Dare investors to founders: turn down for what? – TBEN


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Sahil Lavingia of Gumroad broke into the venture world as one of the first testers of the Rolling Fund, an AngelList product that allows investors to raise capital on a subscription basis. That was in 2020. Fast forward to 2022 and a lot has changed.

One of those changes? The number of pitches from founders who want to increase. “Since March, it’s down about 90%,” Lavingia told TBEN. “I probably saw more than most — about 20 to 40 vetted decks a week — and that number has now dropped to about two to four a week.” He’s also seen an increase in the quality of talent for people who want to work for Gumroad — which he attributes in part to the steady rush of layoffs — and a decline in founders starting companies.

A decline in the number of founders raising capital suggests that startup startups are not as immune to macroeconomic shifts as some investors claim; a boom of new startups, on the other hand, would support the idea that recessions — and the associated wave of layoffs — are the time when startups are born.

Lavingia divides the state of founders into three buckets: “tourist founders, immigrant founders, and ‘born and raised’ founders.” Tourist founders, he said, are those who only start businesses in bull markets, a cohort he says has fallen by about 100%.

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“They are rarely fundable in bear markets,” Lavingia said. “They have to hire others to build things.” Immigrant founders, meanwhile, care less about the reputation and status of starting a business, but do weigh the risk and return. This cohort of founders has halved, per Lavingia. Finally, “born and raised” founders are founders regardless of the market: “They all existed and therefore raised money in 2020-2021, so they too are not starting businesses and raising money at the same pace.

There are two sides to early stage venture capital: the investors who admit that talent has shifted and those who support the deal flow that is still so loud.

If you’d like to read my full opinion, check out my TBEN+ column, “Investors Are Gearing Up for a Founder Downturn. Or Influx. Wait What?”

In the remainder of this newsletter, we’ll take a look at Y Combinator’s shrinking class size and fund managers debut on their collective mood. As always, you can support me by forwarding this newsletter to a friend or follow me on twitter.

Y Combinator reduces its class size

Y Combinator says it intentionally shrunk the number of startups within its accelerator for the Summer 2022 batch. As first reported by The Information and independently verified by TBEN, Y Combinator’s summer 2022 cohort — currently in action — numbers nearly 250 companies, a 40% drop from the previous cohort, which reached 414 companies.

Here’s why it’s important: Over the years, Y Combinator’s ever-expanding batch size has become a common — if not cliché — conversation among techies. I know this because we contribute a lot to this conversation (especially about stocks). The biggest problem people have had with YC’s growing class size is that it threatens one of the accelerator’s biggest value propositions: network. The bigger the class, the harder it is to stand out.

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While YC says it hasn’t scaled back due to criticism or the cost of growing check size, the move will certainly help those within the current cohort stand out simply because of a lack of competition.

Image Credits: Bryce Durbin

New fund managers have thoughts

TBEN+’s Rebecca Szkutak has spearheaded the latest investor survey, which is getting a temperature check of seven budding fund managers who are on the brink of a downturn. What advantages do new VCs have over more experienced competition in a challenging market? What steps are they taking to prepare for the fourth quarter? What keeps them up at night given the current market conditions? These are all questions they answer and more in the piece now live on the site.

Here’s what’s important: There is always a silver lining, but especially if you have a smaller portfolio. Szkutak gives us a teaser snippet below:

“We don’t carry the baggage that comes with having past funds or having a lot of capital tied up in what appears to be overpriced harvest years,” Stuto said. “Like a founder, who sees the world differently than subject matter experts, we (first-time managers) bring a fresh look at how certain problems and industries are evolving.”

Read Survey of Szkutakand they additional analysis of iton the website.

A fully fruity orange tree harvested in an arid Southern California desert landscape;  novice investors thrive in recession

Image Credits: Stephen Swintek (Opens in a new window) / Getty Images

If you missed last week’s newsletter

Read it here: “The bootstrapped are coming, the bootstrapped are coming.” I also recorded an accompanying podcast with my favorite co-worker, Alex, which you can listen to here: “Is it time for the bootstrapper to hop on the venture treadmill?”

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Are there any requests for topics I can delve into, either on Startups Weekly or on the show? Tweet me a big question and I’ll have a shot at it either in an upcoming Startups Weekly or on Equity.

Image of a pair of white headphones hanging against a blue background.

Image Credits: Martin Barraud (Opens in a new window) / Getty Images

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Dear Sophie: How long do I have to stay in my current job after getting my green card?

Done. I’m going to the lake to enjoy these last summer weekends. Take care of yourself!

Talking soon,



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