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Bursts of Color - Stayin' Alive
A few weeks ago my partners and I met with several consecutive founders who shared similar stories: sales are slow and capital is hard to find, but we're being scrappy, doing okay and generally living to fight another day.
This led Wendy to quip:
"I think we can all agree that this year's theme song will be Stayin' Alive from the Bee Gees"
Capital Raises in 2022
Last year about twenty of our portfolio companies needed to raise new cash in order to continue operations. Here's a rough version of how they fared:
5 raised new VC "up rounds"
5 raised new priced rounds that were flat or down
5 raised extension funds via SAFE, note or venture debt
3 were acquired (2 private acquirers, 1 public)
2 declared bankruptcy
So while some of these processes were slow and not all terms were ideal, most companies that needed new capital were able to find it.
The first few months of 2023 have continued with a very similar pattern.
Other Ways of Stayin' Alive
Beyond those companies who went out to raise new capital last year, many others got scrappy to reduce burn and extend runways. New customer segments, channels or pricing; reduced market counts or product lines; re-negotiated fixed costs like SaaS agreements and leases; and so on.
I just saw two more investor updates from companies that hit cash flow breakeven for the first time. And while they may choose to raise new capital and re-accelerate growth in the future, I suspect they will enjoy being in control of their own destiny until then.
This type of low-burn, slower-growth approach is certainly not right for every situation or company. But it's better than some of the alternatives. :)
Two Related Posts I Enjoyed This Week:
Finding The Right Burn Rate for Pre-Seed Companies (Charles Hudson)
Ah, ha, ha, ha, Stayin’ alive, Stayin’ alive
And yes, thanks to Wendy, this song has been stuck in my head for the last couple weeks. Hope you enjoy it too!
PS, If you have not seen the video before, do yourself a favor and watch it now.