So long, easy money – Protocol

Good morning! Well, it’s been a good run, and now it’s done: Venture capital’s money hose is drying up, and the effects are already echoing throughout the tech industry. I’m Biz Carson, and I once wrote a senior thesis in college about the politics of voting at Eurovision. Congratulations on Ukraine!

The boom in VC bust advice

The clearest indicator of an exploding bubble? Perhaps it’s the volume of “RIP Good Times” tweets from venture capitalists and the smart advice they offer to founders on how to cut back, buckle down and prepare for impact. Craft Ventures posted David Sacks ’slides on operations during the downturn (as he did with PayPal two decades ago). Lightspeed Venture Partners posted charts of past corrections. Ho Nam of Altos Ventures though had some meta advice for his fellow VCs: “If you’re able to survive, this fall is like a gift.” Everything is a learning experience!

An important lesson is how to spot red flags. The nosedive of the public market is the first domino toppling in the VC world.

  • SoftBank says it returns 50-75% on start-up investments after it bleeds billions of dollars into technology investments. The startups are worried that the company let them die, and have now confirmed that the escape hatch has closed.
  • Tiger Global lost $ 17 billion, almost entirely invested its latest funds and reduced its public tech-stock portfolio, scrapped Bumble, DiDi, Affirm and others. “If you own growth stocks this year – like we did at Altimeter – you’ve got your face,” Brad Gerstner of Altimeter tweeted in a thread where he admitted that the hedge fund was insufficient.
  • Crypto could have made it even worse, to the point of being Ryanair barbecue “crypto bros” on Twitter. Coinbase’s value has fallen nearly 80% since its direct listing last year and is now lower than where many of its investors bought it in the last stages.

What does this mean for startups? “The firehose of money directed at these companies will be 70-80% smaller,” one investor told me. And the timing is not good for the money hose to dry.

  • Right now, startups are faced with valuation contractions – not profits, which happened in the early days of COVID. Public market comps have dropped by 60% or more in some sectors, and they are likely to be at the forefront of how VCs value startups in the future. That means startups will need more revenue to survive and justify their values.
  • Many entrepreneurs will face two options: reduce spending, as we see in layoffs, and increase capital efficiency, or raise more money to get the extra runway needed to grow here. More often, it is a combination of both.

Easy money is dead. That goes for both startups and the VC itself, who must contact limited partners to raise new funds and suddenly encounter a lot of hands stuck in pockets.

  • There are venture capitalists moved the goalposts for what they are funding. It’s not about how fast you move, it’s about how little investment it takes to get you there.
  • Because public comps have been destroyed and investors like SoftBank are sitting on the sidelines, startups and VCs need to re -run the numbers and not assume that money will just come true.

The long -standing question for startups: Is your worst case really enough? If not, there is a VC waiting to tell you how bad it can be.

Biz Carson (email | kaba)

A version of this story originally appeared in the Protocol Pipeline. Subscribe now for more VC news and analysis.


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People are talking

Elon Musk angry Tesla knocked off S&P 500 ESG list:

  • “It has been turned into a weapon by false fighters of social justice.”

Jeff Bezos is here to remind you of that Wall Street hated AWS when it launched:

  • “The ‘risky bet’ that Wall Street didn’t like was AWS, which generated revenue of more than $ 62 billion last year.”

Starting a QR code campaign? Ravi Pratap Maddimsetty of Beaconstac said to make sure it is safe:

  • “A big problem is that companies set up QR code campaigns and then they forget about it.”
Don’t shift the blame to UST and luna crash, Jeremy Allaire of Circle said:
  • “Honestly, I’m very disappointed in a lot of people.”
  • “The public is not protected. They have no disclosures from these businessmen. ”

Makes moves

DHS’s new Disinformation Governance Board is on hold. Board leader Nina Jankowicz also left after a wave of harassment. So that was a good start.

Former Disney CEO Bob Iger is a new advisor and investor at Gopuff. Iger’s investment terms were not disclosed. He might get rid of the rumored feud between him and Bob Chapek.

Sivanne Goldfarb is the new VP of Risk, Credit & Data Products at Melio. Goldfarb was recently the head of Data Science and Data Engineering, Fraud and Compliance at Meta Fintech.

Marshall Tyler is ClickUp’s new chief strategy officer. He previously worked on global ops at Salesforce and ServiceNow.

Alex Goldman and Emmanuel Dzotsi are leaving Reply All. The show is a staple of Spotify-owned Gimlet, and will no longer continue “this iteration” after June 23, its final episode. Leaving things wide open for the next iteration, though!

In other news

Tech platforms are being investigated of the New York attorney general’s office for their role in the hunt in Buffalo. Discord and Twitch, among others, are under the microscope.

Salesforce is the newest company in the slow recovery and scale back on costs such as corporate travel and upcoming off-site.

Block structured plans for its bitcoin wallet. You know, the one like a rock. Block plans to earn from it using subscriptions. Perfect timing for a big crypto launch!

TikTok’s next big quest is to play, Sources told Reuters. It conducts in-app gaming tests in Vietnam.

The FTC is coming for ed tech. The commission plans to vote on a measure today that could lead to more action against violations of a child’s online privacy

Texas is appealing to the Supreme Court to maintain its legitimacy on social media.

The A16z is about to enter the gaming industry with a $ 600 million gaming fund called Games Fund One.

Your bonkers fact of the day: It’s easier to find Airbnb than an apartment in New York City today.

People don’t think about the tiers the ad supports, according to a new study from Morning Consult. Nearly three out of five adults in the US would prefer a cheaper ad-based subscription. Millennials support the tier, because of course they do.

Who is your dream commencement speaker?

Graduation season is approaching, and some of the biggest figures in tech have been tapped to give the expected address at the start. Tim Cook and Reid Hoffman of LinkedIn were among the leaders wearing this year’s ceremonial cap and gown.

Which tech leader would you like to see delivering a startup address? Do you want Elon Musk on stage, or would you prefer Susan Wojcicki to give the speech? Reply to this email and let us know, and we’ll include our favorites in the Sunday edition of Source Code. Bonus points for your reactions to speech by Taylor Swift at New York University.


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