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Gumroad’s Sahil Lavingia broke into the venture capital world as one of the early testers of rolling funds, an AngelList product that allows investors to raise money in a subscription-like way. That was in 2020. Fast forward to 2022, and a lot has changed.
One of these changes? The number of proposals from founders looking to raise funds. “It’s down about 90 percent since March,” Lavingia told TechCrunch. “I’ve probably seen more than most people — about 20 to 40 heavily vetted decks per week — and that number has now dropped to about two to four per week.” He also sees wanting The quality of the people who work for it has improved Gum Road — which he attributed in part to the ongoing wave of layoffs — and a decline in founders starting companies.
The drop in the number of founders raising capital suggests that early-stage startups are not as immune to macroeconomic changes as some investors claim. By contrast, a boom in emerging startups would support the idea that recessions — and the wave of layoffs that followed — are when startups are born.
Lavingia categorizes founder status into three categories: “travel founders, immigrant founders, and ‘native-born’ founders.” Travel founders, he said, are those who only start companies in bull markets, a group he said has dropped by about 100%.
“They rarely get funding in a bear market,” Lavingia said. “They need to hire other people to build things.” At the same time, immigrant founders are less concerned with the reputation and status of starting a company, and more about weighing the risks and rewards. According to Lavingia, this cohort of founders has halved. In the end, “native-born” founders are founders regardless of the market: “They all exist, so they raised money in 2020-2021, so they didn’t start companies and raise money at the same rate.
Early-stage venture capital has formed on two fronts: investors who acknowledge that talent has shifted and investors who support a deal flow that is as loud as ever.
If you want to read my full article, check out my TechCrunch+ column, “Investors Prepare for Founder’s Downturn. Or Influx. Wait, What?”
In the remainder of this newsletter, we’ll explore Y Combinator’s shrinking class size, as well as the collective sentiment of debut fund managers.As always, you can do this by forwarding this newsletter to a friend or follow me on twitter.
Y Combinator reduces class size
Y Combinator said it intentionally reduced the number of startups in its summer 2022 batch of accelerators.as first reported information And independently verified by TechCrunch, Y Combinator’s Summer 2022 cohort (currently in action) has nearly 250 companies, down 40% from the previous cohort, which had 414 companies.
Here’s why it matters: Over the years, Y Combinator’s ever-growing batches have become a common—if not a cliché—talk among techies. I know this because we have contributed a lot to this conversation (especially on the equity side). The biggest problem people have with YC’s ever-expanding class size is that it threatens one of the accelerator’s biggest value propositions: networking. The bigger the class, the harder it is to stand out.
While YC says it isn’t downsizing due to criticism or the cost of growing check sizes, the move will certainly help those in the current cohort stand out, simply because of the lack of competition.
Fledgling fund managers have ideas
TechCrunch+ Rebecca Scutak Spearheaded the latest investor survey, which got the temperature checks of seven first-time fund managers who found themselves in a downturn. In a challenging market, what advantages do first-time VCs have over seasoned competition? What steps are they taking to prepare for the fourth quarter? Given today’s market conditions, what keeps them up at night? These are the questions they answered, and more are now on the site.
This is important: There is always a silver lining, but especially if you have a smaller portfolio. Szkutak provided us with an excerpt from the trailer below:
“We don’t take on any baggage that might come with prior funding or a lot of money tied up in years that seem to be overvalued,” Stuto said. “It’s like a founder sees the world differently than a subject matter expert. , we[as managers for the first time]have a whole new perspective on certain issues and how the industry is going.”
read Scoutak’s investigationand her perform additional analysis on iton the website.
If you missed last week’s newsletter
Read it here: “Here the Guided, Here Come the Guided.” I also recorded a podcast with my favorite colleague, Alex, which you can listen to here: “It’s the Guider Jumping Risk Is it time for the treadmill?”
Are there any topics at Startups Weekly or the show that I need to dig into? twitter me a big question I’ll give it a try at an upcoming Startups Weekly or Equity.
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Dear Sophie: How long do I need to work in my current job after I get my green card?
This is a package. I’m going to the lake to enjoy these last few summer weekends. take care of yourself!
talk to you later,