Gumroad’s Sahil Lavingia entered the venture world as one of the early testers of Rolling Fund, an AngelList product that allows investors to raise capital on a subscription basis. That was in 2020. Fast forward to 2022 and a lot has changed.
One of those changes? The number of pitches from founders who want to increase. “It’s down about 90% since March,” Lavingia told TechCrunch. “I probably saw the most — like 20 to 40 well-reviewed decks a week — and that number is now down to about two to four a week.” He also has the talent quality for those willing to step up for Gumroad working, increased – which he attributes in part to a steady onslaught of layoffs – and the decline of entrepreneurs.
The decline in the number of founders raising capital suggests that early-stage startups are not as well protected from macroeconomic changes as some investors claim; Conversely, the boom in new startups would support the notion that a recession — and the layoffs that accompany it — is the time when startups are born.
“I think the number of founders that we’re going to see will be small, but the quality bar is rising.” Annie Kadavya, Managing Director of Redpoint
Lavingia divided the status of founders into three bands: “tourist founder, immigrant founder and ‘born and raised’ founder.” Tourist founders are those who only start companies in bull markets, he said, adding that a group have lost.
“They’re rarely fundable in bear markets,” Lavingia said. “You have to hire other people to make the stuff.” However, immigrant founders are less concerned with the reputation and status of a start-up and more with balancing risk and reward. This founding group was cut in half, according to Lavingia. After all, “born and raised” founders are founders regardless of the market: “They all existed and therefore raised money in 2020-2021, so they also don’t start companies and raise money at the same rate.” Huh.”