Venture capital firms such asSequoia Capital and Y Combinator have triggered the alarm for startup firms that the days of capital raising are gone.
The well-known VC gave 250 founders a 52-slide presentation via Zoom on May 16, alerting them to a crucible moment as higher inflation rates, volatility in the stock market, and several geopolitical issues prompted less certainty in the venture capital market. The Information.
Sequoia informed startup founders that there is likely to be no V-shaped recovery as we did at the start of the epidemic, and instead recommended that they assess their companies for costs that might be reduced.
Don''t dismiss (cuts) as a negative, unless it is a way to help save money and make run faster, according to Sequoia.
Sequoia, a pioneer in the venture capital world, has successfully invested in business firms such as Google ( (GOOGL) - Get Alphabet Inc. Class A Report, Apple ( (APPL) ) and Uber ( (UBER) - Get Airbnb, Inc. Class A Report, Stripe, Block (SQ) - Get Block Inc Class A Report(formerly Square), Instagram (FB) - Get Meta Platforms Inc. Class A Report) and WhatsApp.
Sequoia, a California-based VC firm that isn''t shy about alerting its portfolio companies that cutting back on expenses is now a priority, gave a similar warning in 2020 called Coronavirus: The Black Swan, and gave a slide presentation in 2008 in response to the Great Recession and Financial Crisis that started with the housing market''s meltdown entitled R.I.P. Good Times.
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Another Grim Warning
According to Crunchbase data, the VC firm has made 76 investment so far this year.
As of November 2021, the VC held $45 billion in public positions, and in the last 15 years, it has distributed$29 billion to its limited partners, including investing $12.5 billion.
Last week, Y Combinator, a startup accelerator, issued a grim warning to its businesses.
No one can predict how bad the economy will get, but things do not look good, according to the accelerator in a letter that portfolio owners received called Economic Downturn. The safe move is to plan for the worst.
After reporting a loss of $27.7 billion on investments in its Vision Fund, Softbank (SFTBF) said in May that it would modify its choice criteria for investments.
Large losses on the public sector may result in less capital in the venture capital world as limited partnership investors reverse.