"Why do Tech Co.s need to extend their runway ?"

Highlights of the paper-

• It’s a stark contrast to last year, when IPOs were raising record amounts of cash, valuations were sky high and venture firms’ wallets were wide open.
• Prominent VC firms are telling their portfolio companies to start cutting costs and looking for ways to cushion their cash position.
• Y Combinator said companies have to “understand that the poor public market performance of tech companies significantly impacts VC investing."

The venture capital missives are back, and they’re coming in hot.

There is a paradigm shift from 2021, when investors were rushing into pre-IPO companies at sky-high valuations, deal-making was happening at a frenzied pace and buzzy software start-ups were commanding exponential multiples of revenue. That era reflected an extended bull market in tech, with the Nasdaq Composite notching gains in 11 of the past 13 years, and venture funding in the U.S. reaching $332.8 billion last year, up sevenfold from a decade earlier. according to the?National Venture Capital Association.

With tech stocks?cratering?through the first half of 2022 and the Nasdaq on pace for its second-worst quarter since the 2008 financial crisis, start-up investors are alarming their portfolio companies they won’t be spared in the fallout, and that conditions could be worsening. It will be a longer recovery and while we can’t predict how long, we can advise you on ways to prepare and get through to the other side

The sudden change in sentiment is reminiscent of 2008, when the collapse in the subprime mortgage market infected the entire U.S. banking system and dragged the country into recession. At the time, Sequoia published the infamous memo titled, “R.I.P. Good Times,” proclaiming to start-ups that “cuts are a must” along with the “need to become cash flow positive.”

However, Sequoia hasn’t always nailed the timing of its warnings. In March 2020, the firm called the Covid-19 pandemic the “Black Swan of 2020” and?implored founders?to pull back on marketing, prepare for customers to cut spending and evaluate whether “you can do more with less.”

But sustained increases in fuel and food prices, the ongoing pandemic and raging geopolitical conflicts have collided in such a way that investors now fear out-of-control inflation, rising interest rates and a recession all at once.

Further, on a positive note, I am keen to remind founder's that great companies emerge from the darkest of times. Those that prove they can survive and even thrive when capital is in short supply, the thinking goes, are positioned to flourish when the economy bounces back.