Sahil Lavingia of Gumroad broke into the venture capital world as one of the first testers of the rolling fund, AngelList’s product, which allows investors to raise capital on a subscription basis. This was in 2020. Fast forward to 2022 and a lot has changed.
One of these changes? The number of pitches from founders who want to raise. “It’s down about 90% since March,” Lavingia told TechCrunch. “I’ve probably seen more than most – 20 to 40 well-tested decks a week – and now that’s down to two to four a week.” He also saw the quality of talent grow in people willing to work for Gumroad — which he attributes in part to a relentless slew of layoffs — and a decline in the number of founders starting companies.
The decline in the number of founders raising capital suggests that early-stage startups are not as immune to macroeconomic shifts as some investors claim; On the contrary, the boom in new startups reinforces the idea that recessions and their attendant flood of layoffs are the time when startups are born.
“I think the total number of founders we see will be less, but the quality bar is rising.” Redpoint Managing Director Annie Kadavy
Lavingia divides the founding staff into three categories: Tourist Founders, Immigrant Founders, and Born and Raised Founders. Tourist founders are the ones who only launch companies in bull markets, he says, and that cohort has shrunk by about 100%, he says.
“They are rarely funded in a bear market,” Lavingia said. “They need to hire others to build something.” Immigrant founders, meanwhile, care less about the reputation and status of the company’s start-up, but weigh the risk against the reward. According to Lavingia, that cohort of founders has halved. Finally, “born and raised” founders are founders regardless of the market: “They all existed and therefore raised money in 2020-2021, so they also do not create companies and do not raise money at the same rate.”
Credit: techcrunch.com /