If I received a note from an investor stating, “although grim, this data is not intended to alarm you”, well, I might be alarmed.
But this quote from Reach Capital represents a slew of memos sent in recent days by venture capital firms to portfolio companies offering advice and asking questions about how founders are positioned for a downturn.
Natasha Mascaren has received emails from Y Combinator, Lightspeed, Reach and January Ventures with standard suggestions for keeping track and rethinking valuations in “an extremely capital constrained environment”.
In short: Save your money, and if you plan to ask for more, expect less generous terms.
My time in tech has spanned a few recessions, so a lot of things look familiar. If history is any guide, the entrepreneurial class will rebound – I’m more concerned about the fortunes of mid-level and entry-level start-up workers whose personal track might consist of a few months’ rent.
Unicorns and decacorns have already let go of thousands of employees in recent months, and the layoffs are just beginning. Ignore those Memorial Day sales; Winter is coming.
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If you work at a startup, here’s some blunt advice: Your managers don’t give you the full picture of your company’s financial situation because being less than transparent helps them maintain productivity and reduce attrition. .
And if/when layoffs come, they’ll be clumsy and mishandled, because your boss has probably never fired anyone before.
Technicians in highly skilled, non-fungible positions are typically the ones who turn off the lights on the last day. All the others? Save your paychecks, rethink your summer vacation plans, and find ways to support your friends and colleagues during this uncertain time.
Thank you very much for reading,
Intellectual property and cybersecurity disputes are top legal concerns for tech companies
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Litigation can strain resources at the best of times, so it’s understandable that tech companies are beefing up their legal defenses with the recession looming on the horizon.
In its annual Litigation Trends Survey, law firm Norton Rose Fulbright found that patent and intellectual property litigation were the top legal concerns for technology executives, “followed by cybersecurity and data protection”.
Cisco’s latest results indicate a score settlement may soon be at hand
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Is the network leader Cisco in the doldrums?
Ron Miller and Alex Wilhelm looked at the company’s recently released quarterly results and found that year-over-year revenue was flat, with future earnings expected to be well below expectations.
CEO Chuck Robbins told analysts last week that the company was feeling the effects of global supply chain issues and Russia’s invasion of Ukraine, but it’s increasingly unclear whether healthy software revenue may offset the decline in its hardware business.
“Even when supply chain issues are resolved, Cisco must find a way to innovate and monetize networks, something it has struggled with for four to six years,” said Holger Mueller, analyst at Constellation Research. .
Why a downturn can separate recession-proof startups from ‘hacks’
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Assuming competent management, startups that have product-market fit and a reasonable burn rate will likely survive this era.
But that was true before the slump in tech stocks began to drive down startup valuations.
“Companies that make painkillers rather than vitamins, especially solutions that are technically difficult or tricky to develop or anticipate fundamental changes but still integrate into an industry, are uniquely positioned to weather macroeconomic conditions that are out of whack. their control,” said Mallun Yen, Founder and CEO of Operator Collective.
“Pain relievers include products that increase revenue or significantly reduce costs in tangible ways.”
Stripe and Plaid prepare for battle
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Plaid and Stripe didn’t start out as rivals, but recent moves by the two to expand their reach with new financial products could put them on a collision course, report Alex Wilhelm and Mary Ann Azevedo.
Citing “recent skirmishes of the Great Fintech War,” Mary Ann and Alex track a series of acquisitions and product launches that have these fintech companies “now face to face, if not already on their toes.”