The “Pineapple Express” that dumped several inches of rain on the Bay Area last week swept the land. The next storm front, which is expected to arrive tomorrow, is expected to bring great disruption and destruction.
It’s a good metaphor for our startup ecosystem: Just as there aren’t enough sandbags to dry everyone’s house in San Francisco, rising interest rates, savvy investors and looming economic uncertainty are driving 2019. They are set to further lower valuations in 2023.
“In a culture where rising valuations are worn as a badge of honor, founders fear that moving will make them Silicon Valley pariahs,” said Holden Spath, managing partner at private equity firm Thomas Bravo.
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In his TC+ column, Spaht encourages entrepreneurs to revisit the operating and fundraising methods that have supported cheap money in the past.
“The funding path you take has huge consequences for your company’s future, so it shouldn’t be driven by ego or media appetite,” he says.
Downsizing is always an option, but not every company is in a position to start or stop hiring, which is why Spaht suggests examining “business-effects” as alternative notes.
When it rains, everyone gets wet, but receiving a down round allows founders to keep building, “and you have the benefit of re-pricing in a tough market,” Spaht wrote.
happy new year!
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How to make the most of your startup’s big fundraising season
Investments, regardless of size, are a sign of validation for any startup.
However, “when you see other companies raising hundreds of millions of dollars, it can be easy to think that no one wants to hear about your startup’s very small round,” writes Ham Capital CMO Scott Brown.
In his marketing playbook for early-stage startups, Brown explains how to use fundraising ads to maximize media interest, comply with SEC guidelines, and “get the most bang for your buck” with investors.
How to protect your IP during fundraising so you don’t get hacked
Most investors won’t sign a non-disclosure agreement before reviewing your pitch because it’s not worth stealing your idea.
That’s not an insult, just a statement of fact.
You’re less likely to be the first person to come up with an idea, and an NDA can create legal problems for VCs who deal with hundreds of entrepreneurs every year, many of whom are trying to solve the same problems.
“Not all concepts developed by startups are legally enforceable,” writes Alison Miller, a trial attorney at Holwell Schuster & Goldberg LLP. “The next best thing founders can do is to signal as much as possible that the pitch materials they share with funders are confidential.”
Six climate technology trends to watch in 2023
Tim de Chant looks back at his report from last year to make his predictions about where he believes climate technology is headed:
- Software to deploy and manage renewable energy
- Direct air intake
- Green hydrogen
- Home renovation contractor software
- Extraction of vital minerals
- The power of integration
“In the year Will 2023 be the tipping point that marks the beginning of exponential growth? I guess we’ll know more by this time next year.
Redefining ‘founder-friendly’ capital in the post-FTX era
Could FTX’s collapse have been avoided if investors had taken a more active interest in the company’s activities?
Given the chilly climate for late-stage fundraising and widespread economic uncertainty, “it’s time for the startup community to redefine what ‘founder-friendly’ capital means and adjust the sources and costs of capital,” writes founder Blair Silverberg. and CEO of Hamm Capital.
In a TC+ guest post, he weighs the relative merits of active versus passive investors, breaks down the basics of debt financing, and shares advice for “founders looking for better capital balance and external expertise for their businesses.”
High-growth startups should start de-risking their path to an IPO
It seems counterintuitive, but in this cold fundraising environment, late-stage startups should plan to go public when the market opens.
“While some companies are delaying their IPOs, others are able to play their gains and prepare for when the open market fails to reinvest,” wrote Carl Nidbala, COO and founder of commercial insurance brokerage Shield.
In a detailed TC+ article, he looks at why “smart companies risk going public” and can use it to identify which sectors are best positioned, and perhaps especially, which startups are the “IPO of the future.”
What to look for in a term sheet as a first time founder
Most funding relationships between early-stage startups and investors take the form of a SAFE note, also known as a simple agreement for future equity.
Legally, the document sets out both the terms of the company’s appraisal and agreement. “Once you get the word sheet, it’s really game on,” says James Norman, managing partner at Black Operator Ventures.
To help first-time founders better understand “what to ask” and what red flags to avoid, Connie Loizos interviews Norman, Mandela Schumacher-Hodge Dixon, CEO of AllRaise, and Kevin Liu of Techstars and Unrepeatable Ventures.
Dear Sophie: Do employees have to stop working until they get an EAD?
One of our employees is on an H-4 visa and has an employment authorization document. It has been five months since he proposed to renew the EA, which expires next month. Is there a way to speed up this process? Should the new EAD card stop working if it is not received before the old one expires?
We are concerned about another employee who has an L-2 visa with an EAD that will expire early next year, as it takes so long to get EAD cards.
In addition, the H-4 visa worker wants to visit his family in India because it has been more than three years since he last left. Will he and his family be able to return to America after four weeks?
– Intelligent manager