Welcome to Startups Weekly, a fresh human-first take on this week’s startup news and trends. To get this in your inbox, subscribe here.
The Great Resignation, the economic trend of people quitting their jobs in pursuit of other opportunities, has been greeted by a harsh reality: the Great Reset.
This week, a spate of tech companies – largely those valued above $1 billion from their venture capital investors – announced reductions in their workforce. I wrote three layoff stories in fewer than 24 hours, a cadence I haven’t experienced since the beginning of the pandemic. These stories may have the same ledes, but they feel dramatically different.
Unlike before, when startups had to lay off employees in response to the sudden shock of the pandemic, today’s tech companies are making cuts due to – more or less – their own lack of discipline. I have more empathy for a founder who was caught off guard by a pandemic than one who overspent despite knowing that the boom wouldn’t exist forever, and is now cutting the same employees that helped them soar. Whiplash, I’m hearing from some now former employees, is an understatement.
Growth is tricky, and a part of a founder’s job is to moonshot their way to scale, but we also need to remember that change was inevitable. Especially for startups that hit product market fit during a once-in-a-lifetime event.
The biggest difference between layoffs in 2020 versus layoffs in 2022 is cash, potentially a lifeline. Startups raised massive amounts of capital thanks to larger average deal sizes over the past two years; meaning that some of the capital that was once used to sweeten benefits or candidates’ offers may be pivoting to runway. Jason Lemkin, head of SaaStr, put it well on Twitter: “Many startups also lucked out and have years in the bank due to covid rounds… capital that they wouldn’t have had otherwise.”
If you’re a founder, now is the time to unlearn some of that lavish spending and focus on conserving what you do have. For employees, let me know which spreadsheets I need to retweet. For more thoughts, read a round-up of all the tech layoffs this past week, and then head to TechCrunch+ for some advice on how to navigate the market.
In the rest of the newsletter, we’re talking about spicy venture firm pivots, fintech drama and a duo of inclusive play in exclusive worlds. As always, you can support me by forwarding this newsletter to a friend or following me on Twitter or my blog.
What venture firms are raising despite reckoning
A number of venture firms made news this week, either to announce new funding or new strategies. In Afore’s case, it’s both. The pre-seed firm tells TechCrunch that they closed a $150 million fund and introduced an in-house accelerator of sorts with a standard deal. Going forward, any accepted company will receive $1 million at a $10 million post-money valuation. It’s a not-so-subtle dig at Y Combinator and a way for Afore to stand out during a changing market.
Here’s why it’s important: Afore isn’t the only firm to change its mind. Backstage Capital told me this week that, after investing in 200 companies, it will now only do follow-on checks in its existing portfolio. For now, that means no net new Backstage companies, even though the firm is growing assets under management.
Also, we’re hearing that Unusual Ventures’ new $485 million fund comes with an impressive promise of full-time help. Early-stage founders, it’s definitely a stressful time to be in your seat – but also clearly a pivotal one.
Stripe is playing checkers with Plaid
In Equity this week, your favorite trio chatted about Stripe and Plaid drama. For background, Stripe recently announced a new product that would give customers a way to connect directly to their customers’ bank accounts, access financial data and manage transactions. AKA, exactly what Plaid does.
Here’s why it’s important: Plaid CEO and co-founder Zach Perret threw shade at Stripe in a tweet, suggesting that the company may have used its previous relationship with Plaid to get a competitive advantage. We’ve talked about fintech all overlapping, and competing with each other for months on the podcast, but this felt like the most clear example of a tension. Listen to the podcast for our entire take – and why it may be a helpful data point for founders.
Let’s be exclusively inclusive
For the deal of the week that may have flown under your radar, I have two! Walnut and Line are two startups that are bringing inclusive plays to exclusive industries. Walnut, which announced a $110 million Series A this week, has built a buy now, pay later product for healthcare bills, and Line, which landed a $25 million round of majority debt financing, wants to give low income folks an easier way to access emergency cash.
Here’s why it’s important: These startups, if they pull it off, will underscore the promise of tech breaking down barriers for those disenfranchised from our institutions. It’s why I’m taking on fintech, with an angle on wealth, access and education, as my new beat.
Across the week
Seen on TechCrunch
Digital health startups brace for a post-Roe world
Seen on TechCrunch+
Until next time,