May 25, 2022

cloud software The industry has gone through an incredible period of growth and success. However, we have recently seen a deep correction in the public markets. The Bessemer Cloud Index, which tracks public stocks in this category, is down more than 40% from its November 2021 highs.

This repricing is now sweeping through the private venture capital market, affecting late-stage companies before startups feel the impact. This is a big problem for both startups and venture capital companies. Many founders are now wondering if now is the right time to raise capital and how realistic it is.

Let’s look at this question one by one. First, if you’re just starting out – or even dreaming of your own startup – is a recession the right time to start a business?

We think it’s a great time.

Climbing less gives you more room for error, more time to correct course because you have less to do.

Why? Short answer: you need a few, not a lot of clients in the beginning, and you need their time to work with them, and as things slow down, there are more of them. Since you won’t be scaling for a while, smaller ACVs will do. Now it’s more important to attract and retain talent, which is now easier. Once the market starts growing again, your startup will be ready to scale.

If you’re already ahead, have early market acceptance, indications of product-to-market fit, and are ready to expand Serie A, then the second question is: can you move up in that market?

A few months ago, the $10-15 million Series A round seemed perfect. Is it still possible? Venture firms have raised record amounts of new funds in 2020 and 2021, and there’s a lot of talk about how much “dry powder” there is.

However, it is also true that the valuation reset is going through the market. This means that many VCs are now focusing on their existing portfolios – fast growing B and C stage companies that have raised significant funds and are operating at a high burn rate.

Leave a Reply

Your email address will not be published.