broke big news this week: Argo AI, backed by Ford and Volkswagen, is shutting down. The autonomous vehicle startup has raised $1 billion since its launch in 2017.
Here’s why it matters through Korosec: Commercializing AV technology has always been a capital-intensive game, meaning the barrier of entry is more of a wall than a speed bump. Over the past two years, the wind has shifted towards driver assistance systems and passenger car monetization that exist today.
- By the way, subscribe to Korosec’s newsletter, The Station, a weekly post on all things transportation. She’s on too Twitter.
Seen on TBEN
Duolingo’s owl will now scream fractions at you
Meta is in trouble
Twitter’s Elon problem may soon become Apple’s Elon problem
Thoma Bravo, Sunstone Partners Acquire UserTesting for $1.3 Billion and Combine with UserZoom
Seen on TBEN+
Selling UserTesting to Private Equity Is Bad News for Unicorns
How to Raise Money When You’re Not in the Bay Area?
Dear Sophie: How can early-stage startups increase their chances of getting H-1Bs?
Big Tech falls short in the first salvos of the Q3 earnings cycle
The lack of VC funding for women is a Western social deficit
Same time, same webpage, next week?