Red flag
Photo: Kai Bossom via Unsplash

Easy money is over and the VC world needs to adapt

Protocol Pipeline

Hello, and welcome to Pipeline. My name is Biz Carson, and the best croissant I’ve ever had is the turkey pesto at Gold Coast Coffee in Duncans Mills, California. This week: tech workers are obsessed with their total compensation, social media companies are panicking, and the money firehose is drying up.

Buh-bye, easy money

When Keith Rabois tweeted earlier this week that it felt like June 2000, I’ll admit I had to ask my editor exactly what that meant in the boom-to-bust cycle. [Editor’s note: I speak fluent Rabois.] As someone in my thirties, I’ve been in tech nearly a decade but that still puts me in a very large camp of tech workers who haven’t really lived through a true downturn like the one Rabois is forecasting.

Translating what the June 2000 warning meant, my editor’s short answer was that June was the relative calm before the storm — a moment of delusion that the market had hit bottom already (does “buy the dip” sound familiar?) when things would in fact get far, far worse and for far longer than anyone had imagined.

Things aren’t exactly calm right now though. In fact, red flags abound in these choppy tech markets. Let’s take a look at this week.

  • SoftBank said it was pulling back by 50-75% on startup investments after it hemorrhaged billions on tech investments. Already startups were concerned they were being left to die by the firm, and now it’s confirmed the escape hatch is closed.
  • Tiger Global lost $17 billion and has almost fully invested its latest fund. “If you owned growth stocks this year — like we did at Altimeter — you got your face ripped off,” Altimeter’s Brad Gerstner tweeted in a thread where he conceded the hedge fund did not hedge enough.
  • Goldman Sachs is moving away from SPACs amid regulatory scrutiny. The ones that are on the market aren’t faring well either, with scooter startup Bird’s stock dropping below a dollar for the first time this week.
  • Crypto has possibly had it even worse, to the point that even Ryanair is roasting “crypto bros” on Twitter. Coinbase’s value has fallen nearly 80% since its direct listing last year and is now lower than where a lot of its late-stage investors bought in.

What does that mean for startups? “The firehose of money that has been pointed at these companies is going to be 70-80% smaller,” one investor told me. And it’s poor timing to have the money hose dry up.

  • Right now, startups are facing a contraction in valuation — not revenue, which was the case in early COVID days. Public-market comps are down 60% or more in some sectors, and they tend to be the leading indicator of how VCs are similarly going to value startups down the road. That means startups are going to need more revenue to get back to their last valuations and enough runway (think 2.5 years instead of two) to get there.
  • To figure out how to actually do it, a16z’s Justin Kahl and David George published a framework that goes past “save cash” platitudes to walk founders through scenario planning. For many startups, they’ll be faced with two options: trim expenditures, like what we’re seeing with layoffs, and increase capital efficiency, or raise more money to get the extra runway needed to grow into it. More often, it’s a combination of both.
  • Already “flat is the new up” as more founders raise extensions on their funding rounds to avoid a downturn. For example, Faire raised $400 million in November 2021 to much fanfare, only to quietly acknowledge a $416 million extension on the same terms this week. There are a lot of other companies I’m hearing about that are opportunistically opening up their last round while there’s still demand in their business, rather than waiting for a year down the road when cash supplies are lower to stick their hand out.

The short version: Easy money is dead, the firehose is drying up and that goes for both startups and VCs alike when raising money. Venture capitalists have moved the goalposts. It’s not about how fast you move, it’s about how little capital it takes to get you there. With public comps destroyed and investors like SoftBank sitting on their hands, startups and VCs have to re-run the numbers and not assume money will just materialize. The lingering question as startups recalibrate is whether you believe Rabois that it’s June 2000 all over again. And if you do, is your worst-case scenario really worst-case enough?


“After a while, it just becomes this — and excuse my French — but it just becomes this dick-swinging contest.” If you’ve ever been on Blind, you’ve probably seen someone reply “TC or GTFO.” Tech workers say the obsession with listing total compensation has been a boost for pay transparency, but it’s also promoted a money-obsessed culture.

The cost of being founder-friendly: $1,495. At least that’s the fee to apply to Inc.’s list of “founder-friendly” venture capital firms.

Does your startup have a company song? Or even better, a sea shanty? Surprisingly there’s at least one sea shanty about Twilio and someone can clearly run with the first verse of this Sequoia-focused one.

“Product market fit is like an orgasm. If you’re not sure if you have it, you don’t. When you have it, you’ll know,” tweeted Winnie CEO Sara Mauskopf. That’s one way to describe it.


Innovators across the country are unlocking new technological frontiers using AI, 5G, IoT and the cloud to create opportunities never before possible that fundamentally expand our ability to solve important problems —technologies that can improve health outcomes, cut greenhouse gasses and make factories more competitive.

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Inside track

EAs don’t just have to be for executives. Levels’ CEO Sam Corcos explained how his 47-person startup uses 12 outsourced assistants and what it means to delegate effectively.

The top YC companies are worth more than $600 billion combined, but it’s really a winners-take-all distribution. Rebel Fund’s Jared Heymananalyzed YC’s top companies list and found that B2B and fintech companies still dominate the batches, but there’s a growing slice of health care and machine-learning companies that are a growing share of the “minicorn” pie.

If you’re looking to raise a VC fund, here are 15 tips from women who have done it before, compiled by January Ventures’ Maren Bannon.

Is it better to invest pre- or post-IPO? Manhattan Venture Partners released its latest analysis on 147 private companies that went public and found that the mean age of companies going to market has increased to 12 years, up from 5.5 years in 1997-2001.

Need to know

A surprise ruling leads to social media policy panic. Federal appeals court judges are allowing a free speech law in Texas to go into effect — basically opening it up that any social media company with more than 50 million users can be sued by a Texas user who feels they’ve been “censored” for their viewpoints.’s Vishal Garg made a deal with the devil. Garg made a side-letter agreement with SoftBank that he would personally compensate it for losses — an uncapped amount — should “ there be a discrepancy in value of the Better notes SoftBank held once they convert into equity post-SPAC merger,” Fortune reported.

A crypto exchange founder now owns a large chunk of Robinhood. FTX’s Sam Bankman-Fried now owns 7.6% of Robinhood, and there are questions of whether he’ll pull an Elon-Twitter and attempt a takeover.

Instacart filed confidentially for an IPO. It is one step closer to an offering, although now is a particularly bad time for public markets and there are lots of delivery companies that are just bleeding cash. Case in point: pandemic darling Gopuff.

David Marcus is back with a new crypto startup. Facebook’s ex-crypto chief took a lot of folks with him to build Lightspark, a new crypto startup backed by a16z and Paradigm. Oddly, Lightspark wouldn’t say on the record how much it raised, though Bloomberg cited “a source familiar” who said it was $175 million.

Here’s a lesson that should’ve been learned from Theranos: It’s never good to use logos in investor presentations if they’re not actually customers. That’s just one allegation against Bolt, after ex-employees and investors told The New York Times that the startup inflated metrics and its technology’s capabilities. (Bolt co-founder Ryan Breslow refused to comment on the article and issued his own response on Twitter.)

From Protocol: My colleague Janko Roettgers got an exclusive interview with Mark Zuckerberg on the metaverse and a peek at its new Project Cambria headset.

Also on Protocol: Startups may not be able to afford their own “tethics” specialist, so the Ethical AI Governance Group is giving early-stage companies a framework on how to get AI ethics right from the start.

Your weekend reading: “Burn Rate: Launching a Startup and Losing My Mind” by Bonobos co-founder Andy Dunn. No, this isn’t business advice for managing today’s times, but a reflective and raw memoir about the founder’s bipolar disorder and his experience with mental health and entrepreneurship. Don’t confuse it with Michael Wolff’s 1998 dot-com memoir, also called “Burn Rate” — but that might also be worth a read right now.

Five questions with… Maverick’s Matt Kinsella

Matt Kinsella is a managing director at Maverick Ventures, the venture arm of Maverick Capital. A graduate of Notre Dame, he serves on the boards of SaaS, cybersecurity and health care startups and is also on the boards of organizations like OneGoal and the San Francisco General Hospital Foundation.

You made the shift from the hedge-fund side into venture. What was the biggest way you had to shift your thinking and the way you work?

By far and away it was how I thought about and dealt with time. In the venture world, I had to start thinking five to 10 years in the future versus five to 10 quarters. I had to get very used to big swings in financial forecasts on a quarterly basis. I also had to rethink how efficient I was. In the public equity world, I strove to be as efficient as I could in everything — performing diligence, building my models, traveling to see companies — in and out as quickly as possible. When I switched to the venture world I purposefully slowed things down. If I’m traveling for work, I’ll stay an extra night and get dinner with someone. I’ll spend weeks or months working on a theme that might not actually yield any new investments. I’ve learned you need to leave more room for serendipity. Honestly, I probably would’ve been a better public-market investor had I thought more long term and left room for serendipity back then.

We’re in the middle of a pretty big tech sell-off. Do you think we’re headed into a recession or is this just a blip?

The answer depends on your timeframe. We very well could be heading into a recession AND this could just be a blip. When you zoom out far enough, times like these look like blips on the long arc of the market. I try to keep that in mind, even though it feels like I’m being punched in the face on a daily basis when I check the market’s performance!

What product or service are you totally, even irrationally, loyal to?

Mint. I am obsessed with it. I track my spending, investments, bank accounts, etc. like a hawk. It drives my wife a little crazy.

If you could have dinner with any tech executive you haven’t met, who would it be?

Shantanu Narayen from Adobe. This is cheating a little because I have met him before, but not in an intimate setting. I was always so impressed with him, especially when I invested in Adobe long ago during my public equity days. He kept Adobe the clear leader in the creative tools market and pulled off an immensely value-creating maneuver by shifting Adobe from a perpetual license, product-cycle-driven software company to a SaaS company. This process began around 2012 and could have been fraught with disaster, but they executed seamlessly and it unlocked huge shareholder value.

Aliens visit Earth and you can only show them one movie. What would it be?

“Ferris Bueller’s Day Off” — it’s one of my all-time favorites. I think if the aliens wanted to understand the 80s (because everyone should know about the ’80s), that would be the movie to teach them.


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