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The funding market dropoff for Series A+ startups is a big deal for startup employees assuming they can keep high 6 figure salaries at vc-dependent companies wh

The funding market dropoff for Series A+ startups is a big deal for startup employees assuming they can keep high 6 figure salaries at vc-dependent companies where, in recent years, fundraising has far exceeded revenue. Ex: https://tomtunguz.com/fundraising-seasonality/ https://tomtunguz.com/fundraising-seasonality/ . Keeping large salary for many will be HARD, eg, seeing folks have to go to wall st, and junior (bootcamps etc) was already hard without this. We are still waiting for the other shoe to drop. Many high-burn co's did not cut, and of companies that did a round of layoffs, most followed a statistically suspicious trend of 10-20% that suggests a bunch should have done more but didn't. With hiring freezes everywhere.. a lot of pain for job seekers even before more cuts. Worse, even a regular 2-year downturn would flush a lot of startups as fundraises are generally for 12-24mo payroll, and many raised with historically horrible fundamentals (vs valuation) over the last few years. I'm not saying end of world, but I wouldn't want to be a new grad at many seemingly shiny series b/c startups right now. When I was a new grad, I wouldn't have even known the right questions to figure out if my unicorn was really a donkey.

baxtr 4y ago
I think VC money needs to be deployed eventually. They made promises to their GPs within a certain timeframe. So any money held off now needs to be invested in the coming 1-3 years. So I’m not very pessimistic about startup funding. But of course you need to stay alive until then.
- lmeyerov 4y ago
  I asked around similarly earlier this year. Some money goes somewhere... But likely not as much, and not widely distributed. In my convs with GPs, most LPs are very happy to avoid capital calls right now, as they went too far in during the heyday. They will remember GPs forced them during a bad year. When they do go in again, it is at lower valuation multiples, which can easily break cap tables of recently-raising startups. That triggers a downward spiral if they luck into such a fundraise. I bet more likely is what happened ~4 years ago was a lot of the $ went into a smaller # of stronger co's, and I'd expect even more pressure now. Big funds need big winners, and FTX style frauds and less ponzi acquisitions means return of later-stage diligence. When LP money turns back on, unclear if at rate of last few years, which is largely attributed to dumb outside money enabled by low interest rates and startups being good risk/reward. There was fear due to lack of IPOs & historically weird revenue vs valuation multiples, but the above factors counter-weighed. So with valuation multiples cutting and low interests shrinking.. different world for LPs. Net: 1. less $, and to fewer co's 2. This is still a historically amazing time for startups & founders, but feels closer to 10 years ago, than the last few years which supported a lot of people who were mostly providing value on paper, not in revenue.
  - baxtr 4y ago
    To your second point: maybe that’s a good thing :) I had the feeling there were startups with anything meaningful and a ton of money.

baxtr 4y ago

I think VC money needs to be deployed eventually. They made promises to their GPs within a certain timeframe. So any money held off now needs to be invested in the coming 1-3 years. So I’m not very pessimistic about startup funding. But of course you need to stay alive until then.

lmeyerov 4y ago
I asked around similarly earlier this year. Some money goes somewhere... But likely not as much, and not widely distributed. In my convs with GPs, most LPs are very happy to avoid capital calls right now, as they went too far in during the heyday. They will remember GPs forced them during a bad year. When they do go in again, it is at lower valuation multiples, which can easily break cap tables of recently-raising startups. That triggers a downward spiral if they luck into such a fundraise. I bet more likely is what happened ~4 years ago was a lot of the $ went into a smaller # of stronger co's, and I'd expect even more pressure now. Big funds need big winners, and FTX style frauds and less ponzi acquisitions means return of later-stage diligence. When LP money turns back on, unclear if at rate of last few years, which is largely attributed to dumb outside money enabled by low interest rates and startups being good risk/reward. There was fear due to lack of IPOs & historically weird revenue vs valuation multiples, but the above factors counter-weighed. So with valuation multiples cutting and low interests shrinking.. different world for LPs. Net: 1. less $, and to fewer co's 2. This is still a historically amazing time for startups & founders, but feels closer to 10 years ago, than the last few years which supported a lot of people who were mostly providing value on paper, not in revenue.
- baxtr 4y ago
  To your second point: maybe that’s a good thing :) I had the feeling there were startups with anything meaningful and a ton of money.