IT'S TIME FOR OFFENSE. We’re on the cusp of a Great Reawakening for startups. Companies that survived the Mass Extinction need to move decisively or risk being beaten by competitors. Here’s what’s changed & how to get *responsibly* aggressive.🧵/1
PREDICTION: There's a mass extinction event coming for early & mid-stage companies. Late '23 & '24 will make the '08 financial crisis look quaint for startups. Below I explain when, why & how it will start & offer *detailed advice to founders* on surviving the looming die-off. /1
Crypto winter is here ❄️. I was on the
@Coinbase
board until 2021 and led its Series D for
@IVP
. I’ve lived crypto cycles since 2013. Here are my predictions on how and when this crypto winter will end, and how to emerge stronger. 🧵👇/1
PREDICTION: There's a mass extinction event coming for early & mid-stage companies. Late '23 & '24 will make the '08 financial crisis look quaint for startups. Below I explain when, why & how it will start & offer *detailed advice to founders* on surviving the looming die-off. /1
“Silicon Valley gets what it deserves! Screw tech, startups and VCs!”
-Sent from an iPhone via Twitter and Instagram, w an ARM processor instruction set by Marvell, code repo by GitHub, delivered via Cloudflare, while driving a Tesla Model 3 and Slack/Gmail w co-workers
My advice now is: Have enough cash to get through the next 30-36 months and, even more importantly, sufficient FAITH to survive the winter without wavering or chasing new and non-crypto directions. Crypto will come back bigger than ever.🔥 /end
1 in 4!!!
“Upper-class individuals are more likely to have inherited at least some of their wealth. According to a 2022 Bank of America study, only about 1 in 4 people with more than $3 million in investable assets are self-made.”
So this is the time to prepare and think big 💪. During bull runs you’re paying off technical debt and keeping the servers from melting. Winters are for innovating and taking market share. /7
The bottom will come not during this current fear & loathing phase but later, after indifference sets in, crypto is no longer making headlines, and the tourists have left 🎉. That process will take many months. /5
Many VC & crypto investors suffer from recency bias, expecting a quick rebound b/c that’s what happened after the 2020 Covid black swan. This bear market isn’t a black swan; it’s the result of rising interest rates. So these investors will suffer 😳 until rates stabilize. /3
In 2022, crypto will go even lower. 2023 will be mostly flat to down, until indifference 🥱 sets in, signaling a long-awaited spring thaw (explained below). Crypto macro will improve in the 2nd half of 2023. My reasoning: /2
Crypto will rebound when retail discovers novel apps & use cases, esp those enabled by innovations at the protocol & dev infra layers (⬇️ txn costs, easier to build).
@IVP
is excited to back the next gen of crypto innovators, as we did
@coinbase
@FTX_Official
@Sorare
@TaxBit
. /9
Going from crypto peak to floor has historically taken ~12 months. I expect that pattern to play out again, give or take.
#btc
’s peak was Nov 2021. /4
Human psychology will influence this timeline. Crypto price movement is still driven by retail investors seeking novelty and momentum. Those investors are seeing neither right now. /6
11 years ago I was diagnosed with a serious form of cancer and was unsure if I’d have a career or family or, frankly, live. I feel blessed to be alive today and have found personal happiness and a fostering professional environment.
At
@Coinbase
, we used the 2018-19 trough to accelerate product innovation and challenge our existing assumptions.We made tough decisions but came out stronger.🤔 /8
The Street fundamentally misunderstands
@Coinbase
and underestimates
@brian_armstrong
. A majority are valuing the company on today’s trading vol, only some are looking out even a quarter. If you have a multi-year perspective, one of the few public co’s with clear 10x+ upside.
WFH and School from Home is not the panacea we hoped it would be.
If you have young kids (mine are 6,3,1) and they are not in school and you have no childcare, kids and WFH are mutually exclusive.
I’m sorry, but this isn’t going to work.
First, context: “great” startups will always get funded, albeit not on 2021-style terms. Many “good” startups will endure down or flat rounds. Many merely “ok” and pre-product-market-fit startups will die – at a greater rate than anything we’ve seen since 2008. /2
3. Focus on survival, not valuation. Don���t let your ego or anchoring bias kill you. Public company stock prices go up and down every microsecond. Your stock price fluctuating isn’t fatal. Running out of money is. /17
All of this points to a FLOOD of startups coming to market to raise capital beginning in H2 2023 and continuing through 2024. More will seek capital than will get funded. What you hear now is the quiet before the storm. /5
But we're not going back to 15x+ fwd revenue multiples even for excellent companies in the public markets. (We're currently at ~4.5x for most companies and 8x-12x for the elite.) Private mkt multiples may not match the public markets but they will come a lot closer! /10
Many startups raised ~2 years of cash in 2021 and 2022. They cut burn in H2 2022 to extend that 🛫. But no matter what, they’ll need to raise again (or sell, or become a 🧟) in late 2023 and 2024. /3
@McarthurBeard
@coinbase
@IVP
You got me! Totally called out. I alone do not control global asset prices. Damn. Thought I might pull a fast one on you!
6. Play your cards right, survive & go on OFFENSE. The best time to build & take market share is when your competition is dead/in retreat. 2021 felt like the best year to build a startup but it also felt like the best year to buy high-growth stocks ;) Now is the time! /20
Late 2023 into 2024 will be worse than the Great Financial Crisis of 2008-9 for venture-backed startups. GFC was centered on Wall St. Private startup valuations, round sizes & burn didn’t go bananas in the years leading up to the GFC. /6
5. Trade better unit economics for growth. Growth rates are coming way down for everyone this year. It’s all relative when you’re raising money. If you can nail your unit economics, you can always ramp burn and growth later. /19
My 3 year old son just got out of the hospital where he had been since Sunday (not related to COVID). Still wrapping my mind around it all. Grateful to have him home.
California is a great place to live but early on a Saturday morning damn would it be nice to be back in NYC and have a corner deli coffee and egg & cheese sandwich.
The bank run panic contagion is spreading. Either the government steps in in a big way on Monday or it will go from Silicon Valley Bank to First Republic Bank to Main Street Bank by the end of the week.
One of the best lessons I ever learned in VC was from
@MattHartman
before he was a VC.
To achieve breakout success in start ups and VC, you need to increase the variance (how crazy an idea seems) of companies you meet to increase the expected outcome.
Warning! VC narrative violation 🚨
99% of board meetings are a massive waste of time & resources.
🧵
@attentiveHQ
founder
@BrianCLong
+ I reveal:
Why CEOs shouldn’t keep their board in the dark & how to turn board meetings from CEO pageantry into the MOST valuable 3hrs/quarter
You’ll see a flood of startups raising 💰. Gun-shy VCs w/ alligator arms will slow their pace, take less risk and fund the startups with the most concrete traction. Timid LPs will hide under desks. /8
A. Funds won't deploy their capital in 1 yr (unlike 2021) but rather in 3+ yrs, dividing that powder by 3 or 4! Yikes!
B. Many funds have already been partially or mostly invested; their next funds might be smaller and take 2x as long to raise, b/c of LP constraints. /12
1. Raise 💰now or sooner than you expected, before the Great Flood 🌊of 2023. If you fail, you can always try again later. But if you wait, try later & fail, well… /15
This time is different. 2021, for startups, was more toxic than the GFC. The hangover will start later this year and will be more severe than that from the GFC. /7
Prediction:
Many of the investors who are now “discovering” crypto and web3 will head for the hills and erase it from their bios 6-12 months into the next bear market.
C. 2001-2004, there was also "a lot of dry powder", but valuations still plummeted and words like “structure”, “ratchet” and “pay-to-play” were commonplace. Look them up if you need to. For instance:
/13
Meanwhile, reluctant insiders will debate doing pro rata in bridge rounds. Many rounds will involve structure. Layoffs, firesales and shutdowns will ensue. /9
My wife and I have had 1.5 hours away from our kids in the past 372 days. We’re at new levels of exhaustion. But spring is here and I’m hopeful life can return to something resembling normal here in the summer.
4. For mid and later stage startups, bring on seasoned operators in C-level roles and for some companies of scale, it might even mean bringing in professional CEOs. Done right, this allows founders to play to their strengths. /18
I went into the
@IVP
Menlo Park office today to work (to do that live
@CNBC
interview) for the first time since March 13, 2020 and it was like an apocalyptic time capsule, right down to this copy of the
@WSJ
waiting for me.
The ability to travel 48 miles in 59 minutes?!! WOW. Is that even possible with the known laws of physics?
What will humanity invent next?! What a time to be alive.
I know haters love to hate but living in the suburbs is the best. There are six children not my own running through my house in addition to my three. There are also two random dogs running loose. The house and yard are filled with the joyful shrieks of neighborhood children.
As a
@coinbase
investor since 2017, I can tell you no one is better suited for the job than
@brian_armstrong
. It’s easy to over-intellectualize it: $COIN’s fate and stock price are both tied to the fate of crypto/web3 writ large.
Uncomfortable truth: it’s going to be hard to demilitarize the police when we allow civilians to carry military assault weapons.
Police militarization accelerated after the end of the assault weapons ban.
I'm celebrating 10 years CANCER-FREE today. (A THREAD)
Celebrate with me by supporting research:
1) Ocular Melanoma Foundation
2) Stanford Dermatology Melanoma Research
(Sepcial Instructions write "Dr. Kavita Sarin")
(1/6)
I lost my dad to cancer 20 years ago this morning. I can't believe two decades have past. Surreal to me still. He was an incredible role model but we lost him too soon. He is gone but not forgotten. I'm just trying to be as good a dad for my kids as he was to us. Every day.
UPDATE: This is happening. Our internal
@IVP
data shows we have evaluated more deals in recent weeks than anytime in the past 24 months. Going on a limb here, but I believe the volume of companies fundraising (and probably $s) Series B and later has officially past its nadir.
All of this points to a FLOOD of startups coming to market to raise capital beginning in H2 2023 and continuing through 2024. More will seek capital than will get funded. What you hear now is the quiet before the storm. /5
I’m convinced America has a quality control problem. You can’t buy a physical good or service without a 50% chance of an issue. From cars to lamps to medicine, we’ve lost our attention to detail.
I’ve worked at two venture firms and the legendary founders of both firms passed away in the last week: Reid Dennis of
@IVP
and Jim Robinson III of
@RRE
. Both were such kind men and fantastic mentors in this business. I’ll deeply miss them both.
I previously served with
@katie_haun
on the
@coinbase
board and fully agree. Regulators should not be in the business of deciding what technology is good or bad. Tech itself is neutral. We need 1) positive legislation 2) regulators to clarify + create
I’d like to coin a new term on the topic of Dry Powder in venture capital —
Sublimation:🧊🫠 The disappearance of the capital from hedge funds, mutual funds, corporate VCs, family offices, sovereigns, etc. when markets turn frosty.
Xbox One X: Thank you for turning on your Xbox One X!
Me: Hi. I'm here to play for 15 mins with my son.
Xbox One X: I see it has been 5 days since you last turned on your Xbox and updated everything.
Me: Sure.
Xbox One X: Let me first download 45 GB of updates!
Me: [sobbing]
There are years that go by as a parent where you’re just surviving day to day. But then one day you hit a point when your kids are a bit older where you just wish you could hit pause and keep them the same.
“This time last year, US government forecasters predicted domestic production would average 12.5 million barrels a day during the current quarter. In recent days, that estimate was bumped to 13.3 million; the difference is equivalent to adding a new Venezuela to global supplies.”
I’m reading a tweet in the
@Twitter
iOS app and then the timeline refreshes on its own and brings me to a new spot and I can’t get back where I was. Anyone else get 🤬 by that?
Absolute legend. Superhuman. 30 mile swim in water as cold 43F NO WETSUIT against gnarly currents, in the sharkiest water imaginable.
“Woman makes history with swim from Golden Gate Bridge to Farallones”
This article is absolutely fascinating and astounding:
TLDR: Because of Japan’s low fertility rate and some customs around estate inheritance, there are 10+ million abandoned homes and homes depreciate quickly.
It is possible to hold these two thoughts in your head at the same time:
Elon Musk is the world’s best human at building rockets and cars but dangerously wrong on politics and international affairs.
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity....
@anothercohen
Midjourney please show me an SUV that combines sections from a Land Rover LR4, a Ford Explorer and a Lincoln Navigator. But make it a 2024 model and slightly snazzy and put the rear lights too low. Cars have four wheels
I realize we are in a global pandemic and the financial markets are collapsing around us, but it is 67F and like *really* nice outside in Menlo Park right now.
The year is 2124
Son: Dad, why did the American Experiment fail?
Dad: Let me explain. It took took 30 years to build a goddam bridge over a tiny creek in Palo Alto…