On to the fieldnotes...

Positive Updates on SVB

A short update on my SVB take

Last week's essay was pretty grim. I’ve been reflecting on it since we published and decided to add some positive updates...

The cliff notes from last week? I predicted our run of resilience in the face of many repeated disruptions was over. SVB would be the straw that broke the camel's back. Investors' confidence and their willingness to invest in startups would both crumble.

When I began writing the essay, the situation seemed bleak. There was no solution in place to protect depositors, which was the main source of pessimism. When the government stepped in to take the worst possible scenario off the table, the community breathed a sigh of relief, but the tone of my essay remained gloomy. Even though there was a positive resolution to the specific problem, my expectation was still that the fundraising markets would suffer for some time to come.

A pleasant surprise

I published on Tuesday and shortly thereafter I started seeing something kind of wonderful emerge.

Instead of completely withdrawing from the market and seeking refuge, the resilience and optimism that characterizes American innovation began to appear.

I started seeing a mix of efforts to inject confidence and support into the system. This included funds publicly announcing their support of SVB as a continuing entity, as well as individual VCs announcing their intentions to invest online. It was a positive development that instilled confidence and positivity in the fundraising landscape.

Even the dude who yelled ‘FIRE’ in the movie theater transitioned to a more steady vote of confidence:

And this carried over to the real world too. On Pi Day (3.14), I went to a VC event hosted by the folks at TenOneTen Ventures. The energy to push forward was consistent across all types of conversations. Founders were aware of but undeterred by the turbulent waters, and VCs were eager to do the work to support those founders. It was a great energy to experience in person.

Sounds minor... why will it help?

It's important to remember that markets are driven by sentiment and emotion. This is especially true when investment decisions aren't made based on discrete criteria, as is the case with most early-stage investing. When gut, feelings, and signal drive decisions in a market, that market is very susceptible to buying and selling cycles. One bit of positive or negative news can be a domino effect pushing markets in one direction or another.

So these efforts to instill confidence could have a positive impact. One player acting on her own doesn't make a market. 2 players together also isn't a market. But 5 might attract another 5 which could create momentum and an overall sentiment to make or change a market.

Although it won't create a new bull market overnight, if the economy can remain stable, these collective actions will help maintain a consistent flow of investment and have a profound effect on avoiding a barren winter for VC / startups / fundraising, and ensure it's just a chill that we can all survive with a warmer coat and more preparation.

That said, still a sober reminder

Despite these positive developments, it's important to note that the bar for raising funds will be higher.

Startups will need to be more prepared and present a more convincing case to investors. While the efforts to boost confidence are encouraging, it's clear that the fundraising landscape will remain challenging in the near future.

Remember to do the following:

1. Focus on validating your problem / market / product. The bar is higher which means instilling confidence in your stage of company. It will be harder to get VCs to go skydiving with you.

2. Build investor relationships and create market awareness early. In the past, it was easy to get a first meeting with a VC or convince investors to put money in without prior knowledge of the founder & company. In this tighter market, there will be a flight to safety and known quantities.

3. Develop a clear plan for survival. Investors want to know they're not funding a bridge to nowhere. They need to see the path to more funding or profitability.

This too shall pass. You got this.

Smart Twitter Takes

VCs reading this thread for sure feel the shame. They’re all guilty of some of this…

TAKE ACTION! Ship. Sell. Publish. Talk. Do. You’ll thank me later…seriously

P.S. Important to have balance in a healthy relationship 🥲