Startups are taking Advil when in fact might have Cancer
"It is the destiny of the weak to be devoured by the strong."
― Otto von Bismarck
The corrections we observed in 2022 will present fantastic opportunities for the already adapted ones.
If you haven't — there is still time, and I suggest you take action as promptly as possible.
Since April, I have been pretty vocal with the CEOs we have a close relationship with, giving them basic advice that split into the trifecta:
(a) reduce SG&A by 20-30%
(b) develop a plan for profitability and
(c) understand if/when you will have to raise more capital, and be honest about your company's last valuation.
Some followed. Others didn't.
Once we announced the first close of our new fund, we were inundated with CEOs wanting to meet — thank you. That said, many outbound requests were from companies that needed bridge financing. Mostly did not make the necessary inner sacrifices—their idea of a solution = more capital.
New startups continue to be built. It is a great time to start a startup, but one must be realistic that the era of Blitzscaling is over.
This structural change deeply impacts how Venture Capital and startup building is done.
Investors that put capital to work in the asset class expect a 20-30% yearly return, and given the liquidity of the asset class, ownership in more sustainable business becomes paramount so that managers can return capital with exits between 100-300M.
We are not back at pre-pandemic levels. We might have returned to when firms like Softech (now Uncork) and First Round were just getting started. Effectively, we have returned to a world where the term Unicorn wasn't even a reality.
We shall see. I hope I am wrong.
I recommend these two posts if you want to explore this topic. further
You will not live life from one epiphany to another. Real progress in life a series of small improvements that compound.
In this episode, we discussed the energy crisis in Europe and what western leaders might do in order to prepare for the winter.