It seems that the party is over for tech startups.
So far in 2022, the markets have struggled, and multiple Seattle-area companies have been forced to lay off employees. The hardships stand in stark contrast to 2020 and 2021, when startups landed record amounts of venture capital and substantially grew their headcounts.
With the potential for an extended downturn looming, the Business Journal asked local venture capitalists how they are advising their portfolio companies moving forward. Below are some of the most notable responses, which were sent via email.
Heather Redman, co-founder and managing director of Flying Fish Partners
"On the positive side, this is a great time to build quietly, to hire great talent from big and small companies, to avoid chasing headlines and valuations, and very importantly, to say goodbye to parts of your business or team that weren’t working out without taking a hit to your reputational momentum.
"On the negative side, it will be harder than ever to raise money, and if you need to do so in the next 18 months, it could be very hard, so if you have money in the bank now, do everything in your power to extend your runway."
Cameron Borumand, founding and general partner of Fuse
"Assume the bar is higher for subsequent fundraising, especially if you’re pre-product market fit. If you’re post product-market fit, growing fast and selling into a space that won’t see spending cuts, then this is a great time to cement a market lead.
"The cost of talent will decrease dramatically as experienced folks leave late-stage private and public businesses."
Kirby Winfield, founding general partner of Ascend.vc
"If you are raising right now, take money no matter how expensive. ... If you know you're not going to be fundable, start a process to sell your company."
On layoffs, Winfield added: "You want to cut once and cut deep. Do the initial plan where everyone cuts their fat, then take a good chunk of the people who are 'irreplaceable' and add them to the cut list. Dirty secret: Culture almost always improves after you do this."
Julie Sandler, managing director at Pioneer Square Labs
"Get unit economics looking as strong as possible and get runway to at least 24 months even if you closed a successful round recently. Time and cash are everything right now. ... We will all have to make difficult decisions with cash, but if you can, seize the unique opportunities that emerge when others are fearful."
Jason Stoffer, partner at Maveron
"The last few years have led to excesses. When you can raise almost unlimited capital at very high valuations, you tend to spend it. Hence CEOs did not have to make choices and a lack of prioritization led to sloppiness. Companies embarked on too many projects, rather than fewer projects executed well. Companies hired too many employees, when you could have done more with less. ... Do not expect a liquidity event any time in the next few years and plan accordingly."
