The “Pineapple Express” that dropped several inches of rain across the Bay Area last week left the ground saturated. The next storm front expected tomorrow is expected to cause widespread disruption and destruction.
It’s a good metaphor for our startup ecosystem: just as there aren’t enough sandbags in San Francisco to keep everyone’s house dry, rising interest rates, skittish investors and looming economic uncertainty are poised to drive valuations down even further in 2023 .
“In a culture where rising valuations are worn as a badge of honor, founders may fear that taking a down round would make them Silicon Valley pariahs,” writes Holden Spaht, managing partner at private equity firm Thoma Bravo.
Full businesskinda.com+ articles are available to members only
Use discount code TCPLUSROUNDUP to save 20% on a one or two year subscription
In a TC+ column, Spaht encourages entrepreneurs to rethink the operational and fundraising tactics they relied on in the bygone era of cheap money.
“The funding route you choose has huge implications for the future of your business, so it shouldn’t be clouded by ego or driven by media lust,” he says.
Cutting back is always an option, but not every company is in a position to start or freeze hiring.
Everyone gets wet when it rains, but accepting a downturn allows founders to keep building, “and has the benefit of resetting expectations of value in a challenging market,” writes Spaht.
Happy New Year!
Walter Thompson
Editorial Manager, businesskinda.com+
@your protagonist
Contents
- 1 How to make the most of your startup’s big fundraising moment
- 2 How to protect your IP during fundraising so you don’t get scammed
- 3 Six climate technology trends to watch in 2023
- 4 Redefining ‘founder-friendly’ capital in the post-FTX era
- 5 High-growth startups should start narrowing their way to IPO now
- 6 What to look for in a termsheet when you first start up
- 7 Dear Sophie: Should employees stop working until they have their EBD?
How to make the most of your startup’s big fundraising moment
Image Credits: Anatoly Fominyh / EyeEm (Opens in a new window) /Getty Images
Regardless of size, investments 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 will be interested in hearing about your startup’s much smaller round,” writes Scott Brown, CMO of Hum Capital.
In his marketing playbook for early-stage startups, Brown explains how founders can use fundraising announcements to maximize media attention, comply with SEC guidelines, and align more closely with investors to “get the most bang for their buck” .
How to protect your IP during fundraising so you don’t get scammed
Image Credits: MirageC (Opens in a new window) /Getty Images
Most investors won’t sign a non-disclosure agreement before reviewing your pitch because your idea probably isn’t worth stealing.
That’s not an insult, just a statement of fact.
You’re unlikely to be the first to come up with an idea, and a NDA can create legal hassles for VCs who deal with hundreds of entrepreneurs each year, many of whom try to solve the same set of problems.
“Not all concepts developed by startups are legally protected,” writes Alison Miller, litigation attorney at Holwell Shuster & Goldberg LLP. “The next best thing founders can do is state as much as possible that pitch materials shared with funders are confidential.”
Six climate technology trends to watch in 2023
Image Credits: Getty Images
Tim De Chant looked back at his reporting from last year to outline his predictions for where he thinks climate technology is headed:
- Software for deploying and managing renewable energy
- Direct aerial shot
- Green hydrogen
- Home renovation contractor software
- Mining of critical minerals
- Fusion power
“Will 2023 be the turning point that marks the beginning of exponential growth? I suspect we will know more by this time next year.”
Redefining ‘founder-friendly’ capital in the post-FTX era
Image Credits: stockcam (Opens in a new window) /Getty Images
Could the FTX debacle have been avoided if investors took a more active interest in the company’s operations?
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 balance both the source and cost of that capital” , writes Blair Silverberg, co-founder and CEO of Hum Capital.
In a TC+ guest post, he weighs the relative advantages of active versus passive investors, explains the basics of debt financing and shares advice “for founders looking to better balance capital and outside expertise for their company.”
High-growth startups should start narrowing their way to IPO now
Image Credits: Richard Druy (Opens in a new window) /Getty Images
It sounds counterintuitive, but in this chilly fundraising environment, late-stage startups need to plan to go public when the market opens.
“While some companies postpone their IPOs, others can catch up and prepare for the time when the open market is itching to invest again,” writes Carl Niedbala, COO and co-founder of commercial insurance brokerage firm Founder Shield.
In a detailed TC+ article, he looks at why “wise companies risk their public path less,” which industries are best positioned, and perhaps most notably, what benchmarks startups can use to determine whether “an IPO is in their future.” lies”.
What to look for in a termsheet when you first start up
Image Credits: syolacan (Opens in a new window) /Getty Images
Most financing contacts between early-stage startups and investors take the form of a SAFE note, also known as a simple future equity agreement.
The document is legally binding and establishes both a company’s valuation and deal terms. “Once you have the term sheet, the game is really on,” said James Norman, managing partner at Black Operator Ventures.
To help budding founders better understand “what to ask” and what red flags to avoid, Connie Loizos interviewed Norman, along with Mandela Schumacher-Hodge Dixon, CEO of AllRaise, and Kevin Liu of Techstars and Uncharted Ventures.
Dear Sophie: Should employees stop working until they have their EBD?
Image Credits: Bryce Durbin/businesskinda.com
Dear Sophia,
One of our employees has an H-4 visa and has a work permit document. It has been five months since he applied for his EAD, which expires next month. Is there a way to speed up this process? Will he have to stop working if he doesn’t receive his new EAD card before his old one expires?
Because it takes so long to get EAD cards, we are concerned about another of our employees, who has an L-2 visa with an EAD expiring early next year.
In addition, the H-4 visa officer wants to visit his family in India as it has been more than three years since his last visit. Can he and his family return to the US after four weeks?
– Conscious manager
Janice has been with businesskinda for 5 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesskinda team, Janice seeks to understand an audience before creating memorable, persuasive copy.