Welcome to Startups Weekly, a new take on this week’s start and startup 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 an early stage venture is completely uncorrelated with the public stock market, while the other half say everyone is working their way to profitability to expand the runway — regardless of the stage. And while the dissonance is an evergreen story to deal with, 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 finance and still be the sector with the most layoffs from this recent wave? How can LPs 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 from a company leading the way, while also declining what it’s worth amid the downturn in the fintech public market?
These are all rhetorical questions, so to quote my favorite podcast, don’t DM me. I point to these imbalances, not to complain, but to hopefully give some confirmation about how you feel these days. Many things can happen at once, which makes absolute statements quite useless as far as startup theory and market understanding are concerned.
It is, in a sense, the season of unlearning. I attended a meeting of an emerging fund manager last week and was very surprised by the optimism in the room. The investors weren’t as obsessed with the market’s influence on venture capital fundraising as I was; they were definitely stressed about LPs, but were also more focused on expanding their definition of what an LP can be. And so the story I was working on about it being a tough environment for emerging fund managers took on another layer of nuance.
My best advice on navigating a time of change? Keep reading, poll your sources and don’t feel like you need to see the Big Tech News Item of the Week right away.
In the rest of this newsletter, we’ll be covering a creative twist on cap table management, the impact of the Roe reversal on technology and boilers. As always, you can support me by forwarding this newsletter to a friend or follow me on twitter or subscribe to my blog.
Offer of the week
Continuum is a corporate-backed gamble on fractional work, and better yet, that founders want to show humanity during moments of crisis. Launched by CEO Nolan Church in August 2020, the company started off as a play to connect startups with part-time help from executives. Now it has expanded to help struggling tech companies cut staff in a more humane, thoughtful way.
Here’s why it’s important: Continuum’s new layoff tool connects startup leadership teams with an HR manager who will assist in creating a corporate communication plan, diversity and impact analysis, and day support.
Continuum’s broader purpose also hinges on early-stage startups becoming more familiar with the idea of part-time executives. Church believes the recession will accelerate the trend for startups to rely more on contractors, consultants, advisors and angel investors to contribute to a business. Part-time workers help mitigate risk, fill key gaps at critical times, and cut costs as a company tries to focus on sustainable growth.
Stripe’s internal rating is down
Stripe is the latest high-profile fintech company to experience a massive valuation cut as the market downturn begins to hit the sector particularly hard. The latter valued at $95 billion, the payment processor has reduced the internal value of its shares by 28%, sources told the Wall Street Journal. The Journal also reports that the cut is the result of a 409A process, which companies do regularly or when a market even lowers its valuation.
The material event in this case is the stock market downturn.
Here’s why it’s important: Outside of the fintech space, growth-stage companies that boomed during the pandemic have turned inward to respond to the changing macroeconomic environment. In March, Instacart similarly lowered its internal valuation by about 38.5% due to a change from 409A. Both Instacart and now Stripe’s reported internal valuation cuts mean employees can review their stock awards.
Insert “Pitch Perfect” joke here
For starters, londonbusinessblog.com Live is on a brand new platform and we’ve made it easier to sign up for Pitch Practice. Investors (and my inbox) can attest to the importance of brevity, cleverness, and clarity in pitches, so it’s great to see.
Startups can now sign up for Pitch Practice by . any day, any time fill in this form. We select the startups 24 hours before that week’s event and notify startups by email. And if you’re selected for one event, you can also sign up for future events. We want companies to present more than once using the feedback from past experience. Call it growth without cost.
Seen on londonbusinessblog.com
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Until next time,