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Art Shutterstock; Mike Sullivan
Opinion
Venture Capital Startups

The Big Contradiction at the Heart of the Tech Downturn

By  |  July 6, 2022 9:00 AM PDT
Photo: Art Shutterstock; Mike Sullivan

I’ve read a lot of advice venture capitalists have given founders on the current state of the markets. Most of that advice focuses on how founders need to adjust to survive the deteriorating conditions—cutting cash burn by firing underperforming employees, slowing hiring, shrinking marketing budgets and so on. But this advice is only half the story.

Founders cannot afford to simply survive. They need to build companies that attract investment. That may seem impossible right now while the  markets are collapsing, but venture capitalists still have billions of dollars sitting in just-raised funds that they need to invest. With the exception of crossover funds that have lost massive amounts of money and are nervous about losing limited partners, smart investors are not winding down new funds or reducing fees—they’re taking meetings with founders. For VCs, now is a great time to find deals.

There’s never been more cash available for startups, but the people holding that cash (investors) are telling founders there’s no money available for investing. Founders need to understand the logic behind this contradiction and how to operate within it, because rapidly growing companies still (usually) need to raise capital to build their businesses.

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