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Three ways to play offense in a downturn

Protocol Pipeline

Hello, and welcome to Pipeline. My name is Biz Carson, and I’d like to wish my brother a very happy golden birthday.

This week in the startup world: VCs want to fight each other IRL, LA gets its own tech week and my exclusive report on Notion’s tender offer and what it means to play offense in a downturn.

Playing offense in a downturn

Venture capitalists have all been giving the same advice to startups: cut costs, do layoffs, become more disciplined and get cash-flow positive to survive a downturn.

For Notion though, the game has in many ways moved back to its home turf.

“We find ourselves in an interesting spot because we’ve always been cash flow-positive and we don’t need to do those things,” Notion’s COO Akshay Kothari told me. “So we’ve been thinking the last six months a lot about, ‘Well, if everybody is zigging, how do we zag?’”

Notion has gone on the offensive while other startups are playing defense.

  • It acquired calendar app Cron in June and added the Flowdash team earlier this month.
  • It’s launched a global ad campaign — the opposite of cutting down on marketing spend.
  • It also did a tender offer for employees in June, letting current and former employees sell shares so that they know it’s more than paper money. Sequoia and Index also got a chance to buy more at the same price as its last funding round (a $10.3 billion post-money valuation). “It’s not something that people feel like they can just go retire, but I think it gives them a peace of mind,” Kothari said.

It’s not a position every startup finds itself in right now. Companies have been instituting hiring freezes and slashing head count, from TikTok to Unity to Substack. Klarna saw its valuation fall from $45.6 billion last June to $6.7 billion this July in its latest funding round. Stripe, following other startups like Instacart, cut its own internal valuation by 28%.

  • Notion isn’t immune to the headwinds either. A lot of its customers are startups so any downturn that causes them to cut costs could mean tools like Notion might be on the chopping block. Kothari says the company is watching its small-business churn closely right now because of it, but it’s also seeing its mid-level enterprise numbers rise.
  • After reading about Marc Benioff’s regrets over not investing more in 2009 when Salesforce was faring better than expected, Kothari said he realized Notion’s move in this environment was to watch its numbers closely, but play offense where it can.

Notion isn’t the only one leaning into the downturn. Companies like cryptocurrency exchange FTX have seen this time as a prime buying moment, and FTX’s founder Sam Bankman-Fried has invested in many companies in the distressed crypto space. Notion hasn’t been on the same scale of M&A spree, but Kothari has noted a definite shift in entrepreneurs’ attitudes towards deals. As funding has dried up and there are fewer paths to an exit, he’s found more founders willing to become part of bigger companies — and Notion’s open to more conversations.

“I would say we're very much in the market to continue to talk to companies both on the product side as well as on the sort of acquihire side and see how we can accelerate our roadmap internally,” Kothari said.

My story on Notion’s tender offer first appeared on Protocol.com. Read it here.


A real venture capitalist fight club. Inside’s Jason Calacanis and Founders Fund investor Trae Stephens will MMA fight each other in a ring for $100,000, as long as Calacanis doesn’t keep adding terms to it.

“If your company does layoffs, [it] seems like you should be disqualified from any ‘best place to work for’ lists/surveys for at least one year following,” wrote Credit Karma HR head Colleen McCreary on LinkedIn. Leaders are mixed, though, on whether layoffs should be a scarlet letter on a company, or seen as the normal course of business.

Not the discounts you want to see. “Nothing like your inbox being full of emails from brokers offering secondary positions in venture-backed companies you love at steep discounts … Until you scroll down and see your own portfolio companies on the list 🥴” tweeted Bessemer’s Elliott Robinson. The good news, as he pointed out, is that one investor’s off-ramp is another investor’s on-ramp to a 10x outcome.

Is Helium just a bunch of hot air? Noted Web3 critic Liron Shapira did a tweet thread dissecting Helium’s business model after the much-hyped Web3 IoT company raised hundreds of millions of dollars. In a rare move, Sequoia’s Shaun Maguire tweeted that he agreed with Shapira and said it was important to voice skepticism in the industry: “I admire both the Helium founders and early adopters for running this experiment. But I think this financing is absurd.”


Chip shortage could undermine national security: The global shortage of semiconductors has impeded the production of everything from pickup trucks to PlayStations. But there are graver implications than a scarcity of consumer goods. If the U.S. does not ensure continued domestic access to leading-edge semiconductor manufacturing, experts say our national security could suffer.

Read more from Micron

Inside track

In today’s market, it’s better to shift sales strategies to expanding current customers then trying to bring in new ones. Initialized’s Jennifer Wolf talked to former Returnly CRO Greg Lazarus on “five sales strategies to weather the market downturn.”

When will valuations bottom out? Thomvest Ventures’ Don Butler did the math and found it could be “several more quarters” before valuations reach bottom and the rebound starts.

Raising a first fund isn’t unlike raising for a startup — you have to always be raising and tell a story to get it done. Weekend Fund’s Ryan Hoover and Vedika Jain assembled a bunch of advice for first-time managers on how to raise from LPs.

After thousands and thousands of pitch decks, there are three slides that are major red flags for Homebrew’s Hunter Walk. One of them (deceptive founder bios/logos) happens to be a major red flag for journalists, too.

The seven deadly sins are often seen in a negative light, but it’s not a sin to build a successful consumer company off of human behaviors. In a post on investing in the seven deadly sins of consumer technology, Index’s Rex Woodbury breaks down an established company and an up-and-comer that’s capitalizing off each.

Need to know

Another go-round on the carried interest carousel. The Schumer-Manchin climate agreement ended up with a surprise line on carried interest. The provision seeks to narrow the carried-interest tax loophole, resulting in the predictable cries that this will ruin the startup economy but also some support from VCs who view this as a worthy trade. Writing about someone trying to close the carried-interest loophole is a yearly exercise at this point, but maybe this time it will happen?

The one thing that did pass is the Chips Act. The $52 billion for chip manufacturing is a huge boon for the industry, but now it’s time to build.

The FTC sued to block Meta’s acquisition of VR startup Within. It’s an aggressive move against Big Tech, and many are already concerned about the chilling effect this lawsuit could have on startups. “If the government blocks big tech companies from buying small startups in *nascent* markets, all that will happen is there will be fewer startups over time because investors can’t underwrite the risk,” tweeted Box’s Aaron Levie. “This is bad for innovation, and ironically good for the big tech companies.”

LA Tech Week is now a thing, and it’s kicking off mid-August with Marc Andreessen as the keynote.

Narrative violation: While many VC firms are announcing their expansions outside of Silicon Valley, LA-based Upfront Ventures is opening an outpost in SF. Upfront’s Kara Nortman and Greg Bettinelli won’t be investing from the new fund though.

From Protocol: SignalFire CEO Chris Farmer has been waiting for the other shoe to drop for years. He’s now ready for a downturn and the investing shifts that come with it.

Also on Protocol: Why Cloudflare's march into network security can't be ignored.

Your weekend reading: It’s the one-year anniversary of Robinhood’s IPO — and it’s not exactly a happy one. Still, its founders are zen about it and are already plotting their comeback.


Chip shortage could undermine national security: To ensure American security, prosperity and technological leadership, industry leaders say the U.S. must encourage domestic manufacturing of chips in order to reduce our reliance on East Asia producers for crucial electronics components.

Read more from Micron

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