Zombie startups

2 years ago 107

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People leave jobs for all kinds of reasons, but when it’s a CFO departing a richly valued company as the company itself conducts layoffs, the exodus can be a sign of a larger issue.

This was one of the takeaways I had when chatting with Continuum CEO and co-founder Nolan Church about a recent spree of CFO resignations, including but not limited to OpenSea, Noom and Brex. The founder reiterated that we don’t know the exact reasons that people are leaving, but he also noted that it’s a red flag from a recruitment perspective.

He also introduced me to the idea of zombie companies, which I appreciated as it is officially spooky season and we love a festive framework. Zombie companies are basically companies that raised a ton of money over the boom cycle but aren’t producing nearly enough revenue to justify the valuation. The late-stage market is full of them, Church said, and it will take awhile for us to realize this because many got overcapitalized and have enough runway to hide behind.

It’s an interesting idea and colors in why some executive shake-ups sound louder than others. For more thoughts, read my full TechCrunch+ column, “Are CFOs OK? (Answer: Yes, but CEOs? That’s complicated).”

In the rest of this newsletter, we’re going to talk about the do-it-all startups and Sarah Guo’s new VC fund. If you like this newsletter, do me a quick favor? Forward it to a friend, share it on Twitter, and follow my personal blog for more content.

The do-it-all’s

This week I wrote about Getaway, which is taking on Pacaso with its own spin on the vacation home ownership market. Being in the business of convincing people that they deserve a vacation is hard. Being in the business of convincing people that they can co-own a vacation house and enjoy it at the same time can be deceptively harder.

Here’s why it’s important: When you’re a seed-stage startup, the best way to stand out against a unicorn competitor is to try to do it all. I’ve been seeing a lot of startups recently that want the best of both worlds for consumers, and Getaway is no different — combining both an investment and an enjoyment in one product.

While I’m all for entrepreneurial energy, I do wonder how this maps out with the larger conversation of growth-stage startups realizing they need to buckle down and focus. In other words, if the behemoths are turning inward and focusing on what makes them revenue, are the early-stage startups about to get some time to run wild thanks to cushion capital? Food for thought.

Image Credits: Talashow (opens in a new window) / Shutterstock (opens in a new window)

High conviction, why not?

For Equity this week, Alex and I interviewed former Greylock partner Sarah Guo about her new firm, Conviction. She raised $101 million in 10 weeks for her inaugural fund, a process she thinks took too long but, clearly, resonated with a number of investors. We extracted key passages from the conversation for TC+, so take a read.

Here’s why its important: Sensationalist AI aside, Guo’s framework for interesting applications in this space is helpful when trying to divvy up what she is and isn’t interested in. Below you’ll see how she thinks about it.

I think you can take a very clear-eyed view to the landscape and say, what’s valuable to a customer? I think there’s one way go sort of bottoms-up, and be modality by modality, right? We can classify things. We can generate code. We can do math. We can generate images. And I think that’s an interesting one. [But] I think the way I tend to look at the world is to be interested in a set of problem domains that I know well because I know the customer well.

Nails, not hammers first. So you will see me invest in security infrastructure, developer tools, productivity applications, creative apps, generally enterprise-like sort of relational database applications that keep records, [and] verticals where I think the vertical is large, interesting and the data is affected by this, like comp bio. The reason I think that software 3.0 is a really apt term is I’m just naming certain categories of software that I know well, but I fail to see a future where all of those [categories], given the advances in compute and data and algorithms, don’t get more intelligent.

I think that there are going to be completely novel applications of AI that don’t fit well into the existing categories. Visual generation is not an existing software category. Autonomy is not a software category that exists without AI. So I think there are going to be net new application categories … but I’m following the customer more than anything else.

Image Credits: Sarah Guo

A few notes

TechCrunch Disrupt is next week, somehow. Safe travels to those of you traveling into town, and apologies to those of us who are already based in San Francisco and now definitely won’t be able to get a table at Che Fico.

It’s going to be a blast, a pep talk, a realization and a week not to miss. Here’s the full agenda, and here’s where you can get your tickets.

Remember that you can use code “STARTUPS” for a special reader discount for Disrupt tickets. We also have a special for those impacted by layoffs. If you were laid off, go here to get a free ticket to TechCrunch Disrupt’s Expo.

Enjoy these exclusive benefits in the TC+ Lounge at Disrupt

As you know, I co-host Equity, which goes out thrice a week and is TC’s longest-running podcast. We have some besties to listen to, too: including our crypto-focused show that goes by Chain Reaction, and founder-focused show that goes by Found. The TechCrunch Podcast is also a can’t miss, so pay attention to all the good shows that they’re putting out.

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