Due to a recent slowdown in funding, some Indian start-ups have laid off staff as the focus shifts to profitability and capital conservation in order to improve runway. Silicon Valley investors have hence provided key survival tips for startups to help them thrive again.
After amassing a record $35 billion in 2021, Indian start-ups are faced with decreasing valuations and the slowdown in fundraising as investor mood turns sour after more than a decade of bull-run that saw India produce a 100 unicorns. Silicon Valley investors have hence provided key survival tips for startups to help them thrive again.
Portfolio businesses have been advised by venture capital firms to prepare for the long haul, as you must endure, before you prosper.
After years of pouring money into startups’ lofty goals, Silicon Valley’s investors are now engaged in the dismal routine of providing survival counsel to their portfolio businesses.
Lightspeed Venture Partners, Craft Ventures, Sequoia Capital, and Y Combinator, among others, have told entrepreneurs in recent online PowerPoint presentations, blog postings, and social-media threads that they must take immediate measures for what might be the sharpest reversal in more than a decade.
Their recommendations include lowering costs, keeping capital, and abandoning hopes that hedge funds or other investors will come in with huge cheques.
The investors’ warnings are a break from the current growth-at-all-costs ethos for companies, and they come as the venture market shows symptoms of stalling.
According to analytics company CB Insights, funding for global startups is on track to dip by around one-fifth in the second quarter, with approximately $58 billion in pledges midway through the quarter. The tech-heavy Nasdaq Composite Index is down around 25% from its all-time high in November, while SoftBank Group Corp., which has invested more than $100 billion, recorded a $26.2 billion loss in the first quarter as values in its portfolio of internet businesses collapsed. The Fed’s actions are increasing the cost of financing and increasing the pressure on businesses to save cash.
“I would intend to ride this thing out for at least 18 months or more,” Fred Wilson, co-founder of Union Square Ventures and an early supporter of Twitter Inc. and banking company Stripe, wrote in a blog post titled “How This Ends” last weekend.
In a March 2020 message, Sequoia, one of Silicon Valley’s most iconic firms, cautioned founders and CEOs about the risks to businesses posed by the approaching global health catastrophe, including supply-chain concerns and canceled trips. Sequoia Capital, famed for early investments in Apple Inc. and Airbnb Inc., among others, said in a 52-page PowerPoint presentation for around 250 entrepreneurs about two weeks ago that today’s environment is more analogous to the 2008 financial crisis or the dot-com market crash in 2000.
“We do not expect this will be another severe correction followed by a similarly quick V-shaped rebound, as we witnessed at the start of the epidemic,” Sequoia stated in the presentation, which was first published by tech news site The Information.
The “Adapting to Endure” PowerPoint presentation referred to this as a “Crucible Moment” and recommended businesses to cut spending fast and save cash, stressing that “it will be a lengthy recovery.” “The latest presentation echoes the message of a 50-slide presentation Sequoia sent to founders in October 2008, in which it stated that a housing-led recession and overleveraged financials—illustrated with a butchered carcass and a gravestone—meant that companies needed to control spending, focus on quality, and lower risk.
The cost of money has changed significantly, and if you believe things are still the same as they were, you will fall over a cliff like Thelma and Louise “This month, he stated.
“Before you thrive, you must survive,” Michael Seibel, a managing director at Y Combinator, said in a video for entrepreneurs released this month on YouTube. The Silicon Valley accelerator, which has invested in over 3,000 firms, including Airbnb, is advising creators to slash employees, reduce ad expenditure, and boost pricing.
Venture capitalists are also attempting to encourage the entrepreneurs they have supported. They noted that some of today’s most well-known companies in technology, such as Uber Technologies Inc. and Airbnb, were formed during periods of economic downturn in the United States.
According to the venture capitalists, the fight for talent may lessen as employment cuts extend throughout the tech sector. Startups that aren’t sustainable but are still producing competition—a term popularized by Y Combinator co-founder Paul Graham as “default dead”—will likewise likely fail if they don’t have access to cheap capital, they say.
Lightspeed’s most recent Medium article was titled “The Upside of a Downturn.” While underlining the need of businesses slowing recruiting and cutting non-essential activity, among other steps, it also advised founders to remain positive.