I talked with a young startup founder who was more than a little panicked by the sour financial news in tech recently.
Venture investment is down by almost 50% this year. New unicorns are rare again. Tech layoffs continue. Crypto crashed. Hot tech stocks are down 50-90%.
It’s hard to read these headlines and not wonder where this is going.
But the end is not near. Not even close.
Here’s what I told her:
- This is mostly about the financial side of tech, not about the technology or the businesses themselves. The hype cycle on the financial side of tech reached huge levels last year that just couldn’t continue.Most big tech companies and startups with big funding are just getting back to 2020 or 2019 levels on the financial side, but their businesses are bigger and stronger now.
- Big layoffs in tech this year are mostly about the over-funding and over-hiring in 2020 and 2021. Big and small tech over-hired during the tech boom and now it’s back to some version of reality.Facebook laid off 11,000 people, but they hired almost 20,000 people in the last year — a 28% increase. And Facebook is still very profitable despite its crazy investments in the someday-verse.
- Tech companies that didn’t go public and didn’t overdo it with VC funding are growing steadily and hiring just fine.If you didn’t take the big funding drugs when they were offered, you didn’t get addicted and don’t have to deal with the hangover and withdrawals when they were taken away.
- This is just another boom and bust cycle which always happen eventually. I don’t know if we’re even close to the end of the bust. I think the bumpy economy and tech financial rationalization will continue through 2023. Buckle up.
If you sell recruiting software or services to over-funded tech companies, you are going to have problems for a few years.
If you sell “nice to have” software that isn’t mission-critical to happy customers, you’ll have problems too.
Media companies that sell greed and fear clickbait can have it both ways. Most focus on the financial sport of tech, not the actual customer, business or product side. Greed headlines on the way up, fear headlines on the way down. Right?
This particular founder has a profitable and growing SaaS business and doesn’t have outside funding. Her business is really doing great.
She never took the bait with big and easy funding during the boom.
Her biggest competitor raised a HUGE venture round last year. It’s likely they are dealing with their own internal nightmares now and not innovating and aggressively competing in their market.
Are we going to use less tech in 3-5 years? Nope.
Just focus on what you can influence:
- Sell something your customers really want and will pay for
- Make them so happy they tell their friends and buy more
- Create a sustainably profitable or breakeven business
- Focus only on your best customers, best investments, and best people
- Ignore the tech financial headlines
#practicalfounders
