Craft Ventures: Operating During a Downturn Part I (Feb 2022)

Key takeaway

• For entrepreneurs: Focus on capital efficiency, extend runway, and be prepared for a tighter fundraising environment
• For investors: Valuations are normalizing after a period of inflation, creating opportunities for more disciplined investing

Summary

Craft Ventures discusses the recent market correction, its impact on startup valuations, and how entrepreneurs should operate during an economic downturn. They explain the causes of the correction, including inflation and interest rate hikes, and how public market changes affect private markets. The speakers offer advice on fundraising, managing runway, and communicating with employees during uncertain times.

Insights

• Public market corrections are trickling down to affect private market valuations
• The recent period of high valuations and easy fundraising was likely an aberration
• During downturns, everything gets easier for startups except fundraising
• Investors will focus more on capital efficiency and sustainable growth in this environment
• Having 18+ months of runway provides significant advantages in navigating market uncertainty

Implications

• Startups may need to adjust their fundraising expectations and strategies
• Companies should focus on efficient growth rather than growth at all costs
• Talent acquisition may become easier as competition for employees decreases
• Founders should be prepared to run a tighter, more disciplined fundraising process
• The market may take several months to stabilize and find new valuation norms

Craft Ventures: Operating During a Downturn Part II