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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.
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.
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.
- Y Combinator announces the launch of YC, a way for your portfolio to make itself known to the public
- There is a disturbing trend of layoffs in startups
- On Deck is laying off a third of its employees after a quarter cut just months before
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.”
- a16z now wants to manage the money of the entrepreneurs he supports
- Looking at the six new funds begs the question: is a slowdown really coming?
- C2 Ventures raises new fund to invest in ‘boring, dirty and dangerous’ projects
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?”
- Listen to more TechCrunch podcasts, including our crypto show hosted by Chain Reaction (Sometimes stealing crypto is a moral choice) and a founders show hosted by, you guessed it, Found (How NFTs fit into the comics creator economy) The TechCrunch podcast also keeps me fucking entertained, so look at all the good shows they put on. Here last episodewith my participation!
- Remember, TechCrunch Live is on a brand new platform and we’ve made it easy to apply for pitch practice. Investors (and my inbox) can attest to the importance of brevity, savvy, and clarity in presentations, so that’s good to see. Startups can now apply to participate in Pitch Practice any day, any time. filling out this form.
- Six Reasons to Apply for Startup Battlefield 200 at TechCrunch Disrupt
Seen on TechCrunch
Seen on TechCrunch+
And this is a wrapper. I’m going to the lake to enjoy my last summer weekend. Take care!
Credit: techcrunch.com /