Venture capital will soon be filled with ghosts • TechCrunch

October 30, 2022

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Welcome to Startups Weekly, an in-depth look at this week’s startup news and trends from Equity’s senior reporter and co-anchor Natasha Mascareñas. To get it in your inbox, sign up here.

“There’s more dry powder than ever before.”

“There’s never been a better time to start a startup.”

“Discipline is a new scale.” (Okay, okay, I made that last one up, but wouldn’t you believe it?).

The tech industry loves generalizations – and don’t worry, I enjoy my share too — but as the downturn continues, it’s increasingly important to think about the structural changes that may occur in the venture capital landscape. Venture firms, unlike unicorns, often don’t have hundreds of employees to cut. Instead, venture capital firms are cutting costs in quieter ways.

U TechCrunch Disrupt last week, General Catalyst Niko Bonatsos said that venture firms must go through cycles of natural selection and that it would be “survival of the fittest.”

“It’s a very painful exercise for those who have gone through it,” Bonatsos said on stage from Coatue Caryn Maroney. He talked about hundreds of new venture capital firms either choosing to merge with each other to “build a stronger franchise,” saying some will leave the venture capital profession, while others will lose senior partners to retirement and have to figure out what the future of their firms will look like.

HR tracking in venture capital firms offers several examples. For example, Initialized Capital co-founder Harry Tan is leaving the firm to join Y Combinator as president. Tan’s departure has shaken the firm he helped found. He held down the fort after the firm’s other co-founder, Reddit’s Alexis Ohanian, left in 2020.

Another team that has suffered internal changes during the pandemic is Backstage Capital. Four months ago, the company laid off most of its staff, which affected nine of the team’s 12 players. The layoffs come nearly three months after Backstage Capital narrowed its investment strategy to only participating in follow-on rounds of existing portfolios. This workforce reduction further underscores that the venture capital firm is struggling to grow both externally due to a lack of dry powder and internally.

Marouni, a general practitioner at Coatue, says firms “have to earn the right” to survive. “There was a way where you made some investments and made money. It’s like, no, you have to earn the right, and not everyone is going to earn the right … and I think that’s healthy,” the investor said.

I’ll end with the term we’ve been dancing around throughout the intro, which is “quiet quit.” Bloomberg Beta Investor Roy E. Bahat posted a thread describing how savvy venture capitalists can quietly go into “light mode,” aka, becoming a less active, minimally viable team player. Maybe their name helps the firm close new funds with long-term payouts, and maybe their calendar shouldn’t be filled with a ton of introductory calls, enough annual investor meetings.

When we combine the silent exit with the cycles of natural selection and the difficulty of tracking how active a venture capitalist is, we get a confusing, fragmented landscape. No one has an incentive to say they’re not doing business as usual, which creates extremes.

Of course there are natural career cycles, but I guess it’s getting harder to keep track of who’s doing what and how often in the remote world where a partner at a VC firm has been divorced to keep track of many, many things. Today, there are investors who make ghosts because of the sheer flow of trades, and there are investors who become ghosts themselves. haha

You just have to keep in mind. In the rest of this newsletter, we’ll talk about the Clubhouse, the latest tech layoffs, and why $1 billion in equity can’t save AV tech.

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Clubhouse and the bird app

One of my favorite interviews from TechCrunch Disrupt last week was with Clubhouse CEO and co-founder Paul Davison. We hopped on the TC+ stage to talk about the competition and of course what happens when your company’s launch is defined by hype and celebrity.

Here’s why it’s important: Davison talked about his competition, namely Twitter Spaces, and how Clubhouse sees its differentiation in the long term. As you will read in the workhe’s bullish about a more private version of social audio—a space he believes only a program tied solely to an environment, rather than a set of disparate services, will get.

The tide is turning on a wave of layoffs in tech. Like.

According to data, this year more than 780 companies have cut some of their staff data tracker layoffs.fyi. At least 92,558 people were affected by the workforce reduction. The real figure is likely higher given the delay in reporting.

Here’s why it’s important: The same data source indicates that the tide is several transition to the cadence of technical layoffs. Almost 70% of those laid off this year lost their jobs in May, June, July and August.

The layoffs have been reduced since the summer of sadness. In September, the number of layoffs was half that of August, and the number of new layoffs slowed in October, while the impact on people increased slightly compared to August. Read more about how the tide is turning in my latest article for TechCrunch.

Argo AI says goodbye

Transportation editor and one of my favorites, Kirsten Korosetz, reported this week’s big news: Argo AI backed by Ford and Volkswagen. turns off. The self-driving car startup raised $1 billion after launching in 2017.

Here’s why it’s important through Korosec: AV technology commercialization has always been a very intense game, meaning the barrier to entry is more like a wall than a flat training ground. Over the past two years, the wind has shifted toward the driver assistance and monetization systems for passenger cars that exist today.