Market dissonance doesn’t always include an easy hot take

2 years ago 138

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At this point, it’s clear that no one agrees on anything. Half my sources say that early-stage venture completely is uncorrelated to the public stock market, while the other half say that everyone is pivoting their way to profitability to extend runway — regardless of stage. And while the dissonance is an evergreen story to cover, it’s also confusing.

For example, how can there be more VC dry powder than ever, but also a slowdown in investments? How can fintech still receive one out of every five dollars of venture finance, yet still be the sector with the most layoffs of this recent wave? How can LPs be rethinking their venture capital positions, but it also be an optimistic time for emerging fund managers to finally debut? How can Stripe’s adjusted valuation be bullish news of a company ahead of the curve, while also be a decline in what it’s worth amid fintech’s public market downturn?

These are all rhetorical questions, so to quote my favorite podcast, don’t DM me. I point out these imbalances not to complain but to hopefully give some validation on how you may be feeling these days. A lot of things can happen at the same time, which makes absolute statements pretty useless as far as startup theory and market comprehension goes.

It’s the season of unlearning, in a way. I sat in on an emerging fund manager meetup the other week and very much felt surprised by the optimism in the room. The investors weren’t as obsessed with the market’s impact on venture fundraising as I was; they were stressed about LPs, sure, but also were more focused on expanding their definition on what an LP can be. And just like that, the story I was working on about it being a difficult environment for emerging fund managers got another layer of nuance.

My best advice on navigating a time of change? Keep reading, question your sources and don’t feel like you need to have an immediate take on the Big Tech News Item of the week.

In the rest of this newsletter, we’ll get into a creative twist on cap table management, the Roe reversal’s impact on tech and cauldrons. As always, you can support me by forwarding this newsletter to a friend or following me on Twitter or subscribing to my blog.

Deal of the week

Continuum is a venture-backed bet on fractional work, and, better yet, that founders want to show humanity during moments of crisis. The company, launched by CEO Nolan Church in August 2020, started as a play to connect startups to part-time executive help. Now, it has expanded to help struggling tech companies cut staff in a more humane, thoughtful way.

Here’s why it’s important: Continuum’s new layoff tool connects startup leadership teams to an HR executive who will help craft a company communications plan, a diversity and impact analysis, and day-of support.

The broader goal of Continuum also hinges on early-stage startups getting more comfortable with the idea of part-time executives. Church thinks that the recession will accelerate the trend of startups relying more on contractors, consultants, advisers and angel investors to be contributors to a company. Part-time workers help mitigate risk, fill in key gaps during crucial moments and cost less money to add on when a company is trying to focus on sustainable growth.

analog clock and ball of US paper currency equally balanced on seesaw weight scale

Image Credits: PM Images (opens in a new window) / Getty Images

Stripe’s internal valuation is cut

Stripe is the latest high-profile fintech company to take a massive valuation cut as the market downturn begins to hit the sector especially hard. Last valued at $95 billion, the payments processor has cut the internal value of its shares by 28%, sources told the Wall Street Journal. The Journal also reports that the cut comes from a 409A process, which companies do regularly or when a market even may lower its valuation.

The material event, in this case, is the stock market’s downturn.

Here’s why it’s important: Beyond the fintech space, growth-stage businesses that boomed during the pandemic have turned inward to respond to the shifting macroeconomic environment. In March, Instacart similarly cut its internal valuation by about 38.5% due to a 409A change. Both Instacart and now Stripe’s reported internal valuation cuts mean that employees may have their equity grants reframed.

Image Credits: GeorgePeters/DigitalVision

Insert “Pitch Perfect” joke here

First things first, TechCrunch Live is on a brand new platform, and we’ve made it easier to apply for Pitch Practice. Investors (and my inbox) can attest to the importance of brevity, savviness and clarity in pitches so it’s great to see.

Startups can now apply any day, any time for Pitch Practice by completing this form. We’ll select the startups 24 hours before that week’s event and notify startups by email. And if you’re selected for one event, you can apply for future events too. We want companies to present more than once using the feedback provided from previous experiences. Call it growth at no costs.