Startup Market Outlook for 2023: What to Expect with Funding

Right now, let's look at the news. The world is ending, especially in technology. We have fraud from Sam Bankman-Fried. We have stocks in the technology space that are going down. We have interest rates that are going up finally, actually, after many, many, many will say too many years of interest rates being at pretty much zero. And as a result, you're seeing a lot of headlines like this. Okay. And these headlines are accurate. All right. And I'm not saying that these headlines are inaccurate, but I think as somebody that has now been in the startup space for almost 20 years, I bring a little bit of context to the table. So I just want to make sure and I want to share with people the context that we should all be looking at a lot of this news in. And more importantly, what that can inform of the trends that we can expect to see in 2023. And the only way to really understand some of that is to understand how we got here. All right, so let's go all the way back, BC, right before COVID to 2019. 2019 was the second highest year of venture funding of the decade of the 2010s. All right, now, as the second highest year, the highest year, was actually 2018, and 2019 did show a little bit of a dip off 2018. And in 2018, one of the biggest trends was the influx of what, uh, people would refer to as non-traditional investors. Okay, I'm going to be talking a lot about this in a moment, but non-traditional investors would be people that traditionally wouldn't invest in startups now starting to invest in startups, and Definitely the biggest news story of the year across— I mean, it's kind of unfortunate that I'm even calling this technology right now because it wasn't technology, but it got grouped into technology— was a little company called WeWork. Okay. So that's what things looked like in 2019. It was a fairly pretty healthy ecosystem. Again, it was the second largest amount of venture funding in the entire decade. And that decade, I think, by all accounts, was a great decade for startups and venture capital. And that's where we were at the end of 2019. And, you know, I started just referencing here the idea of these non-traditional investors. Okay, so what is the traditional investment flow? And I think a lot of startups don't really understand how this works. I think a lot of startups don't understand that VCs are actually investing other people's money. Okay? Really, you look at the left of this chart, generally they are referred to as LPs or limited partners. These are the people with the quote unquote, the real money. Okay? We're talking hundreds of billions, tens of billions, if not trillions of dollars. All right? These are places like private equity firms, pension funds, pension, like, and I put Ontario Teachers' pension plan in here specifically because they were a direct investor in FTX, which is sort of part of the problem. University endowment funds, family offices, things like that. Okay. These are organizations that literally have, you know, borderline trillions, hundreds of billions of dollars, and they want to put that money to work for them. Those people generally don't want to invest in startups, or traditionally they haven't. Because their time is not efficiently used by investing in things a million dollars at a time, right? Or in the single digits. They need to invest in big things that will have a big impact. And that's where VCs have come into play. VCs generally raise their funds from these LPs, okay? And the VCs provide a hell of a lot of value in doing that, all right? VCs vet the companies, they work with the companies, they understand the technologies, right? They diversify their portfolios, they do all of these things to put that massive money to work. Okay. So your skeptical point of view can be here, okay, well, VCs are just a quote-unquote middleman, like, okay, sure, maybe you can call them that, but they provide a very valuable service here and they bridge the gap between the right side of this chart, which is super, super risky things, right? Startups. And the left side of this chart, which is really, really big money, that they're going to diversify their portfolio, they're going to invest in a lot of safe things, and then they're going to invest in some risky things. So that's where VCs have traditionally fallen. Now, in about the 2017-2018 timeframe, people were making a lot of money in venture capital. So a lot of these larger organizations, these LPs, started saying to themselves, hey, like, we can't really lose here. Why don't we just go straight to the startups? All right. And that was— when I'm referring to non-traditional investors and all of those trends, that's what I'm referring to. Okay. And this really came to a head in about 2018 or so. You know, the biggest stories there were definitely Where was it? WeWork, okay. WeWork was getting non-traditional investment from this organization right here, SoftBank. And there were a lot of other organizations that were just investing directly into those startups. And that was a trend that was starting to bubble up in about 2018. Now, as you could probably imagine, this trend is very risky, okay. As I said, these organizations are working with hundreds of billions of dollars And they need to put that money to work efficiently. So that means that they're not going to do any deal that's not massive. Okay. Generally speaking, it's just not a good use of their time. So that means you're going to see a lot of quote unquote mega deals. Okay. And when you're talking about massive deals, that means bigger valuations. You're going to see, you know, forget unicorns, right? Unicorns are so yesterday. Now you're going to start to see decacorns, right? Companies that aren't worth billions, they're worth tens of billions. With those big valuations come extremely big growth goals, right? You're not going to see scaling, you're going to see blitzscaling, right? These are all terms that became very normalized these last couple of years. And at the same time, when these companies are, you know, investing directly into startups, you know, there's just general risks involved there. They're going to have less expertise on some of those technologies and what's going on in the space. They're going to spend less time doing the diligence on the space, or even if they spend the time doing the diligence, they're going to generally be less effective at it because that's just not what they do on a day-to-day basis. And also, one of the biggest values that VCs bring to the table is value-added investment, okay? And that means that they're not just bringing their money to the table, they're bringing relationships, they're bringing expertise, they're bringing connections to the big corporates that deals with and all this kind of stuff. That's what VCs generally bring. The LPs and the non-traditional investors, generally speaking, will not bring those things because again, they're so far away from the equation that they're really just placing bets. All of these factors brought significantly more risk to the equation. And it may seem like I am I am picking on non-traditional LPs here and blaming them for some of this stuff. To some extent I am, but a lot of it is just they're not the only ones to blame here. A lot of the other factors contributed to all of these trends, zero interest rates, speculation across the board by Wall Street, by everybody. But I think if you were to point to one very, very specific trend that led to a lot of things that we're looking at right now, it is these these non-traditional investors. And as I had mentioned, things on that front, that was a trend that was starting to bubble up. But the biggest story of 2019 was essentially the crash of WeWork. And WeWork was sort of the model. The industry was saying, "Oh, well, obviously, you had non-traditional investors who didn't really understand what they were doing." investing in this company, which is a shared office space company, as if it was a tech company with the same economics that could scale when it wasn't, that definitely was starting a trend of, okay, look, in 2019 and going into 2020, maybe non-traditional investors should start pulling back. Maybe we shouldn't have so many of these massive mega deals. Maybe we shouldn't have these massive mega valuations. That we're seeing. Okay, so that was what we were seeing in 2019. And that's why 2019 was only the second highest year on record in the 2010s. 2018 was, right, because you took a little bit of a dip there because of these types of stories. And then 2020 happened. Okay, so what happened in 2020? Well, a hell of a lot happened in 2020. But let me just describe what happened in the investing space. Holy shit. Now everybody is stuck in their home. They're not allowed to go out. They're not allowed to go into stores to buy stuff. They don't have anything else to do but to watch your streaming services. They need delivery. Guess what? A lot of them now are just going to start using services like Robinhood to start investing. You're going to see things like the GameStop phenomenon that really could have only happened during a period like COVID. You're going to have edtech, healthtech is going to come into play, e-commerce, holy shit. Look at what's going on in the world right now. People have no choice but to use technology. And then guess what happened? The trend came back. And not only did that trend come back from the non-traditional investors, but obviously the entire space. Just blew back up. Right. And if you look here, this is kind of that dip where it was really starting to bubble up in 2018, right, that non-traditional investment. Then 2019, people are like, hey, maybe this isn't so smart. And then all of a sudden we have a pandemic and boom. All right. It was really, really hard to lose money. You would have tried, actively tried to lose money. Investing in startups after the pandemic. And really the biggest point here to understand is that 2021 was just absolutely insane. All right. We'll look back at 2021 in the same way as we look back at 1999 or the year 2000. All right. That's the reference we're going to look at it in. It was a once in 20, 25 year bubble that I think most economists probably expected to happen 10 years ago or so, but it just needed some global shock like a pandemic to really pull it into play. And here are just a couple of the charts to show why 2021 was just insane. This left chart just shows just the amount of money that was raised in 2021. This chart on the right, again, You started to see a little bit of that dip and then it just shot right back up in 2021. And this is where I'm saying, oh my God, unicorns was so 2019, right? Because now we started saying decacorns. It's like, why do you think the number of unicorns shot up by 491%? Right? A company is only a unicorn because an investor says it's a unicorn. You know what I mean? That's what makes a company unicorn is a bunch of investors say, "Yes, you know what? This company is worth more than a billion dollars." And one of them is like, "Billions? What are you talking about billions? Tens of billions. Let's make it a decacorn." I'm being a little facetious here, but just understand that all of these things were just driven by the speculation and driven by all of those trends that I just mentioned. So yeah, it's no surprise that the number of unicorns went up that much. And, you know, just also understand some of the other trends that happened as a result. So there was a record amount of funding raised by VC firms, right? It wasn't just non-traditional investors. Everybody was making money hand over fist. So raise more funds, raise more funds, raise more funds. There are a record number of new venture funds that were started, right? As angels made a lot of money off these deals, as Partners at individual VC funds made a lot of money off these deals. They started spinning out, saying— angels were like, hey, why am I investing my own money? I should invest other people's money. They'll go out and raise $10, $15 million fund, start funding their companies with other people's money. General partners at venture firms started leaving those venture firms and raising their own funds, leveraging their own relationships they have built. All of these things happen. So we had a record number of new venture funds created. Because of all of that massive money that was coming into the space from these non-traditional investors, your traditional VCs started having to move what we would say is downmarket. If they're traditionally investing in Series A or Series B rounds of startups, and now you have these people coming in with hundreds of billions of dollars, taking those deals that you used to have and putting massive valuations on companies where as a reasonable smaller VC fund, it just doesn't make sense for you to invest at that level. You're going to start going earlier and earlier and earlier in the startup lifecycle to be able to compete. All right. And if you look at, you know, Andreessen Horowitz, Sequoia, I mean, a lot of the biggest, biggest name venture funds raised massive, massive funds, right? Hundreds of millions of dollars and things like that specifically for pre-seed and seed startups. And that's a trend that we really haven't seen for quite some time. Um, and at the same time, you also had just the friendliest deals that I've ever seen. All right, look, I'm not an investor, I'm a founder, so I'm always going to be founder-friendly, right? But I can, I can also say, and, and just putting a hat on of somebody that wants to see an ecosystem that's healthy, it's not healthy If a founder can raise a very large round and not have independent board members on their team, like on their board of directors. It's not healthy for things like that to happen. And the odds were just stacked so much in the favor of a lot of the founders of these fast-growing companies, and VCs were having so much FOMO that they were able to close a lot of those deals. So when you look at something like FTX and the fact that none of the investors that were putting in tens of millions, hundreds of millions of dollars had any board seats on that company or really had the sufficient checks and balances that they should have had, those are the types of things that happen in any bubble. I can't really blame those investors for that because that was the market. They were competing with so many other people for those deals. That if they didn't pull the trigger, they were out. All right? And we can look back now with 20/20 hindsight and say, "Well, how could you do that? Blah, blah, blah." Right? That was the market. That's what happens in bubbles. All right? And people with fraud are going to get away with it. And trust me, FTX, maybe it'll be the biggest example that comes out of this recent boom of fraud, but in any boom, there's going to be multiple parts of fraud and multiple cases of fraud. And I can assure you, we're only starting to scratch the surface. All right. I think maybe, maybe that one, just the sheer dollars and the amount of lives that were ruined by FTX's fraud, maybe that will be the most impactful one. But it certainly is not going to be the last one that we see. All right. This is what happens in bubbles. This is what happens in times of speculation. Um, the other thing that I'll mention just on how crazy 2021 is, right? And just think about this, all right? 12 months ago, we were all living in this space and we thought this stuff— I mean, maybe we didn't think this stuff was normal, but at least we were living in it. We're like, okay, sure, right? Sure, there's this thing called the Great Resignation where people are just quitting their jobs in droves. Like, let's take a step back and think about how insane that is. All right, like, we don't see stuff like that happen. Um, and that's what happened. And so my biggest point here, all right, in bringing up all of these different points of how crazy 2021 is, is just to understand that 2021 was an outlier, okay? It was an absolute outlier. Um, and 2022 really has just been a recalibration based off of that outlier. All right, so when you look at headlines like startup funding falls the most it has since 2019, US venture capital raise falls 30% in Q3, venture funding lowest level since 2020, right? A lot of these things are all referencing. And by the way, when I say 2021, I mean in reality you kind of group a little bit of 2020 and 2021 together. Okay. It's just that trend, that just the bubble spiking. So I'm just referring to that as 2021, but literally it's a little started a little earlier and maybe even ended a little earlier than the end of 2021. But you see a lot of charts and a lot of reports, and again, a lot of them are factually accurate, right? Venture funding drops XX%. From 2021, right? People read that and they're like, oh wow, like this market is terrible. Like, no, it's not terrible. 2021 was an outlier. All right. Anybody that uses 2021 as a reference to what could be considered by any reasonable person as normal is either being intentionally misleading or they're just being shortsighted. Okay. So just don't use 2021 as any kind of barometer. We're essentially seeing a return to about 2019 levels. 2019 was pretty damn good. All right. And just really the other thing that you can see right now is that it's just a recalibration on value. All right. There are a lot of shenanigans that go on during a bubble as well. All right. I think a lot of companies instead of reporting EBITDA were coming up with their own metrics. WeWork had a famous example of community-adjusted EBITDA or whatever it was. There's also, I thought was kind of a funny example of Rent the Runway. The EBITDA, the adjusted or metric that they came up with to tout to their investors was was a metric that somehow removed the cost of them buying their luxury, you know, just fashion clothing that they use to rent, right? I mean, think about how crazy that is. Like, you're a business that rents luxury fashion clothing to people, and the statistics that you're using to show the performance of your company is removing all of the costs that you use to buy the luxury clothing that you are selling as the main portion of your business. You could just keep going around in circles and circles and circles. So during a bubble, shenanigans happen, and a lot of investors are now starting to say, like, wait a second, that's stupid. And this other screenshot I put here too is that it's not just happening with startups, public companies, right? People are starting to say, hey, why Why does Meta have so many employees? Why does Google have— you have this many people working on what? All of these things are becoming a lot— becoming under a lot more scrutiny this year. It's basically a recalibration of value, how we're putting value on technology companies, focusing on more basic things now, like, I don't know, profit, revenue, calling BS. When companies try to paint a rosy picture of their finances by coming up with new and inventive financial metrics that they should be valued on and not basic metrics like profit and loss. So this is a lot of what you saw over the last year. And also, Not as a surprise, right, the amount of non-traditional investing has fallen off a cliff. Now again, this non-traditional investing is typically going to hit the later stages, right? As I'd mentioned before, those non-traditional investors, they don't waste time on the early stages. They don't have the time. Okay, they need to invest monies in tens of millions at the very, very least, but preferably hundreds of millions, if not billions. To be an efficient investment for them and an efficient use of their time. So when they start pulling out of the market, it has a massive impact on the overall numbers. Okay, so when you see, oh, the amount of venture funding dropped this much, when the value of deals dropped this much, just know that it's very, very, very largely driven by this trend right here. It's by those non-traditional investors. Starting to pull out of the space. So I started touching a little bit about this, but let's just, now that you understand kind of how we got here, let's just do a reality check, okay? And of what we're seeing right now and what we can expect to see going into 2023. So the perception right now, and again, a lot of those, of just what you're hearing in the press, right? All the layoffs, all of this stuff is that the market for startup funding is really bad. But again, really the market for startup funding is not really bad. The market for startup funding has just dropped compared to 2021, all right? Which was once again, a massive outlier. It should not be considered as normal. We're not bottoming out. We're just returning to kind of pre-2021 levels, pre-pandemic levels. And as I had mentioned before, 2019 was just fine. It was the second highest on record of that entire decade. Right? And I shared out a post with some of these charts the other day. And I like to do this before I do presentations because I usually want to see kind of like what the counterarguments are. Right? So one of the counterarguments I got from somebody on my LinkedIn was like, okay, well, you're just cherry-picking data, right? What about this chart, right? You're telling me this looks healthy? And again, yes, this chart is factually accurate, right? All I'm trying to say here is that let's keep things in perspective and have the proper context, all right? This chart, you know, it's, it's not up into the right, it's up into the— or it's down into the— down into the right, right? Which obviously looks really bad. But let's just look at this right here at Q3. This would still— again, we're basically just going back to 2019. So this level right here would still be above the median, probably for all these years, for the last 8 years or so. If you removed this outlier, it would certainly be above the median amount of investment. And if you remove this outlier here as well, this would be the 4th highest quarter since the beginning of 2014. All right, so just know that yes, everything is going down, but it's going down compared to this, and we should not use this as an indicator. Okay, um, and the other thing to keep in mind is not only can you just say, okay, well, it was a bubble, right? It's just that same bubble drove trends that will help us get through whatever kind of downturn we may be going into right now in the startup market. And the reason for that is dry powder. Okay? And I'll get into some of the counterarguments on dry powder as well, because there are plenty of those. But basically, as I'd mentioned, all of that money from non-traditional investors coming into the space, VCs, it forced them to start going earlier. All right. A lot of these funds, even Q1 of 2022, had more money going into venture funds than all of 2021 combined. OK, so this trend was still there. So all of that money, all of these new— the record number of new funds that were coming into the space, all of these things, you know, while those trends were conspiring to build a massive bubble that we saw in the late stages, they were also conspiring to build the largest amount of interest in the seed and pre-seed spaces that we have ever seen. Okay? So if you think about the last couple years as a party and now we have a hangover, well, you know what? It's a hangover, but while we were drunk, we actually accomplished some things that will help us get through this hangover, right? To use a little bit of a weird analogy. So, and, What this means is dry powder, okay? Dry powder is essentially, it's just a term for the amount of money that VCs have that hasn't been invested yet, all right? And just keep in mind that when somebody invests in a VC, that VC needs to put that money to work, okay? Because the people that invest in that venture capital fund, you know, there's plenty of things they can invest in, especially now because interest rates have gone down, which means more safe investments in, in bonds and things like that become more attractive places to invest money. So it's not like these investors can just sit on this money. That money has to be put out there. All right. Now, one of the biggest— and look, these are the statistics. Okay. And by the way, this is just US venture capital. If you look at the latest estimates of what the dry powder could be around the world, it's closer to about $500 billion. Again, you could see it's absolute record numbers. Now, the counterarguments for people on dry powder are the following. I agree with a lot of these too, by the way, right? But it just shouldn't be an if or statement, right? The arguments could still be true and we can still have a ton of dry powder available. So the counterarguments go as follows. Number one, this data is always going to be a little bit delayed, 100%. Okay. You know, the data is not collected on some daily basis. We don't have some master dashboard of how all this private investment money is going out. You can assume that a lot of that $290 billion has already been deployed. Okay, definitely. The second counterargument will be, okay, well, a lot of that money is really investors are going to hold on to it because they're going to want to use that money to prop up existing companies in their portfolio as well, right, and help them get through any downturn that we may see. So that money's not going to be available to new companies. Okay, um, for sure there's validity in that argument. My counterargument on that would again would just be that, uh, the number of new venture funds, uh, has been at a record for the last several years. And new venture funds, generally speaking, are going to trend towards the pre-seed and seed stages. And those types of venture funds are not going to have follow-on investments in helping a company go through multiple rounds of their investment as part of their investment strategy. Okay. That would be my counterargument there. And my larger counterargument to all of the things that people are saying about TriPower is, look, okay, The numbers that are being put out there, there's a lot of reasons why those numbers are too high. All right? It's the number, the actual number is definitely less than 290. Okay? But once again, like, let's just look at it in a position of context. Cut that 290 in half. Okay? Let's just say, all right, fine, just cut it in half. All right? And we're still looking at a pretty damn good, venture environment, okay? And especially a pretty damn good venture environment for people that are just starting up, all right? For the pre-seed stages, for the seed stages of startups, okay? I'm not going to at all argue that late-stage startups are going to find themselves in a very hard spot. They already are right now. That's why you're seeing layoffs. That's why you're seeing down rounds. A lot of those companies are going to be scooped up by M&A and it's going to continue sort of being a bloodbath in the late stages of companies because they raised mega deals at mega valuations last year that just don't make a hell of a lot of sense. That trend is not going to stop. But for the people in the earlier stages, again, there is capital in the system and there has been a record number of new funds and Traditionally, new funds are investing in the earlier stages, right? Because they're smaller funds by— and just the number of new emerging managers that have been raising funds these last few years has also skyrocketed as well. Okay. So just keep things in context is my main point here. And then the second perception of reality I'll say here is that people are saying valuations are dropping like crazy. Okay. And if you look at the reality, if you look at the latest statistics, It's not valuations are dropping like crazy across the board. Late-stage valuations are dropping like crazy as a result of a lot of the trends that I have just gone through. Overfunded, overvalued, mega deals, decacorns, et cetera. If you look at the latest statistics from PitchBook, angel deal values have actually remained largely unchanged. And this is sort of a constant. Okay. Angel deals are so far earlier than everything I've just been talking about, mostly, which is on the later stage deals that everything is getting the headlines. They're so far earlier that honestly, they are, generally speaking, you know, immune to, or not immune, but at least resistant to a lot of the macroeconomic forces. Okay. So those deals have largely remained unchanged, constant. And I would, as you could see here, they generally do remain that way. And I would expect them to continue that. Seed deals have risen this year. All right. And again, some people are surprised by this. I'm not surprised by this at all because of all of those trends that I just outlined. The amount of non-traditional investors coming into space puts so much capital towards the earlier stages, and that capital has to be deployed, and it is, and those deals are being valued accordingly. And the thing to understand here too is that once these companies start getting to later-stage deals, and again, yes, those later-stage deals are much harder to raise right now and the valuations are getting cut drastically, there's about a 2-year delta. All right? If you're raising angel funding right now, you're not going to need to raise a Series A or Series B, even a best-case scenario, in 2 years. If you're raising a seed right now, your best case scenario is going to be in about a year and you should plan for that to be longer. But the point is that in about a year, in about 2 years, we can expect to see some of that bloodbath in the late stages starting to subside. Even if it's a little bit longer, 2 years or so, these angel deals, these pre-seed deals and these seed deals are going to be a little bit shielded from some of those forces because there was going to be a delta of time between when they need to go and raise money, larger amounts of money. All right. And something that was surprising to me was early-stage deals are actually still continuing to rise. Now, I wouldn't expect this to continue for much longer. All right. And PitchBook here, actually, they were grouping in, they were even, I should have edited this, when I went back and said, wait a second, like, how is, PitchBook defining early stage. They're actually defining early stage by Series A and Series B on these charts. So even those are going up right now. That I think is definitely due to a delay in reporting. And that I think is something that when the next quarter's numbers come out will fall. All right. Because it's kind of a terminology thing. As somebody who works in the pre-seed stage, stages. I consider Series A and B to be later stage, but PitchBook is calling them earlier stage, but I would expect a lot of those to go down. All right, so I spent a lot of time here talking about 2019, 2021, 2022 because it's super important to inform, number one, just how to look at all of the reports and stuff that you've been seeing coming out, Okay, so again, the trend is like, no, valuations aren't dropping across the board. They're dropping in the later stages. Yes, all of the numbers are dropping compared to 2021, but to be honest, that's not saying much because 2021 was insane. All right, they're dropping to about pre-pandemic 2019 levels and everything was just fine by then. All right, but I brought up all of that so that we can now talk about what, what are some of the trends that you can expect to see in 2023. All right, so in about, I don't know, it was maybe 2011, 2012 or so, uh, one of the biggest stories in venture capital and startups was what was known as the Series A crunch. I even specifically remember like a famous article that was in TechCrunch that showed like a cat and crunch cereal box on the COVID right? It was a Series A Crunch. And what does a Series A Crunch mean? That means that at that time, there was a lot of interest in the seed space. So a lot of companies were raising seed funding, and then those companies then got to a point where they needed the next round of funding for their next phase of growth, which would be Series A. And they found it really hard to raise those Series A rounds. Okay, I definitely expect us to see a Series A crunch V2, um, that if it has not already started and it just wasn't reflected in those, uh, charts that I just shown, um, it will start very soon. Okay, um, when that happens, that means that a bunch of new financing models start to become more popular again. Things like revenue-based financing. You're going to see a lot of bridge rounds. You're going to see— yes, you will see a lot of down rounds. You'll see a lot of seed extensions, pre-Series A, right? You're already starting to see some of these things now. And you're going to have a lot of smart investors move into that space to fill that gap, okay? Because those investors will be smart and they'll understand that that crunch at the Series A is going to subside. Right. It's just a cycle. It will subside. So if you can get a position in companies right now to help them wait that out to get to the Series A, then that will be a pretty attractive investment opportunity. So I do expect there to be a Series A crush. I do expect, and you're already seeing this right now, large companies are going to refocus, right? When you have a lot of bloat on your burn and your investors are giving you increased scrutiny, What are they going to say? It's just like, okay, where does 80% of your revenue come from? Oh, that's where it comes from. Then stop spending time on that other 20%. All right. So you're going to see this across the board. You're already seeing it with large companies. That's what's driving the majority of those layoffs. But you're going to see a lot of investors are going to be instructing their portfolio companies to do the same. And what happens there is that you start to see ecosystems and, you know, just communities of people within a business that used to be collaborative. They're all gonna stop talking to each other. They're all gonna sort of put their stake in the ground. So things are gonna become a lot less collaborative. People are going to start vertically integrating, right? It's like when there's a boom time, everybody's in a room together singing kumbaya and saying, oh, a rising tide high floats all boats, right? Let's all help each other. But in times like this, those conversations end. People vertically integrate, they put their stakes in the ground, they stop doing extraneous things, and they try to protect their space, build moats around their space. Okay, so you're going to see a lot of that. There's going to be a lot of M&A and a lot of consolidation, right? As a lot of these startups start to look at down rounds, their investors are going to give them a lot of pressure to sell instead of raising a down round for their companies. So you're already starting to see this pop up right now. Expect a lot more M&A, expect a lot of startups that, you know, it might not even be big M&A, right? A lot of this stuff you don't even read about, a lot of acquihires and things like that. But even a lot of startups will, you know, I think traditionally when you think of M&A, you think of, oh, it's Figma buying Or sorry, it's Adobe buying Figma for I don't even know how many billions that was. Some massive company buying some massive other startup. But I think in a time like this, you're actually going to see it's more mergers than acquisitions. You're going to see a lot of startups that were looking at each other as rivals right now and realizing that their economics have gotten significantly worse, and it's just like, hey, maybe we should just work together to survive. Right. I think a lot of that is going to happen. You're going to see a lot of accelerators fail. All right. We saw this as well, kind of in the early 2010s. There's definitely been an accelerator boom these last couple of years. And as somebody who runs accelerators and has been running accelerators since '29, I can tell you from experience that it is extremely difficult business to run the, the, the economics are very challenging, all right? And a lot of accelerators were started these last couple years during this boom. And, you know, during unsustainable times, unsustainable businesses get started. So you're going to see a lot of these things just fall off the map. And this is a similar trend that we saw in the early 2010s. And the thing with accelerators is when accelerators stop or when they fail or close, It's not like you hear, like it becomes news, right? They just stop accepting new cohorts quietly. And that is something that you're, or they, you know, another thing that happened is they just sort of pivot into just being like a consultancy and they just say like, oh no, our accelerator's not closing. We're just only gonna work with like 2 companies a year now and we're gonna focus our efforts, right? And what that really means is now they've just become a consultancy and they've dropped the whole accelerator model and they're just going to pick 1 or 2 companies to work with consult. So that's something that you can also expect to see. And I also don't expect the layoffs to end anytime soon. I think you've only seen the tip of the iceberg on the layoffs in the financial space. I think Goldman just announced a bunch of layoffs, but I think the dominoes have really yet to fall on the financial space, which as you can see in a lot of my presentation here, drove a lot of the speculation what we've seen so far this year. And I also think that there has been a ton of companies that were able to raise big rounds right before things started falling off a cliff. And some of those are going to— they've been able to delay a lot of their layoffs probably, but I wouldn't expect the amount of layoffs to drop until at least halfway through 2023. And that brings up a larger point here, which is a massive opportunity for startups. Okay, if you look at the last couple of years where all of the speculation drove mega rounds, drove, you know, just hyper acceleration, blitz scaling, crazy growth goals, crazy valuations, right? What does that lead to? That leads to crazy amount of hiring. Right. And that led to talent wars. So all of those factors in the last couple of years conspired to create a massive amount of talent wars with companies hiring really talented people. And a lot of those same people now are getting laid off because we're coming back to reality and they're not getting laid off because of anything that they did. They're getting laid off because of the market, right? Because of speculation. This is just what happens during a bubble. These people now are looking at a job market that's not great. Okay. And a lot of these people, generally speaking, are probably in a decent financial position. That provides a massive opportunity for startups. Right. And this is why I do think that 2023 will look back at this in 2030 and say that, wow, that was the time, whereas 2021 or 2020, 2021 and a little bit of 2022, you saw a massive influx of capital. Into the startup space. 2023 is going to be marked by the massive amount of talent into the startup space, right? You're going to see a lot of people joining startups or starting startups that wouldn't have even been interested in that space before because of how competitive the job, you know, all of these overfunded companies were to get their services. Right? So it's a massive opportunity for startups in 2023 to get access to a lot of people that honestly, they just don't, they never, they shouldn't normally have the ability to get access to. And I know a lot of people on the line here, probably the main question that you have is like, okay, hopefully I've given you an understanding of some of the trends of the last couple of years. What does this mean for actual fundraising in 2023? And really, in my opinion, it's just a return to the fundamentals. This is kind of a funny thing that I put together. If you were raising capital in the 2000s, and I was part of this crowd, and I started— I was a co-founder of a website called defunded.com because of a lot of the bad activity of investors back then when investors had all the power. Some of the early things you would've heard is just unrealistic expectations of growth. Late combo of, here's our term sheet and expires close of business today. That was known as the exploding term sheet back then, which was normal business practice. And I would call that maybe a little bit of God complex. That's where the investors had all the power. Now let's go to the other side of the equation. 2020, 2021, this is where the founders have all the power. And the early combos, there's no diligence. It's just, Oh, they're in. Okay, I'm in too. Oh no, I don't need to see that. Just give me— here's the signed doc you signed, right? And they're not being driven by the God complex on one side, they're being driven by FOMO, fear of missing out. Okay, I think we can all agree that both sides of the spectrum are super unhealthy. The healthy area is where founders and investors both have somewhere around equal amounts of power and influence. right? And you start to have more reasonable conversations, right? And that is what we're getting back to right now. And this is healthy. This is healthy. All right. As a founder and not an investor, trust me, I love it when founders have more power. I've been sort of dedicated my career to helping founders, but at the same time, like, you can't, you know, that the healthy equilibrium here is in the middle. And a healthy equilibrium means that the early conversations you'll have with investors are not going to be about who else is in. They're going to be about what your metrics are and what your actual business looks like. What are the unit economics? And your late conversations aren't going to be, "Sure, here's the signed doc you signed." It's probably going to be, "Okay, this sounds super interesting, but I'd love to see if the growth that you're telling me you've had for the last 3 months is going to continue into the next couple of months." Right? All very reasonable, healthy conversations that investors and founders should have. And this is what we're starting to see right now. So as a result of kind of these return to fundamentals, I see 4 main trends. Okay. The first trend is a return to benchmarks. All right. If you go back to how investors should typically treat their investments, they want to maximize upside, minimize downside. All right? So if they're going to minimize downside, they want to see metrics, right? If all of the last couple of years have been about qualitative decision-making and investing, using fear of missing out and who else is in as ways to gauge an investment, we're just going back to quantitative, like, all right, you know what? Let's remove the bias. What are the numbers? So these are a lot of the numbers that we're seeing right now. We released this at fi.co/benchmarks. A week or two ago, just to give people insight into a lot of the metrics and deal terms and things like that that we're seeing, because the Founder Institute has over 6,500 portfolio companies and we're just— we see term sheets and deals on pretty much a daily basis. All right, now this is very generalized, all right? We operate on 6 continents, so we're just trying— this will definitely vary across industry, it'll definitely vary across geography, and there's a million different factors, right? So To ask for this to be perfect is literally impossible, but we put this out there just so people can at least have some kind of benchmark. Okay? And again, the metrics are great again. All right? If an investor wants to mitigate risk and maximize upside, a lot of that, what they're judging is the quality of the founder. And the quality of founder means how much you been able to accomplish with little. They don't invest, generally speaking, in ideas. They invest in a little bit of a kindle. You have this little fire going, like, look what I have, these two sticks. It's all I have. I've been able to just create this little bit of a kindle of a fire to prove that what I'm doing is worthwhile, is that it has potential. And I'm raising money from you, the investor, to pour gasoline on this fire that already exists. An investor, generally speaking, is not going to invest in you to create that initial kindle, unless your name is Elon Musk or somebody like that. They want to see that you have been able to be resourceful. So again, these metrics are great again. And really, I think what it comes down to here is that resourcefulness, is much more valuable than resources. Okay? The question is, what have you been able to accomplish with little, right? With what you have, which will give me so much more confidence that if I give you money to throw fire on top of the kindle that you've created, that a great business will flourish thereafter, right? Resourcefulness over resources. This is how it's always been. In investment and venture capital. The last couple of years have been an outlier and we have strayed away from these concepts. I think the third thing here is that grit is good again as well. All right. Founder Institute runs a program called Funding Lab, which is a free program for Founder Institute alumni, and it basically takes people that come through the Founders Institute core program, and it puts them through a process to get the lead investor for their pre-seed or seed round of funding. And our guidance for those people has always been, look, this is what you have to expect. You have to expect to get 100 nos before you start to get yeses. And you have to expect that with those 100 nos, every no can help you get towards yes, as you say, because you need to keep iterating your message, keep iterating your deck, keep iterating your story, and all these different things to eventually get to a strong fundraise, right? And this generally means that you have to devote more than 20 hours per week for over 8 weeks to do this fundraise. And this is the CEO and/or the founders, okay? You can't just hire some consultant to do this for you, okay? It has to consume your everyday life, basically. For about, at the very least, 2 months. These benchmarks definitely went down these last couple of years, but I see them going right back to this. Okay. And honestly, if you look at these numbers and if you're about to go on the fundraising trail and you've never fundraised before and these numbers scare you, they should scare you. Okay. It sucks. Not going to lie. It sucks. It takes a lot of grit, takes a lot of determination. It takes a lot of perseverance to be able to get 5 nos and keep going, to be able to get 10 nos, 20, 30, 40, 50, right? To get to 100, you literally have to be like a stoic Zen master. All right. So this, it's hard. It's very, very hard. If it was easy, everybody would do it. Right. But this is the process. So just the fact that it's so hard, the fact that it takes perseverance and iteration, is literally what weeds out the vast majority of people from successfully raising funding. All right? But it requires grit. And this is where we are right now. This just is what it is. And I want to just provide an example. There was a pretty cool movie— I liked the movie— a couple of years ago called The Edge of Tomorrow. It was with Tom Cruise. And if any of you— I'm just a big sci-fi nerd, so I thought that was a pretty cool movie. Right. And one of our mentors, his name is Scott Painter, and he's taken several companies public. He's raised billions of dollars in venture funding. Right. He's literally one of the world's most prolific VC fundraisers of all time. Okay. And even he came to a Founder Institute session and literally just spent half an hour just talking about how much it sucks. And his analogy was that movie. Right. His analogy was you literally have to be like the characters in that Edge of Tomorrow movie. Where every single day they try to get— they try to achieve their goal and then they get killed. Right. And then they wake up in the same spot and they have to take the learning that they just had to get killed and they just have to get a little bit farther, but then they get killed again and then they start over and you just keep going over and over and over. And that's what the process is like. Okay. It's like you have to be prepared to take all of these nos. And we're just getting back to that state. The fourth trend that I'll see this year in fundraising is just a heightened scrutiny on team. Okay. During a bubble, diligence goes by the wayside, and that's how fraudsters like this gentleman on the left here get away with what they've done. Any business will have kind of these red flags. Okay. And what I like to call these red flags Is, you know, there's a phrase, the 800-pound gorilla in the room, or there's another phrase similar, it's like, you know, what's the elephant in the room, right? Anytime I hear a startup pitch, I am always just naturally kind of attracted and just thinking about what is the elephant in the room on this pitch, on this business, right? What is the thing that I keep thinking about and probably any other investor is going to think about but is not being talked about. That's kind of the elephant in the room. That's the 800-pound gorilla in the room. And that usually drives a lot of diligence from investors. Now, if you go back to FTX, maybe somebody on these teams should have had experience running multinational exchanges. Maybe somebody should have had a very large amount of experience with financial regulation. These are all things that go by the wayside during a bubble, but not only are they coming back, but they're coming back in force because of this, because of this kind of fraud. And the best way for you to mitigate these 800-pound gorillas that you have is through your team. Okay, team is the great equalizer here. Now, some of them are obvious, right? If I look at any business that is, you know, their whole revenue model, their whole business is to sell to massive enterprise companies, right? Immediately in my head, I'm like, okay, well, those deals take a lot of time, massive sales cycles, super complicated, a lot of negotiation, a lot of legal, right? That requires a very specific amount of expertise. You don't have that kind of expertise on your team. Massive red flag. Okay. Similarly, if it's like some kind of consumer product, right? Like I'm always going to be thinking about, you know, the mass— you could build the greatest product in the world, but if it's a consumer product and you don't have some way to reach customers at scale and to acquire customers at scale and efficiently and not just by like buying like, you know, a ton of Facebook ads, that's going to be the 800-pound gorilla in the room. Identify what the 800-pound gorilla in the room is for your pitch. Again, sometimes it's obvious, but other times you just have to start pitching just to figure out what it is and then make sure it is mitigated by your team. Now, to some extent, you can kind of hack this a little bit by bringing on advisors to your team. But to be honest, savvy investors kind of can see through that hack. You know, as I mentioned before, 2023 is going to mark the largest migration of talent from big companies to startups that we've ever seen. So use that to your advantage. Okay, whatever the 800-pound gorillas are that you have on your team, mitigate it, bring on team members. All right. And again, you have opportunities now to bring them on, maybe they're even just consultants, maybe that, you know, you have opportunities to bring them on where you don't have to pay them crazy salaries, all right, because of what the job market looks like right now and because of all the trends that you're seeing in venture. Okay, well, this presentation was a lot longer than I expected it to be, but let me just finish off here with one final note. And then we'll see— to Diane, who's in the chat here gathering questions for me, Diane, maybe if you can just pick like maybe the top 3 questions or so and I'll tackle those just because we are going a little bit over here. But before we get to those questions, okay, just one final note as we go into 2023. So I understand that, you know, what do I do for a living? I run a startup accelerator and we help idea stage companies, new entrepreneurs launch new startups. Okay, so you can certainly look at every single thing that I've said during this presentation so far and look at it as extremely self-serving, and that's fair, definitely fair, right? Part of it is just I'm a founder, I'm an entrepreneur, so I sort of have a natural tendency to be optimistic about these things. Part of it is just 20 years of experience that I've seen in startups and how I've seen these things work. But also part of it is that I know that downturns are amazing times to start companies. Okay. And again, I say this from experience. The Founder Institute was started in April 2009. Okay. April 14th, 2009, our 14th birthday is coming up here in a couple of months, makes me feel very old. But look at this chart, April 2009 was literally, you know, if you were to look at larger macroeconomic indicators as a way to say, oh, this is It's a great time to start a company. It was at the absolute nadir, absolute bottom of the Great Recession. So I do say this from experience. And if you look back at the companies that were started during that time period, coming out of the whole housing crisis, coming out of that whole downturn, these were the companies that were started. And look at these companies. These were the companies that defined the last decade plus in technology, right? Category-defining companies. You had companies like Airbnb and Uber and companies like that, right? Kind of sharing economy, gig economy, all those kinds of companies. You had the massive wave of fintech companies that came into the space. You had the massive wave of edtech companies that came to the space. Space. You had direct-to-consumer companies, right? All of these companies literally defined the 2010s in technology, and they were started in that time period. Okay. And if you go back to about the 1999 to 2002, 2003 time period, right around that crash, you'll see the same exact trend for the companies that define that decade. In technology, all right? Financial downturns and just downturns in the economy are always a great time to start a company, right? And why? Because everything's getting disrupted, right? There's a reason why it's called the Disrupt Conference. Entrepreneurs thrive in disruption. Large companies who generally can be seen as competitors to startups, you know what they're not doing right now is really paying a lot of attention to the needs of their customers and expanding into new business lines. They're actually doing the exact opposite. They're focusing, they're cutting people, they're restructuring. That provides an opportunity. You have the number of layoffs and the people that are coming into the space, the amount of talent that is available, that provides massive opportunity. You just have the fact that everything is getting disrupted and the number of new problems and changes to all the markets are just happening on such a fast and day-to-day level. Those are things that, that slow-moving dinosaur big companies never have a chance to, to be able to adapt to. And when they're cutting half their workforce and restructuring and dealing with activist investors and their stock is tanking, it is the last thing that's on their mind, right? This is why these kinds of times are a great time to start companies. So I can assure you that you know, in 2030, you're gonna see— I'll be able to put up a similar slide. Okay. You know, hopefully by then, I don't know, maybe I'll be more handsome and all these kinds of things, but I think the slide is probably going to be very much the same. All right. You see this time and time again. The companies that will define the tech industry in 2030 are being formed or scaled right now. Smart investors know that, smart entrepreneurs know that. So I encourage anybody, if they're thinking about starting a company, right, again, now I— you have to be in a good financial spot to start a company, okay, for sure, right? But if you are comfortable financially and you're thinking that this might be the time, then it should be the time. All right, because in a couple of years you'll just look back and say, I should have done it. And worst comes to worst, you'll learn some stuff, you'll pick up some, a lot of skills that will be very valuable in your career. And best case scenarios, you'll be part of this wave of innovation and new startups that I expect to see these next couple of years with the amount of talent coming into the space, with the amount of new problems and new opportunities being created in the market, and with the amount of investment that is still available. All right, thank you very much, everybody. So just a couple of links here. We do have some free startup events coming up that you can participate in. That link, or some of those charts that I, that I showed where they were talking about the benchmarks that are available, check out fyi.co/benchmarks. I talked a little bit about bringing on advisors to your company as a way to supplement some of the knowledge and skills gaps. Check out fi.co/fast. That's a free legal template that anybody is available to use to bring on advisors to your company. And also, if for anybody that, you know, specifically if you've been laid off or you really just have an idea and, you know, you're not sure if starting a company is right for you or if it's the right time to start a company, check out this free bootcamp that we're running in January called Open to Start. And you can see that at fi.co/start. Open. Okay, all right, let's get to some questions here. Many founders are asking, so, uh, that is there a difference between the VC trends between the USA and the rest of the world, specifically, uh, Europe and Africa? Okay, so let me, let me talk about this. Generally speaking, normally you would see a difference in VC trends between, um, the US and Europe where, and I don't know, maybe this says some deeper things about our cultures, who knows, but European VCs traditionally have been a lot more conservative. A lot more focused on metrics, a lot more focused on benchmarks and things like that. So as a result, you have usually seen that European VC investment is a little bit more immune to what's happening in the US VC market. And that's both on the high side and the low side, right? So when it's booming in the US, is it growing in Europe? Yes, but to a lesser degree. And when it's really dropping in the US, is it dropping in Europe as well? Yes, but to a lesser degree, right? That's generally how you can track the difference between those things. But I think the biggest trend that you've seen the last couple of years across Europe is the heightened interest in sustainability and climate tech. Europe has 100% taken the lead on a lot of those things, and that investment is going to continue. Okay? Just keep in mind all of these new climate tech funds, sustainability funds, all of the interest on ESGs and things like that, and the the 17 SDGs over the last couple of years, right? A lot of funds were raised based on those principles during those frothy boom times. And again, that money still needs to be deployed, right? So I definitely see Europe leading the way on those types of sustainable type investments over the next couple of years. Africa is a little bit of a different story. Okay, so what I would say is Generally, LATAM really, really exploded during the last few years, and Africa kind of followed a very similar trend right after LATAM in investment as well. Okay. Now, to some extent, it's going to be a little bit shielded because, again, a lot of those funds were raised during frothy times specifically to fund African startups. But if you look at things realistically from a more meta point of view, yes, when people start to invest a little bit more conservatively, what that generally means is they're going to go back to markets that they consider to be safer. Okay. So again, I do think that there will be a contraction in some of these, what may be considered emerging markets. I wouldn't consider Europe an emerging market. I would consider LATAM and Africa. To be emerging markets, I would expect some contraction. But again, that's contraction from 2021. Okay? In those markets, if you looked at the trends, they were already going on the way up. It was already a very healthy venture ecosystem. But the last couple of years, like the entire market, investment in those markets skyrocketed. And it's all because of the same trends, right? When you have institutional investors coming into the space, when people are making money hand over fist, a lot of people, they start to look at more opportunities in places that are a little bit less competitive for them to invest money. Right. And a lot of those places have been emerging markets. Right. So I do. Yes. I would expect those numbers to flatten for sure. But once again, just look at, keep things in context. All right. Look at if you want to have an indication of what 2023 is going to look at, look like. Look at 2019. All right. And again, if you look at 2019, you'll see a pretty damn healthy startup ecosystem and not something that's crashing and particularly terrible. All right. So Danilo asked, what's the new path to raising capital for startups seeking up to $1 million? So Danilo, to be honest, Those are the types of questions that can be answered in boom times, but the types of questions that become a little bit less relevant when we're getting back to more normal times. Okay, I would put that question back to you. All right. In boom times, what do people get to? Right? They immediately start talking about the prices. They immediately start talking about the dollar. Right? They just get down to the brass tacks, right? In more normal times, there's nuance, and that's where we're going towards, right? So my more nuanced way of breaking down your question, Danilo, of what's the path to raising capital for starting startups seeking $1 million, um, would really be that you need to segment your growth plan and, um, your corresponding plan to raise funding based on the actual financial and business milestones that you have for your business. Okay, so usually in non-boom times, which is what we're going back towards, an investor won't want to hear a statement like, I'm raising $1 million for 18 months of runway. Okay, they'll gloss over that. It's a stupid way to answer that question. All right, what they want to hear, um, once again is Get back to that analogy that I mentioned of, you have to have this little kindle of a fire and you're asking investors for gasoline to pour on that fire to get to a certain milestone. Investors don't want to know how much time you need. They want to know strategically, what are the next major milestones that you have in your business that you need to reach to to then raise your next round of funding. Okay? And then they wanna understand how the amounts of funding that you're raising right now will allow you to achieve those business milestones. Okay? Those are the questions that matter, and those are the questions that you should be asking, right? So again, Danilo, I'll flip it back to you and say, don't talk about raising $1 million, Okay, um, go back to things like look at fi.co/benchmarks, right? Look at the things that, that people need. Um, talk to investors and understand like what are the type of metrics that they, they want to see, um, to raise that funding, and then reverse engineer it to what you need in order to get there, right? Because honestly, maybe last year $1 million was an acceptable, acceptable figure for you to use to get there. But again, resourcefulness is being valued much more than resources now. So it's not about the money, it's about the metrics that you need to achieve. And then money is the second thing, right? Money is just a means to get there. JC asks, how many board seats are VCs now expecting? So again, this also is— it's just a lot of these questions are just signs of the times, guys. It was always very normal for any investor starting at about seed, but certainly once you got to any kind of Series A level or honestly even any kind of priced round where they would get a board seat. Okay. And it wasn't all investors, but certainly the lead investors and things like that. Right. And look, I think founders generally see that as a bad thing, as a cost. And can it be a bad thing? Yes, sure. I've had a board member back in the day in those 2000 times when it was a different market throw clipboards at faces during board meetings. Okay, so I can understand why it may be seen as a negative sentiment. But now let's look at FTX, right? The point of board members is checks and balances, right? So you need checks and balances are just a healthy part of the environment. In any kind of early-stage funding, should investors be taking more than one board seat? No. But I honestly see it as a cost of doing business. And as soon as I started seeing deals priced rounds and Series A and Series B rounds that didn't include any board seats, that's sort of when the alarms start going off, is It's like, okay, we're starting to get into unsustainable territory here. Alright. So yes, I would expect that. And, you know, managing a board and providing board updates and, you know, making sure that, you know, influencing who's on the board and things like that. There's a whole science and an art to that, and there's a ton of useful information. Honestly, if you just Google it online. About how you can do that, but I wouldn't necessarily see that as a bad thing. I would just see it as a return to the norm. Uh, and then Glenn asks, uh, should a founder work with investors to scale their business quickly, or should they focus on slower, steady growth? So Glenn, it— and, and this will be the last question, everybody. Um, It's a very nuanced question, right? So let me put it in a couple of different ways. All right. As a founder, before you even think about investing, you need to think about what kind of business you want to build. All right. In 5 years, if you see yourself running a nice little business with, I don't know, 20 people or so, and, you know, you have nice work-life balance and you know, you're paying everybody, you know, you're paying yourself a fair wage and you're, you know, able to enjoy a nice life and, you know, sustainable growth on a year-to-year basis, then you should make that clear to yourself and definitely with your co-founders and any other stakeholders you have in your business. All right, because if that's where you want to be, that immediately is going to exclude you from raising funding from a lot of venture investors. Okay? And that's just the reality of it. They have no interest investing in those types of businesses, generally speaking. Now we're starting to see new models of venture investment, right, that can facilitate growth like that. And I think that's amazing and I think we need those things. But at least right now, if you're talking about your traditional investor, Their economics work as follows. They're going to invest in 10 companies. They assume that 5 of those companies, the investment will go to zero at least. They assume that maybe there's 2 or 3 where maybe they'll get a fraction of their money back from their initial investment, maybe even break even. And then there's 1 or 2 that will kind of go to the moon, and that's where all of their returns from their investments will come from. All right. And as a result, for them, it's not smart to bet on companies that just want to be in a nice sustainable place in the next couple of years. They want to bet on companies that are like Mars, right? You're shooting for the moon, you're shooting for the stars or bust, right? Now, is that healthy? No, it's not healthy. And the whole venture ecosystem needs a lot of innovation. It needs a lot of new models so that there isn't just one recipe for success here when it comes to venture investment. Right. And there are some, a lot of things that have been popping up. There's revenue-based financing, which will allow you to do that. You know, there's crowdsourcing or crowdfunding. You know, there's a lot of other alternative investment models. But, you know, when you, when you ask a question like that, I'm assuming that you're referring to kind of traditional startup investors. You don't have a choice with them. Okay, you're gonna have to scale quickly. Alright, so just know that, that it's kind of a trick question. It's like, should a founder work with investors to scale their business quickly, or should they focus on slower, steady growth? If you work with investors, you sort of have to scale your business quickly. Okay. I personally like Founder Institute is we don't have venture investors in the Founder Institute, and that has been a very conscious decision, right? That presents a lot of challenges. Okay, that means that any investment that we make, right? I mean, we're operating off of revenue. We have to be scrappy. We operate very much like a startup. We have a small team, our salaries aren't great, right? All of these things that you would kind of expect from a general kind of a small business or a startup, like those are the constraints that we work with because we're not operating with venture capital, right? So there's downsides, but to me, the upside is that it allows us to control the destiny of the company. It allows us to control the mission Right. And we're a very mission-driven business. We operate in a lot of markets and a lot of countries and developing markets where we lose a lot of money on a day-to-day basis. So if we had outside investors, right, they would probably start to nix those kinds of things because they're not, you know, smart for the business. Right. But being independent allows us to, you know, not just look at the bottom line on every single decision that we make. It allows us to be a more mission-focused business. So honestly, Glenn, I think your question really gets down to, you know, just figuring out what is— what kind of business do you want to run. And, you know, if you want to shoot for the moon, um, that's a decision to make. And if that is the way you want to go, then 100% you should look at traditional VCs. If you want to take a more steady and slower growth tact, then you probably want to look at not scaling up quickly, at not hiring quickly, at least for the first couple of years bootstrapping and just growing based solely on revenue. And then after that, starting to look at more alternative funding methods, things like revenue-based financing, crowdfunding and things like that. It really is a personal choice. Okay. All right. Well, thank you so much, everybody. Thank you for indulging me with this platform to share some of my thoughts. We will be sharing out a video of this talk within the next 48 hours or so. So thank you all for joining. If you do have any other questions or any other concerns or even just want to learn a little bit more about venture capital, check out fi.co/events. For the next two Wednesdays at about the same time, I will be running some AMAs, some ask me anything sessions, which unlike this will— won't be kind of dominated by a presentation. There'll be a very short presentation and then it will just kind of be a two-way conversation. So I encourage you to check out those at fi.co/events. Co/events. And if we don't connect before the new year, have a happy and healthy new year. And I'm excited for what 2023 brings. I hope you are too. And, you know, just, just take all the news that you read with a grain of salt. Anything that is using 2021 as a comparison is just not a fair comparison. I'm very bullish on 2023 and I think we're going to go back to a healthy startup ecosystem for everybody involved. All right, everybody, thank you very much and, uh, and have a good day. Bye.