Tag: 2023 startup trends

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TechCrunch+ roundup: Space tech predictions, startup IP strategy, finding feasible funding

I once aspired to own San Francisco real estate. Now, I’m only interested in acquiring intellectual property.

Case in point: “Scooby-Doo” aired on TV before I was born, but the spin-off “Velma” just premiered on HBO Max.

It’s getting ripped to shreds on social media, which means people watched, so we can expect more to come.

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Use discount code TCPLUSROUNDUP to save 20% off a one- or two-year subscription

Hollywood studios are adept at wringing every ounce of value from their IP. Similarly, cost-effective IP management strategies can fortify startup valuations over the long-term, according to Kyle Graves, counsel at Snell & Wilmer, but only if founders are vigilant.

Do you have IP counsel? Does your app have a UX protection strategy? Have you ever conducted an audit?

“There are a thousand little oopsies that can become big oopsies when word gets out that a big payday may be coming.”

Thanks for reading,

Walter Thompson
Editorial Manager, TechCrunch+
@yourprotagonist

Cost-effective IP strategies can lead to massive exit valuations

7 space tech predictions for 2023

The crowd cheers at Playalinda Beach in the Canaveral National Seashore, just north of the Kennedy Space Center, during the launch of the SpaceX Falcon Heavy rocket, on Feb. 6, 2018. Playalinda is one of closest public viewing spots to see the launch, about 3 miles from the SpaceX launchpad 39-A. (Joe Burbank/Orlando Sentinel/Tribune News Service via Getty Images)

Image Credits: Orlando Sentinel (opens in a new window) / Getty Images

As of January 17, Wikipedia notes that there have been eight successful spaceflight launches so far this year.

New spaceports are entering operation, cell phone users will soon have connectivity from space, and the Artemis program backed by NASA is one of several ventures that will bring robots (and eventually human crews) to the Moon.

“Despite the economic uncertainty, we believe new records will be established in spacetech as giant commercial projects get funded,” says Mark Boggett, CEO and co-founder of Seraphim Space Manager LLP.

7 space tech predictions for 2023

4 tips to find the funding that fits your business

A row of sphere trying to get through an opening of wall to another side. A bigger sphere stuck, not able to get through due to it's size causes the rest of the smaller sphere behind not able to get through as well.

Image Credits: Getty Images

Raising money without a detailed business plan is a proven way for losing value.

Before seeking capital, founders need a firm plan for ramping up hiring, going to market and expanding into new areas. Otherwise, they may be “mistaking funding for validation,” writes Carlos Antequera, CEO and co-founder of Novel Capital.

“Not all capital providers are equal, so seeking financing isn’t just about securing capital. It’s a matter of finding the right source of funding that matches both your business and your roadmap.”

4 tips to find the funding that fits your business

TechCrunch+ roundup: Space tech predictions, startup IP strategy, finding feasible funding by Walter Thompson originally published on TechCrunch

Posted on

TechCrunch+ roundup: Space tech predictions, startup IP strategy, finding feasible funding

I once aspired to own San Francisco real estate. Now, I’m only interested in acquiring intellectual property.

Case in point: “Scooby-Doo” aired on TV before I was born, but the spin-off “Velma” just premiered on HBO Max.

It’s getting ripped to shreds on social media, which means people watched, so we can expect more to come.

Full TechCrunch+ articles are only available to members
Use discount code TCPLUSROUNDUP to save 20% off a one- or two-year subscription

Hollywood studios are adept at wringing every ounce of value from their IP. Similarly, cost-effective IP management strategies can fortify startup valuations over the long-term, according to Kyle Graves, counsel at Snell & Wilmer, but only if founders are vigilant.

Do you have IP counsel? Does your app have a UX protection strategy? Have you ever conducted an audit?

“There are a thousand little oopsies that can become big oopsies when word gets out that a big payday may be coming.”

Thanks for reading,

Walter Thompson
Editorial Manager, TechCrunch+
@yourprotagonist

Cost-effective IP strategies can lead to massive exit valuations

7 space tech predictions for 2023

The crowd cheers at Playalinda Beach in the Canaveral National Seashore, just north of the Kennedy Space Center, during the launch of the SpaceX Falcon Heavy rocket, on Feb. 6, 2018. Playalinda is one of closest public viewing spots to see the launch, about 3 miles from the SpaceX launchpad 39-A. (Joe Burbank/Orlando Sentinel/Tribune News Service via Getty Images)

Image Credits: Orlando Sentinel (opens in a new window) / Getty Images

As of January 17, Wikipedia notes that there have been eight successful spaceflight launches so far this year.

New spaceports are entering operation, cell phone users will soon have connectivity from space, and the Artemis program backed by NASA is one of several ventures that will bring robots (and eventually human crews) to the Moon.

“Despite the economic uncertainty, we believe new records will be established in spacetech as giant commercial projects get funded,” says Mark Boggett, CEO and co-founder of Seraphim Space Manager LLP.

7 space tech predictions for 2023

4 tips to find the funding that fits your business

A row of sphere trying to get through an opening of wall to another side. A bigger sphere stuck, not able to get through due to it's size causes the rest of the smaller sphere behind not able to get through as well.

Image Credits: Getty Images

Raising money without a detailed business plan is a proven way for losing value.

Before seeking capital, founders need a firm plan for ramping up hiring, going to market and expanding into new areas. Otherwise, they may be “mistaking funding for validation,” writes Carlos Antequera, CEO and co-founder of Novel Capital.

“Not all capital providers are equal, so seeking financing isn’t just about securing capital. It’s a matter of finding the right source of funding that matches both your business and your roadmap.”

4 tips to find the funding that fits your business

TechCrunch+ roundup: Space tech predictions, startup IP strategy, finding feasible funding by Walter Thompson originally published on TechCrunch

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7 space tech predictions for 2023

Mark Boggett Contributor
Mark Boggett is the CEO and co-founder of the Seraphim Space Manager LLP, the world's first listed fund focused on space tech.

Cell phone connectivity from space

Multiple players in the industry have recently set their sights on direct-to-mobile connectivity from space. While it’s still a very early market with limited existing capabilities, companies such as Apple, T-Mobile, Globalstar, SpaceX, AST SpaceMobile and Lynk Global are targeting this area. Multiple mobile network operators are already on board, even before some of the first operational spacecraft have been launched.

Apple has partnered with Globalstar to provide SOS connectivity with its new iPhone 14, and T-Mobile is planning to begin low-earth orbit (LEO) connectivity in 2023 through SpaceX, which recently filed an application with the US FCC to include direct-to-cellular capabilities in its Gen 2 Starlink satellites. Amazon is also set to launch its first batch of LEO satellites for Project Kuiper.

Most of these early projects will not provide high-speed broadband from space, and will instead offer low-bandwidth connectivity suitable for emergency calls and texts. All of this aims to service the currently underserved population around the world, which does not live within reach of traditional cell tower networks.

Commercialization of the moon begins in earnest

Despite the economic uncertainty, we believe new records will be established in spacetech as giant commercial projects get funded.

Extensive government and commercial efforts are underway to head “back to the Moon” decades after the Apollo program finished in 1972. This has been kicked off by NASA’s Artemis program, which saw the Artemis 1 mission’s Orion capsule returning to Earth after spending almost a month traveling around the Moon.

At almost the same time, the first fully-privately-funded lunar mission was launched by SpaceX for Japanese company iSpace, which is taking a fuel-efficient trip to the Moon and is due to get there in April. This would be the first fully commercial mission to land on the Moon, a milestone in the cooperation between Japan and the U.S. in space. Other commercial companies, such as Intuitive Machines and Astrobotic, are also targeting Moon landings.

With the first commercial companies headed moonward alongside national efforts, we expect 2023 to be a breakthrough year for the cislunar ecosystem.

Three drivers underpin revenue growth

Developments in the defense, cybersecurity and climate sectors will prove to be strong tailwinds for revenues in spacetech in 2023. Record growth in defense budgets driven by the war in Ukraine and rising geopolitical tensions will drive business, and governments’ increasing desire for sovereign capability from space assets will lead to some huge orders in the sector. And, since cybersecurity is another tool in the geopolitical toolbox, satellite resilience against attacks is a priority.

A growing reliance on datasets generated in orbit means the security demands for the flow of data from the satellite to the cloud and ground stations are growing exponentially. We see 2023 as the year when the industry embraces quantum capabilities.

7 space tech predictions for 2023 by Ram Iyer originally published on TechCrunch

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7 space tech predictions for 2023

Mark Boggett Contributor
Mark Boggett is the CEO and co-founder of the Seraphim Space Manager LLP, the world's first listed fund focused on space tech.

Cell phone connectivity from space

Multiple players in the industry have recently set their sights on direct-to-mobile connectivity from space. While it’s still a very early market with limited existing capabilities, companies such as Apple, T-Mobile, Globalstar, SpaceX, AST SpaceMobile and Lynk Global are targeting this area. Multiple mobile network operators are already on board, even before some of the first operational spacecraft have been launched.

Apple has partnered with Globalstar to provide SOS connectivity with its new iPhone 14, and T-Mobile is planning to begin low-earth orbit (LEO) connectivity in 2023 through SpaceX, which recently filed an application with the US FCC to include direct-to-cellular capabilities in its Gen 2 Starlink satellites. Amazon is also set to launch its first batch of LEO satellites for Project Kuiper.

Most of these early projects will not provide high-speed broadband from space, and will instead offer low-bandwidth connectivity suitable for emergency calls and texts. All of this aims to service the currently underserved population around the world, which does not live within reach of traditional cell tower networks.

Commercialization of the moon begins in earnest

Despite the economic uncertainty, we believe new records will be established in spacetech as giant commercial projects get funded.

Extensive government and commercial efforts are underway to head “back to the Moon” decades after the Apollo program finished in 1972. This has been kicked off by NASA’s Artemis program, which saw the Artemis 1 mission’s Orion capsule returning to Earth after spending almost a month traveling around the Moon.

At almost the same time, the first fully-privately-funded lunar mission was launched by SpaceX for Japanese company iSpace, which is taking a fuel-efficient trip to the Moon and is due to get there in April. This would be the first fully commercial mission to land on the Moon, a milestone in the cooperation between Japan and the U.S. in space. Other commercial companies, such as Intuitive Machines and Astrobotic, are also targeting Moon landings.

With the first commercial companies headed moonward alongside national efforts, we expect 2023 to be a breakthrough year for the cislunar ecosystem.

Three drivers underpin revenue growth

Developments in the defense, cybersecurity and climate sectors will prove to be strong tailwinds for revenues in spacetech in 2023. Record growth in defense budgets driven by the war in Ukraine and rising geopolitical tensions will drive business, and governments’ increasing desire for sovereign capability from space assets will lead to some huge orders in the sector. And, since cybersecurity is another tool in the geopolitical toolbox, satellite resilience against attacks is a priority.

A growing reliance on datasets generated in orbit means the security demands for the flow of data from the satellite to the cloud and ground stations are growing exponentially. We see 2023 as the year when the industry embraces quantum capabilities.

7 space tech predictions for 2023 by Ram Iyer originally published on TechCrunch

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Predictions for the longevity industry in 2023

Abby Miller Levy Contributor
Abby Miller Levy is the managing partner and co-founder of Primetime Partners. She formerly served as the SVP of strategy and growth at SoulCycle and founded Thrive Global with Arianna Huffington.

Last year was when we all got the wake-up call about longevity. From major reports published on the impact of longevity by the National Academy of Medicine and McKinsey to every leading newspaper, public discourse highlighted how our global healthcare, financial and housing infrastructure was failing to serve a rapidly growing older adult population.

While this demographic data is not new, from kitchen table talk to Congress, there was a heightened call for urgency and immediate action.

At Primetime, we observed this wake-up call beyond the research and media attention. First, our deal flow of early-stage businesses in the sector increased from 70 in Q4 2021 to 120 in Q4 2022. And, we were one of only three dedicated funds investing in aging and longevity when we launched in 2020, but we are now aware of at least six more agetech funds in formation, in addition to many other existing funds keen to expand their team to cover the sector.

We are very optimistic for 2023 as we see incredible founder momentum, untapped areas to build new businesses and a window to an increasingly tech-accessible, rapidly growing consumer market.

Here are our top predictions for the longevity industry in 2023.

By 2030, the 50-plus market is projected to swell to 132 million people, who are projected to spend an average of $108 billion every year on tech products.

Health span is the new life span

The COVID-19 pandemic had a dramatic impact on older adult behavior with regard to technology usage, penetration of telemedicine and remote health monitoring, early retirement and financial insecurity. Sadly, one of the harshest implications of the pandemic was that life expectancy in the U.S. declined to 77 from 79.

This year will shift the conversation from “life span” to “health span” — how we live healthier for longer.

While telemedicine usage has declined from its peak during the pandemic, the new average is much higher than before the pandemic. We are particularly excited about companies that will accelerate the growth of 100+ primary and specialty-care telemedicine startups by managing their technology, patient payments and reimbursement, as well as provider acquisition and certification.

In an effort to prevent costly hospital visits, the past few years have seen a proliferation of startups offering supplemental health plan benefits for older adults — from transportation to home modification.

Predictions for the longevity industry in 2023 by Ram Iyer originally published on TechCrunch

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Six crypto investors talk about DeFi and the road ahead for adoption in 2023

The crypto venture capital industry has become more selective thanks to the general market downturn and wavering trust caused by a slew of scandals and market disruptions, but investors at major firms are still writing checks in the space.

Amid market volatility, decentralized finance, or DeFi, is an area that continues to be in focus in both the crypto VC world and across the community as new use cases, protocols and projects arise.

Anywhere from 20% to 50% of crypto-related pitches today are DeFi-focused, several investors we surveyed said. That shows there’s a vast number of DeFi projects looking for funding.

“To stand out in this crowded space, founders should focus on highlighting unique technology and a clear advantage for a specific use case, as well as a defensible moat,” Alex Marinier, founder and general partner at New Form Capital said.

Ultimately, DeFi is a mirror reflection of traditional finance (TradFi), and founders who have deep sector expertise in TradFi, coupled with a fundamental understanding of blockchains will stand out from the other teams, Paul Veradittakit, general partner at Pantera Capital, shared.

Last year, the crypto world faced a handful of massive industry-changing events like the Terra/LUNA ecosystem collapse in May and the cryptocurrency exchange FTX collapsing in early November. Both events brought down a lot of smaller startups and big players who intermingled with those now defunct market players.

As the market looks toward the future, some venture capitalists are revamping their investing strategies, while others are holding to their current plans, with perhaps a small tweak or two. Read on to find out how active investors are thinking about DeFi, how they’re advising their portfolio companies amid the lack of funding, the best way to approach them, and more.

We surveyed:

Michael Anderson, co-founder, Framework Ventures

How big is the DeFi market today? How much do you expect it to grow in the next five years?

When thinking about the DeFi market, we look at the total market cap of DeFi assets, total value locked (TVL), and trading volume. While total value locked (TVL) as a metric certainly has its flaws, we think it’s still a decent measure of activity in the sector. As TVL increases, we also think it’s possible that total market cap could follow.

We’re keeping a close eye on the sector’s relative activity, like trades, volumes and users, compared to centralized alternatives like exchanges. Despite the negative sentiment surrounding crypto today, we still believe activity will eventually return to the industry. However, in the aftermath of all of these dramatic centralized finance (CeFi) explosions, we think that the next time users decide to enter the space, they’re going to think twice about trusting a CeFi exchange or company, and instead opt to use decentralized protocols.

What were the biggest challenges your firm faced in 2022? What steps are you taking to better prepare for 2023?

As with most investors in the space, our biggest challenge has been navigating the seemingly endless CeFi blowups and failures that have rocked our industry. We were able to avoid the vast majority of these blowups, as we passed on several FTX ecosystem projects.

As a result, Framework wasn’t hit nearly as hard as many of the big VC firms in the space, and we’re in a pretty strong position to continue deploying capital in this new market.

These CeFi incidents have caused plenty of collateral damage across the industry, so a major priority over the last 12 months has been making sure all of our portfolio companies are sound, liquid, well-capitalized, and can survive the next 1-3 years. This means helping the founders in our portfolio cut costs, prioritize high growth activity, and providing advice on product, growth, and future fundraising strategy in a less friendly funding environment.

In general, our position is a validation of our core theses over the last 3 years, and we’re going to continue doubling down on DeFi, web3 gaming, and more. Given that a lot of the other firms aren’t actively investing at this time, we see this market as a great opportunity for Framework to selectively deploy capital.

How are you advising your portfolio companies going into 2023?

We’re working with them to cut costs and focus on surviving the next 1-3 years. We believe in crypto long-term, but we don’t know how quickly the market could bounce back, and so survival should be the top priority.

We’re also encouraging founders to think more strategically about project development. If a team was focusing on three different areas, we’re encouraging them to instead prioritize the highest-growth activity only.

Of all the pitches you get, what percentage are DeFi protocols or projects? What can they do to stand out in the broader crypto landscape?

These days, around 30%-35% of the pitches we receive are firmly DeFi-focused.

If a DeFi project wants to really stand out, we want to see that they’re thinking about where the puck is going. We’re looking for projects that have the potential to be regulation-friendly. It’s a non-starter if the team is not thinking about regulation, or thinks they can just figure it out down the line.

Additionally, we’re interested in projects that have direct connections to institutions or at least a compelling growth strategy that involves institutions. We don’t think that retail will offer projects a large enough market in DeFi over the next two years, so creating something attractive to institutions should be more of a core focus than previously.

We also want to see that the project is differentiated from a product perspective. We’re not interested in another Uniswap clone, or an Open Sea copycat of the flavor of the week alt-L1.

What is your current strategy for investing in DeFi protocols and projects? How has that changed from past quarters?

In 2020, during the height of DeFi summer, the market was big enough that projects courted retail and DeFi degens [a nickname for people interested in risky, niche, speculative crypto projects]. The market is totally different now.

Unfortunately, retail was blown up more than a dozen different ways last year, and they’re unlikely to come back for a few years. As a result, we’re focusing more on projects that are thinking about addressing new, more institutional users and markets.

We understand that regulation is likely coming down the line, so we’re very interested in projects that are pro-regulation, or at the very least, regulation-friendly.

What types of DeFi use cases do you think will gain more mainstream adoption going forward? Which areas of DeFi are now perceived as more significant than they used to be?

With the Merge officially behind us, liquid staking has become a big area of excitement for us. We think liquid staking projects will receive much more attention after Shanghai goes live and users have the opportunity to withdraw their assets without worrying about illiquidity.

How can the gap between traditional finance (TradFi) and DeFi be bridged?

We need to see more DeFi products and services that more realistically accommodate institutions. This means projects that have pro-regulatory elements baked into the products themselves, including KYC, the ability to limit certain assets, and more. Projects that institutions will be able to transact with won’t look and feel like the traditional DeFi we’re accustomed to and will co-exist as a relatively different ecosystem.

How do you think regulatory frameworks can affect the DeFi space? Which country or region seems to be going in the best direction?

At some point in 2023, we’ll have the landmark crypto regulation that everyone has been waiting on for years. More clarity could be very positive.

We don’t have a firm position, but on the surface, it looks like the UK is rapidly becoming one of the most open, from a thought-leader perspective.

How do you like to receive pitches? What’s the most important thing a founder should know before they talk with you?

We really like a good storyline. We want to know why you’re working on this problem, why it needs to be solved now, and why you think you can beat everyone else. Competitive advantage is key for us.

Alex Marinier, founder and general partner, New Form Capital

How big is the DeFi market today? How much do you expect it to grow in the next five years?

The DeFi market is currently around $50 billion in TVL. In the next five years, we expect the market to bifurcate into two categories: permissioned and permissionless.

Permissioned DeFi will gain traction among institutions, because it marries the benefits of blockchain technology with the compliance standards of traditional finance. If just a small percentage of traditional finance activity moves on-chain, it could create a market opportunity worth more than $1 trillion.

When you add in permissionless DeFi, which is more geared towards individual users and makes up most of DeFi today, the combined market has the potential to become worth anywhere from $500 billion to $2 trillion by 2028.

That said, DeFi’s growth will depend on more than just an increase in use cases. It will also be influenced by developments in infrastructure, regulation and financial innovation.

What were the biggest challenges your firm faced in 2022? What steps are you taking to better prepare for 2023?

Navigating the high-profile collapses (Terra, Celsius, FTX) was certainly the focus of 2022. We had to take more time to support our founders and ensure they have sufficient runway to endure an extended bear market.

This year, our focus is on helping founders find creative ways to grow through this market and position themselves for the next bull market. We’re also focused on sourcing opportunistic investments at attractive valuations and incubating more projects in-house.

Six crypto investors talk about DeFi and the road ahead for adoption in 2023 by Jacquelyn Melinek originally published on TechCrunch

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TechCrunch+ roundup: New success metrics, M&A timeline, 5 cloud trends for 2023

You don’t need to be an economist to appreciate the myriad forces placing downward pressure on startups today.

Setting aside the legions of investors keeping their powder dry, is your yearly revenue growing faster than the inflation rate? What percentage of your sales team has experience working during a downturn?

Amidst the angst, there’s some good news: investors are adjusting expectations to meet the new reality, which means “crisper methods for evaluating success will emerge,” predicts Lonne Jaffe, managing director at Insight Partners.

Instead of chasing growth like a plant reflexively bending toward the strongest light, he says founders should prioritize more meaningful “efficiency metrics,” such as:

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  • Gross retention rates
  • Lower CAC
  • Average revenue per sales rep
  • High gross margins

Looking ahead, he recommends that founders start considering M&A options now before a predicted wave of consolidation hits the private markets in the coming months and also examines why startups in “areas of tangible innovation” like generative AI will have a “relatively” easy time fundraising.

“We’re entering 2023 with a great number of known issues and a constrained ability to forecast what’s ahead,” says Jaffe. “One thing’s for certain, though: This year will be more about nailing it than scaling it.”

Thanks very much for reading,

Walter Thompson
Editorial Manager, TechCrunch+
@yourprotagonist

2023 will bring crisper methods for evaluating startup success

A timeline for startup M&A processes: Key steps and factors to consider

I’ve worked with many early stage founders, and they all had one thing in common: each was absolutely, completely convinced that they could successfully build and scale our company.

In reality, “not all companies are best positioned to go it alone, and that’s okay,” writes Vishal Lugani, general partner and co-founder at Acrew Capital.

In a detailed guide to the M&A process, Lugani offers a week-by-week deal timeline that breaks down every step between sourcing offers and post-close integration.

A lot can happen over the months it can take for a deal to close, so the article includes strategies for selecting an acquirer, maintaining product momentum, and managing your team (and investors!).

A timeline for startup M&A processes: Key steps and factors to consider

How can fintech startups outlast the VC winter?

Piggy bank buried in snow

Image Credits: Peter Cade (opens in a new window) / Getty Images

“Everything else being equal, embedded banking startups and new fintechs will live and die on the basis of the user experience they provide,” says Peter Hazlehurst, CEO and co-founder of Synctera.

Because so many fintech investors are seeking startups that already have “concrete customer traction,” Hazlehurst shares proven tactics for gathering user feedback that can help companies get an MVP out the door in weeks instead of months.

“By drilling down to a lean, mean, meaningful MVP, startups can position themselves to reach the next leg of their journey,” he writes.

How can fintech startups outlast the VC winter?

5 cloud trends to track in 2023

Cloud computing in photography studio

Image Credits: Peter Dazeley (opens in a new window) / Getty Images

Despite the downturn, Gartner estimates that global IT spending will reach $4.6 trillion this year, a year-over-year increase of 5.1%.

Josh Berman, president of C2C Global, has identified five trends that cloud technology startups should keep in mind as they create product, fundraising and hiring plans for the new year.

“The promise of these technologies is too significant to ignore,” writes Berman.

5 cloud trends to track in 2023

A flat year for crowdfunding isn’t a bad sign at all for early-stage startups

equity crowdfunding

Image Credits: Getty Images

The global equity crowdfunding market slowed in 2022, but it certainly did better than venture funding, reports Rebecca Szkutak.

Even though crowdfunding fell from $486 million in 2021 to $426 million last year, “I’ve seen a lot more Y Combinator companies, Techstars and venture-backed companies,” said Krishan Arora, CEO and founder of the Arora Project.

“They look at it for getting another $2 million, $3 million, in a bridge round,” he said. “There is more higher quality deal flow trickling into this space.”

A flat year for crowdfunding isn’t a bad sign at all for early-stage startups

TechCrunch+ roundup: New success metrics, M&A timeline, 5 cloud trends for 2023 by Walter Thompson originally published on TechCrunch

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2023 will bring crisper methods for evaluating startup success

Lonne Jaffe Contributor
Lonne Jaffe is managing director at Insight Partners.

The momentum of the most active 12 months ever for venture investing did not carry over well into 2022, to say the least. As interest rates and inflation spiked, geopolitical challenges arose and the economy began trending downward, fundraising slowed dramatically throughout the year.

But if 2022 was a year of paradigm-shifting dynamics, 2023 will be a year when we’ll determine the winners and the losers — and more importantly, when crisper methods for evaluating success will emerge.

The landscape for software companies

The tech ecosystem has seen a few downturns (though none were meaningful) since cloud computing emerged as a dominant trend over a decade ago, but inflation is a new beast for many of us.

It’s been 30 years since inflation was a tangible, real-world macroeconomic consideration. When inflation is at 7%, if you aren’t growing by at least that much, you are shrinking.

In a difficult budget environment, high gross retention rates can be a strong signal that customers love your products and get real value from them.

In tandem with inflation, the demand curve is being whipsawed — we first saw a period of strong product growth driven by the COVID-19 pandemic, and now we’re seeing budgets and spending being tightened as startups and mature companies alike prepare to weather the storm.

We’re entering 2023 with a great number of known issues and a constrained ability to forecast what’s ahead. One thing’s for certain, though: This year will be more about nailing it than scaling it.

The predictors of success

In this environment, investors will look for efficiency metrics like high gross margins, strong gross retention rates (how many customers continue to subscribe each year), rapid expansion within customers, decreasing customer acquisition costs, shorter sales cycles and productive sales reps.

Gross retention, in particular, will be critical, because companies must be able to retain customers to stabilize their 2023 growth plans. In a difficult budget environment, high gross retention rates can be a strong signal that customers love your products and get real value from them.

Investors are also watching the path to break-even based on the current balance sheet — via metrics such as cash burn as a multiple of net new annual recurring revenue.

Assuming you have high gross retention rates, it may make sense to burn cash, but it won’t if you are burning more capital than the amount of new business accrued. As growth rates decline, many companies are slashing burn rates accordingly, resulting in a wave of layoffs even at companies with strong balance sheets and market positions.

2023 will bring crisper methods for evaluating startup success by Ram Iyer originally published on TechCrunch

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TechCrunch+ roundup: Dry powder’s slow fuse, landing page basics, generative AI hype

It’s impossible to plan for everything that can go wrong while building a startup.

A definitive founder’s guide would have to include chapters like, “So you’ve hired the wrong person,” or, “Five ways to tell if an investor is lying to you.”

A definitive guide would have to include chapters like, “So you’ve hired the wrong person,” or, “Five ways to tell if an investor is lying to you.”

Mentors and advisors come in handy, but startups move at breakneck speed. Investors say they want to add value, but for founders under pressure, it’s hard to know exactly when to ask for help.

Before Tracy Young was co-founder and CEO of TigerEye, she held the same roles at construction productivity software startup PlanGrid.

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Even though she led the company to $100 million in ARR before its acquisition by Autodesk, she has had “years to dissect the mistakes I made with my first startup,” she writes in TC+.

Young looks back at “five key failure points” that are common potholes on every founder’s path, and shares tactical advice for addressing internal conflict, losing product-market fit, and other stumbles.

“If these reflections help even one founder make one less mistake, I would consider this effort worthwhile.”

On Thursday, January 19 at 10 a.m. PT/1 p.m. ET, Tracy Young will join me in a Twitter Space to talk about how she dealt with these and other common founder challenges. Bring your questions and join the chat!

One last note: TC+ roundup is TechCrunch’s fastest-growing newsletter! Thanks very much for reading and subscribing!

Walter Thompson
Editorial Manager, TechCrunch+
@yourprotagonist

5 failure points between $5M and $100M in ARR

3 questions founders should be asking investors in Q1 2023

The maneki-neko (literally "beckoning cat") is a common Japanese figurine (lucky charm, talisman) which is often believed to bring good luck to the owner.

Image Credits: Yago Studio (opens in a new window) / Getty Images

Money is power, and VCs know it.

It’s one of the reasons why so many founders perform inadequate due diligence on their investors, says Talia Rafaeli, a partner with early-stage European VC fund Kompas.

Instead of going into a pitch meeting hoping to eke out favorable terms, Rafaeli advises entrepreneurs to interrogate investors with direct questions about liquidity, exit expectations and how they intend to add value over time.

“A tough economic climate doesn’t mean the power dynamic automatically tips in favor of those with the cash,” she says.

“The best working relationships are those built on an equitable footing with honesty and clarity.”

3 questions founders should be asking investors in Q1 2023

Will record levels of dry powder trigger a delayed explosion of startup investment?

Image Credits: Tim Robberts / Getty Images

There’s a subtext to the waves of layoffs and Craigslist ads for discounted office furniture: tech investors have amassed approximately $290 billion in dry powder.

“Despite the downturn, strong cash supply and tailwinds for spending on digitization are leading some market participants to believe we’re in a strong investment cycle,” according to Raphael Mukomilow and Pierre Bourdon at Picus Capital.

After they tracked uninvested capital by year going back to 2006, the pair found that “a crisis within the investment landscape has often been followed by years of systematic outperformance of returns, and history has a way of repeating itself.”

Will record levels of dry powder trigger a delayed explosion of startup investment?

Whoops! Is generative AI already becoming a bubble?

generative AI, bubble

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Generative AI is making a splash with apps like Lensa AI, DALL-E and ChatGPT, but does that make it a strong investment?

Several VCs who responded to a recent TechCrunch+ survey “said the tech’s growth has reminded them too much of crypto,” writes Rebecca Szkutak.

“Everyone is piling on faster than they should be.”

Whoops! Is generative AI already becoming a bubble?

When will IPOs return? The past may hold some clues

Time is money concept with one hundred dollars note and clock face on it.

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Natalia Holgado Sanchez, head of capital markets at Secfi, studied the impact of five downturns since 2002 to see how well privately-held startups held up, “and, most importantly, how long it took the IPO market to reopen.”

For each period, Sanchez looked at the inciting events, the similarities and differences between this downturn and past crises, and how startups were impacted.

“Based on historical data, the IPO market has opened up after 18 to 24 months, on average,” she found. “Given that we’re now about 9 months since our window closed, we could see movement by June 2023.”

When will IPOs return? The past may hold some clues

Dear Sophie: How can I transfer my H-1B to my new startup in 2023?

lone figure at entrance to maze hedge that has an American flag at the center

Image Credits: Bryce Durbin/TechCrunch

Dear Sophie,

I am RESOLVED: This is the year I finally live my dream and create my startup! I currently have an H-1B for my full-time engineering role at another company.

How can I transfer my visa to my startup? How do we structure the startup for immigration success?

— Restless & Resolved

Dear Sophie: How can I transfer my H-1B to my new startup in 2023?

Teach yourself growth marketing: How to set up a landing page

Orange Funnel on bright background

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In the first article of a five-part series on growth marketing fundamentals, Jonathan Martinez explains how to create an essential part of every company’s sales funnel: a landing page.

This overview includes basic steps for writing a clear headline, offering visitors social proof that builds credibility, and crafting calls to action that drive results.

Next week, Martinez, who helped scale startups like Uber, Postmates and Chime, will share his tips for launching a paid acquisition channel.

Teach yourself growth marketing: How to set up a landing page

TechCrunch+ roundup: Dry powder’s slow fuse, landing page basics, generative AI hype by Walter Thompson originally published on TechCrunch

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How global unrest will impact innovation in 2023

David Magerman Contributor
David Magerman is managing partner at Differential Ventures.

The global economic and political turmoil of the past year has had a meaningful impact on corporate innovation in the technology industry and beyond.

The worldwide battle with COVID, the Ukraine-Russia conflict and the economic fallout of the COVID lockdowns and supply chain disruptions have together created a painful combination of a global recession, global inflation and unpredictable instability in the worldwide economy.

All of these factors have led to belt-tightening in the corporate world, layoffs and hiring freezes and a more conservative investment posture from the investment community. Inevitably, these changes will have a chilling effect on innovation in the years to come.

However, there is perhaps a silver lining when it comes to the prospects for innovation. In some ways, these market forces might actually serve as an accelerant for creativity and advancement in technology.

In this climate, it might be easier to buy and integrate instead of trying to build from scratch.

Short-term impacts

In the short term, the impact of these negative economic trends and the political instability will be felt by the centers of innovation in both the corporate and startup worlds.

Corporations are likely to slash spending on internal and external innovation. That is, they will reduce their research and development budgets and likely focus R&D on projects that can have immediate impacts on profitability at the expense of long-term visionary projects.

Corporations will also spend less on collaborations with other innovators and expensive acquisitions of advanced technology. We expect to see more acquisitions of early-stage companies as they become weaker and corporations look to develop new technologies more cheaply by buying at a discount rather than building from scratch.

How global unrest will impact innovation in 2023 by Ram Iyer originally published on TechCrunch