Welcome to Startups Weekly, a fresh look at this week’s start and startup trends. To get this in your inbox, subscribe here.
As late-stage tech startups face the changing environment in the public markets, their early-stage counterparts are in a completely different world. The cohort has had access to ample capital in recent quarters, giving them a venture capital bubble that provides some protection from rapid changes in the larger economy.
But while the bubble doesn’t pop, it changes shape.
While we may not see early-stage startups experiencing aggressive layoffs or an immediate drop in valuations due to changing market conditions, there is another signal worth following: pivots. Pivots – a change in business strategy based on a new insight or market trend – are somewhat unavoidable for young companies that are still looking for a product-market fit. I would say pivots are more important to track than a funding round because they provide a snapshot of a startup responding to a new tension in the market. Furthermore, unlike a funding round, a pivot is a clear signal that something is changing, a different tension than a group of investors confirming that a founder is on the way to something big.
After talks with a number of investors and founders, it’s clear that there will be many subtle shifts in the way startup startups do business in the coming weeks and months. Some are re-prioritising objectives to reduce risk, while others are pursuing new, shorter-term business models to finally bring in some revenue.
For my full take on this topic, check out my TechCrunch+ column, “It’s pivotal season for early-stage startups.” In the rest of this newsletter, we’ll talk about an epic deal, fintech going full-stack, and why a company is going to fund itself. As always you can support me by sharing this newsletter, follow me on twitter or subscribe to my personal blog.
Offer of the week
Fortnite game maker Epic bought Bandcamp, a music marketplace where any musician can sell their music and keep 82% of the profits. The acquisition comes amid a wider conversation about the role (and power) of platforms in creators’ lives, making platforms like Bandcamp stand out simply through the alignment of incentives. Now that it’s within the comfortable embrace of Epic, there’s a new chapter to analyze.
Here’s why it matters, via Amanda Silberling:
“When artists see a platform that makes their living being bought, their usual response isn’t, ‘Oh cool, they’ll have more money to produce better features to help me monetize my creative work!’ They think, ‘Oh shit, not again.’
It happened when Google bought YouTube and when Spotify bought Anchor. Artists recognize that when a platform changes hands, even the smallest changes can affect their livelihoods. Why should artists trust Big Tech companies when Spotify payouts are bleak, OnlyFans are making temporary career-threatening decisions for sex workers, and Patreon is flirting with the idea of crypto payments, a move many of its creators strongly oppose?”
I wonder, of course, whether the purchase is in the light of the community, or simply in pursuit of capitalism. We’ll talk about it next week on Equity, so tweet us your suggestions!
Does fintech today play offensively or defensively?
On Equity this week, I spoke with Alex and Mary Ann about the state of fintech. It was inspired in part by Ramp’s expansion into travel and Pipe’s acquisition of an, er, entertainment company (?!).
Here’s why it’s important: In addition to continuing the conversation that fintech is going full-stack, we’ve gone over our biggest questions about fintech’s maturation right now. For example, if all fintechs become the same company over time, how do you differentiate yourself when initially fighting for the same user cohort? The market made the conversation even more relevant, as price revisions in the public market could be a trigger for fintechs to pursue more proven revenue streams.
So what, SoFi?
Homebrew goes self-financed
Homebrew has a new cup of tea (or coffee, or beer, or drink of your choice). The venture capital firm is moving away from its strict germ-stage roots—and its traditional corporate structure—towards a more stage-agnostic evergreen model funded solely by Homebrew’s general partners Satya Patel and Hunter Walk.
Here’s why it matters: Homebrew’s pivot takes place at a pivotal market moment for tech startups. Public technology stocks are being hammered regardless of the sector. And while early stage private start-ups appear to be largely unscathed, due to venture capital inflows, later stage companies are currently in a more difficult position.
The move is also notable in a market where raising ever-larger (and larger) funds has become routine. Of course, the eternal challenge of raising more capital is that an investor has more pressure to achieve those results. You may have been able to deliver results at a 5x rate on a $15 million fund, but can you still achieve entrepreneurial goals if you ask them to support a $150 million fund? What about $1.5 billion?
Returns on returns:
during the week
We will meet in person! Soon! Techcrunch Early Stage 2022 is April 14, aka around the corner, and it’s in San Francisco. Join us for a one day founding stop with GV’s Terri Burns, Greylock’s Glen Evans and Felicis’ Aydin Senkut. The TC team has gone out of their way to come back in person, so don’t be surprised if the panels are a little spicier than usual.
Here is the full agenda and buy your launch tickets here.
Also follow our latest producer for Equity: Maggie Stamets!
Seen on TechCrunch
Putting the autonomous cart for the robot horse
YC-backed Blocknom aims to become the ‘Coinbase Earn of Southeast Asia’
Snowflake Acquires Streamlit For $800 Million To Help Customers Build Data-Based Apps
Carl Pei’s Nothing works on a smartphone
Seen on TechCrunch+
After 2 rejected deals, Zendesk is considering next steps
Companies are struggling to join the enterprise game
Raquel Urtasun from Waabi on the importance of distinguishing your startup
How wrong were those SPAC projections?
What US startup founders need to know about the R&D tax credit
Until next time,
This post Welcome to the so-subtle pivot season – TechCrunch was original published at “https://techcrunch.com/2022/03/05/early-stage-startups-pivot-season/”