Sahil Lavingia of Gumroad Broke into the venture capital world as one of the early testers of rolling funds, an AngelList product that allows investors to raise money in a subscription-like way. That was in 2020. Fast forward to 2022, and a lot has changed.
One of these changes? The number of proposals from founders looking to raise funds. “It’s down about 90 percent since March,” Lavingia told TechCrunch. “I’ve probably seen more than most people — about 20 to 40 heavily vetted decks per week — and that number has now dropped to about two to four per week.” He also sees wanting The quality of the people who work for it has improved Gum Road — which he attributed in part to the ongoing wave of layoffs — and a decline in founders starting companies.
The drop in the number of founders raising capital suggests that early-stage startups are not as immune to macroeconomic changes as some investors claim. By contrast, a boom in emerging startups would support the idea that recessions — and the wave of layoffs that followed — are when startups are born.
“I think the total number of founders we’re going to see will decrease, but the quality bar is going up.” Anne Kadavi, Managing Director of Red Dot
Lavingia categorizes founder status into three categories: “travel founders, immigrant founders, and ‘native-born’ founders.” Travel founders, he said, are those who only start companies in bull markets, a group he said has dropped by about 100%.
“They rarely get funding in a bear market,” Lavingia said. “They need to hire other people to build things.” At the same time, immigrant founders are less concerned with the reputation and status of starting a company, and more about weighing the risks and rewards. According to Lavingia, this cohort of founders has halved. In the end, “native-born” founders are founders regardless of the market: “They all exist, so they raised money in 2020-2021, so they didn’t start companies and raise money at the same rate.”