Welcome to Startups Weekly, a fresh look at this week’s start and startup trends. To get this in your inbox, subscribe here.
The Great Resignation, the economic trend in which people quit their jobs to seek other opportunities, was greeted by a harsh reality: the Great Reset.
This week, a spate of tech companies — mostly companies worth more than $1 billion from their venture capitalists — announced headcount cuts. I wrote three discharge stories in less than 24 hours, a cadence I haven’t experienced since the start of the pandemic. These stories may have the same leads, but they feel dramatically different.
Unlike in the past, when startups had to lay off employees in response to the sudden shock of the pandemic, today’s tech companies are cutting back because of – more or less – their own lack of discipline. I have more empathy for a founder who was caught off guard by a pandemic than for someone who spent too much money despite knowing the boom wouldn’t last forever, and who is now cutting the same employees who helped them soar. Whiplash, I hear from some now former employees, is an understatement.
Growth is tricky, and part of a founder’s job is to make their way to scale, but we also need to remember that change was inevitable. Especially for startups that fit into the product market during a once-in-a-lifetime event.
The biggest difference between layoffs in 2020 and layoffs in 2022 is cash, potentially a lifeline. Startups have raised huge amounts of capital thanks to larger average deal sizes over the past two years; meaning that some of the capital once used to reconcile candidates’ benefits or offers may turn to the catwalk. Jason Lemkin, head of SaaStr, put it right on twitter: “A lot of startups have also been lucky and have been sitting on the couch for years because of covid rounds… capital they wouldn’t have had otherwise.”
If you’re a founder, now is the time to cut some of that lavish spending and focus on preserving what you do have. For collaborators: Let me know which spreadsheets to retweet. To learn more, read an overview of all the tech layoffs from the past week, then head to MovieUpdates+ for advice on navigating the market.
In the rest of the newsletter we talk about spirited venture firms, fintech drama and a duo of inclusive play in exclusive worlds. As always, you can support me by forwarding this newsletter to a friend or follow me on twitter or my blog.
What venture companies raise despite settlement?
A number of venture companies made headlines this week to announce new financing or new strategies. In Afore’s case, it’s both. The pre-seed company tells MovieUpdates that they’ve closed a $150 million fund and introduced some sort of internal accelerator with a standard deal. Going forward, each accepted company will receive $1 million at a $10 million post-money valuation. It’s a not-so-subtle dig at Y Combinator and a way for Afore to stand out in a changing market.
Here’s why it’s important: Afore isn’t the only company changing its mind. Backstage Capital told me this week that after investing in 200 companies, it will now only do follow-up checks on its existing portfolio. For now, that means no net new Backstage companies, even if the company is growing its assets under management.
We also hear that Unusual Ventures’ new $485 million fund comes with an impressive promise of full-time help. Early-stage founders, it’s certainly a stressful time to sit in your seat — but clearly a crucial time too.
Stripe plays checkers with Plaid
In this week’s Equity, your favorite trio talked about Stripe and Plaid drama. In the background, Stripe recently announced a new product that allows customers to connect directly to their customers’ bank accounts, access financial data, and manage transactions. AKA, exactly what Plaid does.
Here’s why it’s important: Plaid CEO and co-founder Zach Perret shaded Stripe in a tweet, suggesting the company may have used its past relationship with Plaid to gain a competitive advantage. We’ve talked about fintech all overlapping and competing for months on the podcast, but this felt like the clearest example of tension. Listen to the podcast for our entire recording – and why it can be a useful data point for founders.
Let’s be exclusive inclusive
For the deal of the week that may have flown under your radar, I’ve got two! Walnut and Line are two startups bringing inclusive plays to exclusive industries. Walnut, which announced a $110 million Series A this week, has built a buy now, pay later product for health care bills, and Line, which secured $25 million majority debt financing, aims to give low-income people an easier way to access to get emergency cash.
Here’s why it’s important: These startups, if they can pull it off, will underline the promise that technology will break down barriers for those who are not entitled to our institutions. That’s why I’m taking fintech, with a view on wealth, access and education, as my new beat.
during the week
Seen on MovieUpdates
Digital health startups brace for a post-Roe world
Your MVP is not minimal, viable or a product
If Roe v. Wade reversal looms, should you delete your period tracking app?
Peloton reportedly looking to sell 20% stake amid struggles
Seen on MovieUpdates+
Understanding UiPath’s Falling Valuation
Psychedelic startups are on a long journey into consumer markets, but these 5 VCs are taking over
Hire top startup talent on a budget during the Great Resignation
Until next time,