See how and why in today's tweetstorm:

Michael Karnjanaprakorn@mikekarnj

The Boom Over the past 18 months, seed stage valuations went from < $10M to $100M+. Companies were raising at 200x revenue, pre-revenue hype/FOMO, or on the pedigree of the founding team. It didn't make sense to join an early-stage startup. It made sense to start one.

Michael Karnjanaprakorn@mikekarn

The Acceleration For early-stage investors: • Funds were being raised faster than ever. • Capital was being deployed faster than ever. • Startups mark-ups were happening faster than ever. Paper mark-ups removed the J-curve allowing fund managers to accelerate this cycle.

Michael Karnjanaprakorn@mikekarnj

The Correction With interest rates going up, public tech stocks have taken the biggest hits. I won't go into why that is... but it happened. Some tech stocks are down 80% from their highs last year: • $SHOP: -66% from ATH • $ZOOM: -74% from ATH • $PTON: -81% from ATH

Michael Karnjanaprakorn@mikekarnj

The Lag Private market valuations tend to lag public market valuations. Today, late-stage growth startups are seeing the impact on their valuations. Before long, we will see this trickle down to early-stage startups. The days of 100–200x multiples will be behind us.

Michael Karnjanaprakorn@mikekarnj

The Hurdle With valuations coming down, startups that have raised super high valuations will face the biggest risk. They make some progress but not enough to clear a market correction. In other words, they have to skip a round with the same amount of capital and time.

Michael Karnjanaprakorn@mikekarnj

Here's an overly simplified example: • Startup raises a seed round at $100M. • They make progress on shipping product, hiring a team, and getting to $2M in revenue. • But, Series A valuations have come down to $50M for that same traction. So, now what?

Michael Karnjanaprakorn@mikekarnj

The Boom Over the past 18 months, seed stage valuations went from < $10M to $100M+. Companies were raising at 200x revenue, pre-revenue hype/FOMO, or on the pedigree of the founding team. It didn't make sense to join an early-stage startup. It made sense to start one.

Michael Karnjanaprakorn@mikekarnj

The Acceleration For early-stage investors: • Funds were being raised faster than ever. • Capital was being deployed faster than ever. • Startups mark-ups were happening faster than ever. Paper mark-ups removed the J-curve allowing fund managers to accelerate this cycle.

Michael Karnjanaprakorn@mikekarnj

The Correction With interest rates going up, public tech stocks have taken the biggest hits. I won't go into why that is... but it happened. Some tech stocks are down 80% from their highs last year: • $SHOP: -66% from ATH • $ZOOM: -74% from ATH • $PTON: -81% from ATH

Michael Karnjanaprakorn@mikekarnj

The Lag Private market valuations tend to lag public market valuations. Today, late-stage growth startups are seeing the impact on their valuations. Before long, we will see this trickle down to early-stage startups. The days of 100–200x multiples will be behind us.

Michael Karnjanaprakorn@mikekarnj

The Hurdle With valuations coming down, startups that have raised super high valuations will face the biggest risk. They make some progress but not enough to clear a market correction. In other words, they have to skip a round with the same amount of capital and time.

Michael Karnjanaprakorn@mikekarnj

Here's an overly simplified example: • Startup raises a seed round at $100M. • They make progress on shipping product, hiring a team, and getting to $2M in revenue. • But, Series A valuations have come down to $50M for that same traction. So, now what?

Michael Karnjanaprakorn@mikekarnj

If you're a startup founder: Become default alive. • Get the company to place where it can continue indefinitely if it receives no more funding. • Lower your burn multiple (net burn / net new revenue) to 2x or better. • If you can raise cash, raise cash. Stay alive.

Michael Karnjanaprakorn@mikekarnj

If you're a startup employee: Do your diligence and avoid overvalued companies. • Valuation: 200x revenue multiple • Cash: <6 months runway • Burn Multiple: 5x If you still decide to join a new startup with these red flags, understand the risks.

Michael Karnjanaprakorn@mikekarnj·16hIf you're an investor: Stay patient. • Invest into anti-fragile startups. • Don't get attached to paper markups. • Stay away from hype/FOMO deals. Price is what you pay. Value is what you get.

Michael Karnjanaprakorn@mikekarnj

The Good News The most epic companies were started and built during bear markets: • Google (1998) • Coinbase (crypto bear market 2018 - 2020) • Bitcoin :) Great companies will succeed regardless of the market. They get stronger, not weaker. Keep building.

Michael Karnjanaprakorn@mikekarnj

If you're a startup founder: Become default alive. • Get the company to place where it can continue indefinitely if it receives no more funding. • Lower your burn multiple (net burn / net new revenue) to 2x or better. • If you can raise cash, raise cash. Stay alive.

Michael Karnjanaprakorn@mikekarnj

If you're a startup employee: Do your diligence and avoid overvalued companies. • Valuation: 200x revenue multiple • Cash: <6 months runway • Burn Multiple: 5x If you still decide to join a new startup with these red flags, understand the risks.

Michael Karnjanaprakorn@mikekarnj

If you're an investor: Stay patient. • Invest into anti-fragile startups. • Don't get attached to paper markups. • Stay away from hype/FOMO deals. Price is what you pay. Value is what you get.

Michael Karnjanaprakorn@mikekarnj

The Good News The most epic companies were started and built during bear markets: • Google (1998) • Coinbase (crypto bear market 2018 - 2020) • Bitcoin :) Great companies will succeed regardless of the market. They get stronger, not weaker. Keep building.

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