The Reason Why Startup Incubators and Investors Are Signaling Doomsday
If you’re an entrepreneur and didn’t get the pants scared off you last week reading the “leaked” YCombinator founder memo calling for their incubees to go to the mattresses, don’t bother. It’ll only fill you with dread.
You may also want to steer clear of all the subsequent memos that were spit out shortly after by other investors who hopped on the suddenly fiscally conservative bandwagon as it seemingly raced by.
I’ll TL;DR all of the hand-wringing for you.
Easy money is over. Everything in those memos, all the doomsday warnings and all the recommendations, those are 100% accurate and warranted. The economic downturn that is part inflationary pressure, part global instability, and part “we threw way too much money at things that probably didn’t need money,” — it’s going to hit you, me, and a lot of people we depend on to make our businesses work, grow, and profit.
But those warnings have been true for a while — philosophically, they’ve been true forever — and to act like this is some startup-eating monster that’s now lumbering over the horizon feels like sweeping a lot of laissez faire irrational exuberance under the rug.
But I’m not here to criticize. I’m here to calm. Let’s go find your pants.
Here’s What We’ve Been Ignoring
It didn’t take seer-level foresight to understand that this was coming. I’ll turn my sarcasm setting up to 11 to make it clear what you’d have to believe to be blindsided:
- Startup valuations over the last three-to-ten years have been perfectly sensible, especially at earlier stages.
- The silver lining of the pandemic cloud that boosted certain types of “stay-at-home” business models would continue to grow into a completely shiny silver cloud.
- SPACs are a valid way to take a company public without all that overblown due diligence being required.
- The Internets are still new and engagement still matters more than profit.
I’d slap NFTs while I’m at it, but I honestly don’t think they’re playing a big role here.