Start-up optimism collides with harsh reality
This masthead can also confirm layoffs at police software maker Mark43, after former employees posted online saying it fired an entire team, payment company Zepto and medical management firm Perx. Health. (Mark43 did not respond to repeated requests for comment, and NSW Police, which it provides, declined to comment. Chris Jewell, Zepto’s chief executive, said the downturn forced Zepto to make the “heartbreaking” decision. to lay off around 10% of its staff, whose contribution to the company he praised. Hugo Rourke, chief executive of Perx, said the company had made the difficult decision to make some layoffs at the end of May, but that she had gotten “winning clients” since then.)
The list does not end there. Solar energy company Brighte also recently cut jobs, while neobank Volt announced its closure this week.
The cuts that have been made public are widely seen as the tip of the iceberg, with many companies quietly downsizing.
For founders, it’s a delicate balancing act. ‘The dance is that people have to grow to rise, but they have to be financially disciplined to get there,’ says a member of staff at the Sydney start-up, who was not authorized to speak officially. .
In other words, venture capitalists tend to back only companies that generate income quickly. But unlike a few months ago, Australian venture capitalists are now wary of companies that spend at all costs to get there.
Outspoken American venture capitalist David Sacks, who was an early leader of PayPal alongside tech titans such as Elon Musk and Peter Thiel, said on the influential All inclusive podcast last week that start-ups got the dance wrong.
He recalled a recent industry conference where the founders were told they needed enough money to cover their company’s losses over the next three or four years because if they had need to raise more funds in a year, the amount of money available would have dropped by 75%. . When asked how they would approach the situation, Sacks said, the results showed a contradiction.
“There is a common set of values that go beyond company to company and which, in these difficult times, is very useful.”
Jono Herman, co-founder of Earlywork
“On the one hand, the founders understood intellectually that we’re heading into a downturn, we’re heading into a recession, and so the polls reflected that,” Sacks said. “On the other hand, if you ask the founders how they’re going to react…are you going to downsize or are you going to ramp up your business to beat your competitors, everyone says ‘Oh, we’re going out-speed up our competitors.’ So everyone thought they were the exception.”
Some Australian founders who have spoken to overseas venture capital funds in recent months confirm that US companies are being asked to make tough choices, fast. Others seeking funding report a more positive image.
Dany Milham, the founder of fast grocery delivery company Milkrun, told this masthead he had received considerable interest from overseas companies for another capital raise despite losing $13. by order a few months ago in one of its best stores. Another found the overseas market more receptive than local venture capitalists, whom the founder described as hesitant to invest while waiting to see the severity of the downturn.
Local venture capital firms, such as Blackbird, Square Peg and AirTree, either refused to make any of their partners available or did not return calls requesting interviews. But the funds have previously said they are advising their companies to be more cautious, but still have large sums of money to invest in good companies.
It points to a multi-speed sector. Companies that have resisted raising, raised and spent lavishly, or simply need a lot of money to grow, are in a tough spot. But many start-ups that were lucky enough or strategized to rise when the market was still booming and have spent wisely since then are sitting on tens of millions of dollars in dry powder, allowing them to hire aggressively.
Customer research start-up Dovetail, which raised funds to a valuation of almost $1 billion late last year, displayed posters and an advertisement on the light rail in Sydney announcing its policy $5,000 bonus for any member of the public who refers them as the successful candidate.
Investors in AfterWork Ventures, which invests in start-ups, and Earlywork, a platform that steers people into tech careers, quickly launched a free tool this week to match laid-off staff with companies that are hiring. Again. More than 100 companies signed up for the service – dubbed Between Work – in less than 24 hours.
Jessy Wu, chief investment officer at AfterWork, says growing companies have jumped at the chance to access talented staff with experience that is typically hard to find.
“The silver lining here is the opportunity for early-stage companies to capture some of the talent that has been abandoned by early-stage companies and tap into the skills and experience of workers as they scale. says Wu.
Earlywork co-founder Jono Herman sees the way the community has rallied around Between Work as a demonstration of industry collegiality at its best. It was born, he says, from a shared view of technology – much like that expressed by Teo – as a fundamentally positive force in the world and from an empathy for founders and staff facing a difficult market. .
“We haven’t spent a dollar on paid marketing,” Herman says. “It’s only thanks to the generosity of the ecosystem to spread the word, which is amazing to see.”
“There’s a common set of values that go beyond company to company, which in these difficult times is very helpful,” he says.
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