Image Credits: Bryce Durbin/TechCrunch
When the World Health Organization declared the COVID-19 outbreak a global health emergency at the end of January 2020, the startup world held its breath.
Many entrepreneurs put hiring and expansion plans on hold as they searched for ways to continue operating in a world that had been changed by the Pandemic. Tech publications ran stories and interviews with investors who left Silicon Valley to set up shop in Austin, Miami and other places to see how the situation played out.
Last year saw new records set for VC funding, and in some cases, far less interest in due diligence than in years past.
Money is still available for founders who have good ideas, but investors have higher expectations for revenue and growth, which could limit the kinds of startups that receive funding.
The question is how to prepare for a retreat in startup valuations.
Mary Ann Azevedo and Alex Wilhelm are the trio behind the Equity podcast and they share their predictions about what will happen in the future.
When I first thought about the question, I jumped to the conclusion that private startups will focus on their runway in preparation for a downturn in venture funding. There is no shortage of venture capital in the markets today. Early-stage and mid-stage companies will be able to enjoy a capital-rich environment for a little longer than late-stage companies, giving them a bit of a bubble inside of a broader burst, since all those mega-fund dollars need to go somewhere.
Is it idealistic to expect a startup to build out leaner, less opulent operations in a growth-focused environment where many enjoy lofty valuations and access to excess capital?
In the event of a dip, I think we will see the re-emergence of lean startups that know how to stretch a dollar until it squeals. The Lean Startup was written in response to the 2008 crisis and promoted the idea of testing, building and managing a startup all at the same time.
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