‘You Haven’t Seen The Pain’ Yet | Marlon Nichols in Protocol
‘You haven’t seen the pain’
Sure, startup CEOs are facing the new reality. But many are still struggling to comprehend the gravity of the current situation, says MaC Venture Capital partner Marlon Nichols.
- “It feels like retreat to a lot of Type A personalities,” Nichols told me. “It’s hard for them to be like, it’s the right thing to do vs. I feel like a failure.”
- There’s a spectrum of companies, from those seeing surging demand and opportunity to companies that didn’t have enough cash and are now struggling to raise. And then there’s the bucket of startups that were doing OK but then saw their revenues fall to zero.
- “The biggest thing for me is just CEOs getting their heads wrapped around the reality of where they sit during this time.”
But the real pain hasn’t even started, warns Upfront Ventures’ Mark Suster. There are a lot of funding rounds now and a lot of companies laying off employees, but those are only the companies either in true crisis or really opportunistic positions, he says.
- “You haven’t seen the pain,” he told me. “The real pain is Q1 of next year.”
- That’s when many startups will find their runway comes to an end. So many companies have a runway of six to 18 months of cash, Suster says. Those CEOs may feel OK during this moment of crisis, but eventually they will have to raise again.
- Startups need to have a plan for if, and when, demand weakens: Suster thinks a lot of enterprise contracts may not be renewed by the end of the year, for example. What will that do to a startup’s ability to raise money?
“Come Q1, a bunch of companies won’t have been able to raise money — not all, but a bunch,” said Suster. “And you’re going to see a lot more bankruptcies.”