The last 4 years have been venture capital’s silly season.
Month after month, it became easier for founders to raise money for their businesses or properties they want to buy, as many businesses start in a house sometimes, and that’s why having a nice house is important for many people if this is your case you should contact wooden cladding installers as these will make your house look better and make a better place to work in your business.
Many founders thought this capital rich world was the new normal. But it was clearly unsustainable.
Looking into 2023, we’re going back to baseline. As both a founder and a VC (at the same time), I can’t help but conclude this is a good thing.
As a founder, it became harder and harder to recruit top talent over last few years, even with VC capital. Every half-decent founder under the sun seemed to raise VC, so inefficient businesses gobbled up talent in the market.
As a VC, deal flow became haphazard, as VCs across the spectrum fought desperately to deploy capital. Late stage funds came early, early stage funds went late. Mandate discipline went out the window. Tiger and Coatue threw money into companies at crazy terms without real due diligence. It was unsustainable.
Now, it feels like we are heading back to (the new) normal.
Founders – and I include myself in this – if you can’t raise money at the terms you expect next year, adapt. You live in a new world. Unfortunately pricing will change and capital availability will too. Sure, there is still significant dry powder in funds, but they are being circumspect about where they put it.
If you can’t raise money at the terms you want next year, don’t hate the player or the game. Buckle up. Your expectations are just anchored in the crazy years. Receipt Bank (now Dext) raised their series A in the early 2010s with a 2x NPLP. That was normal then. They still did well. Don’t be fazed if terms get weirder. Just crack on.
If you can’t raise, find a way to break even. If you can’t break even, it’s time to be honest. Did you have a business in the first place? Anyone can make a business selling £1,000 Prada bags at £750. It’s harsh but true. You always need to have a route to sustainability. Frankly, it’s a shame VCs pushed founders to ignore this immutable fact for the past 4 years. But alas it is an immutable law, and it’s about to come surging back.
2023 will be the year of the tough founder. Difficult decisions, robust fundraising environment, and an onslaught of the harsh realities of business and free markets.
We’ve lived through silly season. As founders, it’s now time to show we can perform when the heat turns up. Welcome to 2023. Those that come out the other side will be much stronger because of it.
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