“Dancing in the Rain” – a new cartoon that illustrates how different companies are dealing with the onset of the recession. This week the US technically went into a recession, recording two consecutive quarters of declining growth. The last six months have seen a steady deterioration of confidence by tech business leaders built on a narrative of declining venture funding, M&A and hiring. Most notably, Sequoia Capital in a letter to its portfolio companies laid out the case for a long and drawn-out recession and instructed founders to “do the cut exercise” immediately.
However, a closer look shows that some of this might be overblown and there are significant growth opportunities for those businesses that want to take advantage of the new environment. For example, three venture funds raised crypto-only VC funds of over $6bn (Bain, a16z, Haun) and M&A in the first half of 2022 is up 58% year over year. Companies with a strong product-market fit that can easily scale, cash-burn discipline, and leadership who can navigate turbulent bear markets are going to be benefiting from these times to build successful companies such as AirBnB, Square and Netflix did in the Great Recession.
(Check his website and find the mentioned image)