Welcome to Startups Weekly, a fresh look at this week’s startup news and trends. To get this in your inbox, subscribe here.
At this point, it’s clear that no one agrees on anything. Half of my sources say that an early-stage venture is completely unrelated to the public stock market, while the other half say that everyone looks to profitability to expand the runway – regardless of stage. And while dissonance is an evergreen story to be unraveled, it’s also confusing.
For example, how can there be more VC dry powder than ever, but also a slowdown in investment? How can fintech still receive one in five dollars in venture funding, yet still be the sector with the most layoffs from this recent wave? How can long-term companies rethink their venture capital positions, but is it also an optimistic time for emerging fund managers to finally make their debut? How can Stripe’s adjusted valuation be bullish news for a company that’s ahead of the curve, while also being a drop in what it’s worth amid the fintech public market slump?
These are all rhetorical questions, so to quote my favorite podcast, don’t DM me. I point out these imbalances not to complain, but to hopefully provide some confirmation of how you may be feeling these days. Many things can happen at the same time, which makes absolute statements pretty useless when it comes to startup theory and understanding the market.
This is the season of unlearning, in a way. I attended a meeting of emerging fund managers last week and felt very surprised by the optimism in the room. Investors weren’t as obsessed with the market’s impact on venture fundraising as I was; they were stressed about LPs, of course, but they were also more focused on expanding their definition of what an LP could be. And just like that, the story I was working on about it being a tough environment for emerging fund managers got another layer of nuance.
My best advice for navigating a time of change? Keep reading, question your sources, and don’t feel like you have to have instant insight into the Big Tech News of the Week.
In the remainder of this newsletter, we’ll dive into a creative twist on cap table management, the impact of Roe’s reversal on technology, and boilerplate. As always, you can support me by forwarding this newsletter to a friend or follow me on twitter or subscribe to my blog.
Deal of the week
Continuum is backed by a risky bet on part-time work, and even better, that the founders want to show humanity in times of crisis. The company, launched by CEO Nolan Church in August 2020, began as a game to connect startups with part-time executive help. Now it’s expanded to help struggling tech companies downsize in a more humane and thoughtful way.
Here’s why it’s important: Continuum’s new layoff tool connects startup leadership teams with an HR executive who will help craft a company communications plan, diversity and impact analysis, and support day.
Continuum’s broader purpose also depends on early-stage startups being more comfortable with the idea of part-time executives. Church believes the recession will accelerate the trend of startups relying more on contractors, consultants, advisors and angel investors to participate in the company. Part-timers help mitigate risk, fill key gaps at critical times, and cost less money to add when a company is trying to focus on sustainable growth.
Stripe’s internal rating has been downgraded
Stripe is the latest high-profile fintech company to take a massive valuation cut as the market downturn begins to hit the sector particularly hard. Last valued at $95 billion, the payments processor has reduced the intrinsic value of its stock by 28%, sources told the Wall Street Journal. The newspaper also reported that the reduction comes from a 409A process that companies do regularly or when the market may even lower its valuation.
The essential event in this case is the stock market decline.
Here’s why it’s important: Beyond the fintech space, growth-stage businesses that thrived during the pandemic turned inward to respond to the changing macroeconomic environment. In March, Instacart similarly cut its internal valuation by about 38.5% due to a 409A change. Both Instacart and Stripe’s now-reported internal valuation cuts mean employees may be reconsidering their equity grants.
Insert “Pitch Perfect” joke here
First, 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, comprehensibility and clarity in pitches, so it’s great to see.
Startups can now apply any day, any time for Pitch Practice by filling out this form. We will select the startups 24 hours before this week’s event and notify the startups via email. And if you’re selected for one event, you can apply for future events as well. We want companies to pitch more than once, using the feedback provided by previous experience. Call it cost-free growth.
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Until next time,