Inflation vs Startups ❤️🩹- Get rid of your bad habits ⛔️- Thibaud Elziere's interview highlights at GDIY ✅- Facts from "Un monde sans fin" ⛽️- About good & bad management 🚦
Sometimes you just have to open the door, jump out of the plane, and hope you packed the parachute tight.
Episode #64. Hey Sunday readers!
Today is another good time to reflect on some content you may have missed this week. 2 great articles, 1 book, 1 Twitter thread and a 3hour long podcast summarized below in a 7min read 😎:
A summary of a great piece from BrightEye VC "called “Fundraising in a downturn”,
Highlights from another enlighting Twitter thread from Sahil Bloom called “15 bad habits holding you back from unlocking your potential”,
Some great extracts from the recent interview of Thibaud Elzière (eFounders) “Startups, Web3, voile solaire et maisons de luxes; quand la curiosité n’a plus de limites”,
My selection of facts about climate change from the French cartoon written by Jean-Marc Jancovici (climate change activist) “Un monde sans fin” (Ed. Dargaud),
Takeaways from Patrick Kervern about “Good management is not good strategy” (Digital Tonto).
#1. The end of a golden era for startups? ❤️🩹
TL;DR From this article 👉 Fundraising in a downturn (State of the market Q2 22) published by BrightEye Ventures on May 24, 2022.
Inflation is leading to a rise in interest rates by central banks. And inflation is not good for startups. As a consequence, with company valuations depending on the value of future discounted cash flows (taking a higher interest rate into account), valuations decrease. “Because high-growth companies have a higher proportion of their cash flows in the future, growth stock valuations are more impacted by rate rises”.
Unfortunately, inflation is probably here to stay. “We do not see a quick reversal in asset valuations. Private market investors should prepare for valuations to be marked down in the coming quarters, especially in VC.”
Here is how startups are already being impacted by higher inflation:
Deals are taking longer to close because series B valuations are -25% lower than they were before inflation pressure arrived.
Only companies growing fast (3x+ per year) in a capital-efficient way, are still fundable.
IPO and exit volumes are down nearly 50% but exit valuations remain higher as there is still demand for strong companies.
What about raising VC rounds in 22-23?
The key metric that will be looked at is Cash burn/net ARR added; this is the metric showing your capital efficiency.
« Option 1: If you are not currently fundable but have sufficient momentum to get to profitability on your existing cash runway, even if it means cutting burn and sacrificing some growth, that may be the optimal path given current uncertainty.
Option 2: If you are not fundable and have sufficient runway (12+ months), then you should consider restructuring to provide more runway to give you the time to adequately establish sales efficiency and growth (if that appears possible), and/or establish partnerships which can provide a route to exit and better product-market fit.
Option 3: If you have less than 12 months of cash, are not fundable, and have no path to profitability, you should evaluate the prospect of an exit or inside round and/or reduce burn to extend your cash runway and give yourself more time to hit funding benchmarks. »
The Sequoia playbook for cutting costs is also covered in this article:
Engineering - decrease headcount for the next version?
Product - what features are absolutely essential?
Marketing - measuring & cutting what’s not working?
Sales/Bus Dev - ROI on expense increase?
Pipeline - Real probabilities of closing deals?
Finance - (i) Where can payments be deferred (ii) What G&A departments are essential?
#2. Bad habits you have to kill to become successful ⛔️
TL;DR From this Twitter thread 👉 15 bad habits holding you back from your potential published by Sahil Bloom on May 21, 2022.
Stop complaining. Free time is a call option for future opportunities. « The ability to say no is a superpower of successful people ».
Stay active. Your body was made to move. Do not jog. Sprint, rest, walk, and sprint. Jog is comfort you cannot afford as life is too short.
Stop wanting to be right. Successful people deliberately allow themselves to be wrong.
Be aware that there is no such thing as the perfect moment.
Sometimes you just have to open the door, jump out of the plane, and hope you packed the parachute tight.
#3. What makes a good entrepreneur? ✅
TL;DR From this podcast 👉 Thibaud Elziere (eFounders) at GDIY interviewed by Matthieu Stefani published on May 15, 2022.
Thibaud Elzieres, founder of the (well-known in France) startup studio called eFounders (Front, Aircall) is now verticalizing a series of studios. One is led by Camille Tyan in Fintech; a web3 studio called 3Founders will launch in 2022.
The interview starts with a good piece of introspection. What is the best period of your life?
Matthieu believes that the best period is a function based on optimizing 3 components. Health x wealth x time. Being young you may enjoy health and a lot of free time but generally with little money in your bank account. Being older, you may have been successful enough to have money and free time to enjoy, that is when you may be struggling with your health.
What makes a good entrepreneur? According to Thibaud, this is neither hard(er) work nor being smarter; good entrepreneurs develop a capacity to be more focused. Drivers for good entrepreneurs are neither money nor recognition. They generally enjoy “Not working for someone else”. They also cultivate naive optimism: everything is going to be alright.
#4. Not (fun) facts about la fin du monde ⛽️
TL;DR From this book 👉 Un Monde Sans Fin written by Jancovici / Blain published in 2022 (Ed. Dargaud). Sorry for the French 🇫🇷.
Chaque terrien consomme en moyenne 22000kWh par an. L’équivalent de 200 esclaves qui travaillent pour chacun de nous en permanence.
Les centrales à charbon mondiales représentent 40x la puissance des centrales nucléaires françaises. Pour limiter à 2C le réchauffement climatique, il faudrait que la totalité des centrales à charbon ait disparu d’ici à 2050.
80% de ce que l'agriculture produit en France serait destinée à nourrir les animaux.
Paris a une configuration de ville parmi les plus sobre au monde car très dense avec son architecture hausmanniene où les immeubles sont collés les uns aux autres.
Le digital émet une quantité de dioxyde de carbone équivalente à toute la flotte mondiale de camions.
L'organisation mondiale de la santé dit qu’on meurt plus d'obésité que de la faim dans le monde.
#5. Good (or bad) management 🚦
TL;DR From this article 👉 Good management is not good strategy. Here’s what it is published on May 8, 2022 in Digital Tonto. Summary by Patrick Kervern.
“One of the most annoying things I hear from leaders is that “we had a great strategy, but just couldn’t execute it.” That’s simply not possible.
If you can’t execute it, it’s not a great strategy. Most likely, “it was a fantasy cooked up by some combination of consultants and investment bankers which was enshrined in PowerPoint.” explains Richard Rumelt points out in his new book.
Strategy starts with defining a problem that addresses a particular market reality. Kroc designed McDonalds to fit with an emerging suburban lifestyle. Lazarus came up with the “everyday low price” at Toys “R” Us to solve for the huge inventory swings that sale events caused. Watson bet the company on the IBM 360 because the lack of compatibility among IBM’s machines was slowly killing the company.
We need to take a more Bayesian approach to strategy, in which we don’t pretend that we have the “right strategy, but endeavor to make it less wrong over time. Good strategy isn’t a plan, but a set of choices made about how to address meaningful challenges.”
Ray Kroc didn’t invent the Egg McMuffin at McDonald’s, but his strategy of allowing franchisees to experiment gave birth to it and many other things as well. Charles Lazarus started with a baby furniture store, but his quest to find repeat customers led him to create Toys “R” Us and pioneer the category killer. Thomas Watson Jr. bet the company on the IBM 360, but it was the decision to move to an 8-bit byte that would revolutionize the computer industry. None of these were planned for.
Good strategy is not a function of good management, but a process of discovery. Managing by metrics will always be limited to what came before and cannot see what lies ahead. We need to learn how to identify grand challenges that shift the competitive environment and change perceptions of what is possible.
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