Venture investors to founders: why give up?

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Gumroad’s Sahil Lavingia 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.

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One of these changes? The number of pitches from the founders who want to raise. “Since March, it’s down about 90%,” 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.

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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, the “born and raised” founders are founders regardless of the market: “They all existed and therefore raised money in 2020-2021, so they too don’t start companies and don’t raise money at the same rate.

In early-stage venture capital, two sides are formed: investors who recognize that talent has changed, and those who support a flow of deals that is louder than ever.

If you want to read my full review, check out my column on TechCrunch+. “Investors are bracing for a founders downturn. Or influx. What to expect?”

In the remainder of this newsletter, we’ll cover Y Combinator on its class size reduction and debut fund managers on their collective mood. As always, you can support me by forwarding this newsletter to a friend or follow me on twitter.

Y Combinator cuts his class

Y Combinator deliberately reduces the number of startups in his accelerator for the summer 2022 batch. As first reported Information and independently validated by TechCrunch, the Y Combinator Summer 2022 cohort – currently live – boasts almost 250 companies, down 40% from the previous cohort of 414 companies.

Here’s why it’s important: Over the years, the ever-increasing batch size of the Y Combinator has become a common – if not cliché – conversation among techies. I know this because we contribute a lot to this conversation. (especially for stocks). The biggest problem people have with the growing size of the YC class is that it threatens one of the accelerator’s most important offerings: the network. The bigger the class, the harder it is to stand out.

While YC says it hasn’t cut spending due to criticism or the cost of its rising check size, the move will certainly help those in the current cohort stand out. simply because of the lack of competition.

Image credits: Bryce Durbin

Aspiring fund managers have thoughts

TechCrunch+ Rebecca Shkutak topped the latest investor poll, which receives temperature checks for seven new fund managers at the start of a downturn. What advantages do aspiring venture capitalists have over more experienced competitors in a challenging market? What steps are they taking to prepare for the fourth quarter? What keeps them awake at night given today’s market conditions? These are all the questions they answer and more in parts now live on the site.

Here’s what’s important: There is always hope, but especially if you have a small portfolio. Shkutak gives us teaser excerpt below:

“We don’t have any baggage that could come from having previous funds or having a lot of capital associated with what appears to be a highly overpriced vintage,” Stuto said. “Like a founder who sees the world differently than subject matter experts, we (new bosses) bring a fresh perspective on how certain issues and industries are evolving.”

Read Shkutak’s surveyAnd her further analysis ofon the site.

A full-fruited orange tree is harvested in the barren desert of Southern California;  budding investors thrive amid economic downturn

Image credits: Steven Swintec (Opens in a new window) / Getty Images

If you missed last week’s newsletter

Read it here: “The rich are coming, the bootstraps are coming.” I also recorded an accompanying podcast with my favorite colleague Alex, which you can listen to here: “Is it time for the bootstrapper to jump on the venture treadmill?”

Any requests for topics for me to dig into Startups Weekly or the show? Send me a big question and I will try to do this either in the upcoming issue of Startups Weekly, or in Impartiality.

Image of white headphones hanging on a blue background.

Image credits: Martin Barro (Opens in a new window) / Getty Images

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Dear Sophie! How long do I have to stay in my current job after getting a green card?

And this is a wrapper. I’m going to the lake to enjoy my last summer weekend. Take care!

Speak soon


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