Venture capital will soon be teeming with ghosts

Venture capital will soon be teeming with ghosts

Welcome to Startups Weekly, a nuanced take on this week’s startup news and trends from Senior Reporter and co-host of Equity Natacha Mascarenhas. To get it delivered to your inbox, subscribe here.

“There is more dry powder than ever before.”

“There’s never been a better time to start a startup.”

“Discipline is the new scale.” (OK, OK, I made that last one up, but you didn’t believe it?).

The tech industry loves generalizations – and don’t worry, I appreciate my fair share too – but as the downturn continues, it’s increasingly important to think about the structural changes that may be forming in the venture capital landscape. Venture companies, unlike unicorns, often don’t have hundreds of employees to cut. Instead, venture capital firms cut costs more discreetly.

At TechCrunch Disrupt last week, General Catalyst Niko Bonatsos said venture capitalists have to go through cycles of natural selection and it will be “survival of the fittest.”

“It’s a very painful activity for anyone who’s been through this stuff,” Bonatsos said onstage with Coatue’s. Caryn Maroney. He explained how the hundreds of new venture capitalists will decide whether to merge with each other to “build a more sustainable franchise,” saying some will exit the venture capital profession and others will lose core partners. retired and will need to determine what the future of their businesses will look like.

The monitoring of staff activity in at-risk sites offers a few examples. For example, Initialized Capital co-founder Garry Tan is leaving the company to join Y Combinator as president. Tan’s exit shakes up the company he helped found. He maintained the fort after the company’s other co-founder, Reddit’s Alexis Ohanian, retired in 2020.

Another team that has had its fair share of internal changes during the pandemic is Backstage Capital. The company cut most of its staff four months ago, impacting nine of the 12-person team. The layoff comes nearly three months after Backstage Capital reduced its investment strategy to only participate in rounds of monitoring existing portfolios. This downsizing again underscores that the venture capital firm is struggling to grow, both externally due to its lack of dry powder and internally.

Marooney, a GP in Coatue, says businesses ‘must earn the right’ to survive. “There was the path where you made investments and made money. It’s like, no, you have to earn the right and not everyone is going to earn that right…and I think that’s healthy,” the investor said.

I’ll end with a term that we danced through the intro, which is “quietly stop”. Roy E. Bahat, Bloomberg Beta investor posted a thread describing how seasoned venture capitalists can quietly switch to “easy mode,aka, becoming a less active, minimum viable player on the team. Maybe their name helps the company secure new funds with LPs, and maybe their calendar doesn’t need to be busy with a ton of introductory calls, just annual meetings. investors.

If we combine silent abandonment with cycles of natural selection and the difficulty of tracking how active a venture capitalist is, we face a confusing and fragmented landscape. No one is encouraged to say they are not doing business as usual, which creates a landscape of extremes.

Of course, there are natural career cycles, but I imagine it’s getting harder and harder to know who does what and how often in a distant world where a venture capitalist partner has been diluted to mean many, many things. Today, there are investors who ghost due to deal flow, and there are investors who become ghosts themselves. Ha.

Just something to keep in mind. In the rest of this newsletter, we’ll talk about Clubhouse, the latest tech layoffs, and why $1 billion in capital can’t save AV tech.

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Clubhouse and the bird app

One of my favorite interviews from TechCrunch Disrupt last week was with Clubhouse CEO and co-founder Paul Davison. We jumped on the TC+ stage to talk about the competition and, of course, what happens when the start of your business is defined by hype and celebrities.

Here’s why it’s important: Davison touched on its competition, namely Twitter Spaces, and how Clubhouse envisions its long-term differentiation. As you’ll read in the article, he’s bullish on a more private version of social audio – a space he thinks will only be won by a support-only app instead of committing to a suite of different services.

The tide is changing on the wave of tech layoffs. Type of.

More than 780 companies have reduced some of their staff this year according to data tracker The workforce reductions affected at least 92,558 known people. The actual figure is likely higher given reporting delays.

Here’s why it’s important: The same data source suggests that the tide is changing somewhat on the pace of tech layoffs. Nearly 70% of those made redundant this year lost their jobs in May, June, July and August.

Since the Summer of Sorrow, downsizing has diminished. September saw half the number of layoff events compared to August, and in October, new layoff events slowed while those affected increased slightly compared to August. Learn more about how the tide is changing in my latest for TechCrunch.

Argo AI says goodbye

Transportation editor and one of my favorites, Kirsten Korosec, announced major news this week: Argo AI, backed by Ford and Volkswagen, is shutting down. The self-driving vehicle startup raised $1 billion after launching in 2017.

Here’s why it’s important via Korosec: Commercializing AV technology has always been a capital game, which means the barrier to entry is more like a wall than a speed bump. The tides have turned over the past two years towards the driver assistance systems and passenger vehicle monetization that exist today.

  • By the way, subscribe to Korosec’s newsletter, The Station, a weekly dispatch on all things transportation. She is also on Twitter.
argo ai operations center

Picture credits: Argo AI

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Same time, same webpage, next week?


Picture credits: Bryce Durbin / Tech Crunch

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