Investment company Y Combinator advises startup founders that 'we should prepare for the worst during a recession'



In 2022, there are

concerns that the global economy will slow down due to Russia's invasion of Ukraine, rising prices, and the effects of the remaining coronavirus infection (COVID-19). In fact, while the Dow average stock price plummeted in the New York stock market on May 19, Y Combinator , which has invested in startups such as Dropbox, Airbnb, Reddit, told the founders of the startups to support, 'The economy is I couldn't predict how bad it would be, and I should plan for the worst. '

YC advises founders to'plan for the worst' amid market teardown | TechCrunch
https://techcrunch.com/2022/05/19/yc-advises-founders-to-plan-for-the-worst/

Y Combinator warns startup founders to be wary of economic downturn --SiliconANGLE
https://siliconangle.com/2022/05/19/y-combinator-warns-startup-founders-wary-economic-downturn/

In 2022, there are growing concerns about a recession due to various factors such as inflation, rising interest rates, the war in Ukraine, and the lockdown of China due to COVID-19. Y Combinator advises the founders of supporting startups to 'prepare for the worst' while the stock prices of major companies such as Shopify, Netflix, and Meta have already plummeted. I sent an e-mail. In an email, Y Combinator argues that in times of recession, you should shift your mind quickly and plan ahead.

Here's the advice that TechCrunch actually got in the email:

◆ 1: The outlook is bleak
No one can predict how bad the economy will be, but it is unlikely that it will move in the right direction.

◆ 2: Make a plan for the future
Y Combinator said, 'A safe move is to plan for the worst,' and said that costs should be reduced within the next 30 days to extend the runway period of cash shortage. Claim. He states that the company should aim for a 'default alive' state where spending is constant and profits continue to grow.



◆ 3: You should move to raise funds as soon as possible
If you are likely to run out of funds before reaching the default alive and you expect investment from existing or new investors, you should consider moving to raise funds early.

◆ 4: To survive for the next two years
Y Combinator has told its founders that the company should be able to survive in the next 24 months without funding.

◆ 5: Poor performance of high-tech companies has an adverse effect
Poor performance of various major tech companies will affect the investment strategies of the venture capital firms that invest in them. During a recession, even venture capital firms with a lot of money will slow down their capital development, and small venture capital firms will stop investing or go bankrupt. As a result, it will be easier for capital to concentrate on companies that are already performing well, and the number and amount of new investments in startups will decrease. Also, since the number of investors attending meetings does not decrease in proportion to the decrease in total investment, it is wrong to speculate that 'there are many meetings held, so we are actively investing.' It is said that there is.

◆ 6: The funding environment so far is not common sense
Founders who started startups in the last five years of the upturn need to rethink that the funding environment hasn't been the norm. 'Your funding experience is likely to have been unusual and future funding will be more difficult,' Y Combinator said in an email.



◆ 7: Funding round slows down
If a startup has completed a Series A funding round in the early stages of its business, it will continue to: It should be assumed that no funding round will occur.

◆ 8: Change of financing plan
Y Combinator said, 'If you plan to raise money in the next 6-12 months, you may be raising money during peak recession. Even if your company is successful, you have a chance of success. Remember that is very low. We encourage you to change your plan. '

◆ 9: Survival is the highest priority
During the recession, many companies continue to spend a lot without planning well and understand that they failed when they tried to start the next round of funding. Y Combinator told the founders, 'In a recession, it is often the case that you can gain a large market share just by surviving,' and insisted that you should focus on the survival of the company during a recession.

In addition, Y Combinator told the founders Dalton Caldwell , an entrepreneur and partner of Y Combinator, and Michael Seibel , managing director of Y Combinator, 'How to protect startups in the event of a recession' We also encourage you to watch the following videos that talk about.

Save Your Startup during an Economic Downturn-YouTube


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