Silicon Valley is bracing for a 'Darwinian moment for startups' in late 2023
Meanwhile, tech companies permeate throughout every industry and there are more startups in the market than ever before. But huge numbers of them have less than 12 months of run-way in the tank.
But despite the initial panic the"Black Swan" event, as Sequoia called it, didn't materialize. US venture-backed companies. That's nearly double the previous record of $166.6 billion raised in 2020. It turned out that keeping people locked inside and glued to their screens was a huge boon for tech companies.
"The total number of companies that will ultimately do down rounds, go out of business, that sort of thing, will be greater this time around," he told Insider. Over the last year, the mood in Silicon Valley has darkened. Rampant inflation prompted the United States Federal Reserve to raise interest rates to its highest levels in 15 years. The spectacular implosion of Silicon Valley Bank — a key funder and financial institution for many tech firms — shook the industry.
Almost as soon as Linda Ahrens, the cofounder and CEO of startup Unown, started looking for Series A funding for her fashion startup, she could tell something had changed. Over the past year, many startups that rely on Silicon Valley funding have been steeling themselves for the slowdown to avoid similar fates.
"I will say, I do think the worst is yet to come," Pitchbook analyst Vincent Harrison said. He pointed to the vast funding rounds throughout 2021 and early 2022, and the 12-24 months of runway many companies secured in them."A lot of those companies have yet to even return to market or attempt to return to market to raise capital."
"Companies with no revenue are most at risk," Steve Brotman, Managing Partner at Alpha Partners, told Insider. Brotman believes venture capitalists will shift their strategy to support their existing portfolios or companies that already have a potential to generate large revenue. Growth stage firms may also survive, albeit with restructured ownership and a lower valuation.
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