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20 May, 2022
Startups warned for bad weather ahead

Crashing tech stocks in public markets, record inflation levels, the prospect of rising interest rates and a wider economic slowdown set the scene for difficult times for startups. Therefore, Y Combinator, a Silicon Valley kingmaker, is advising its portfolio founders to “plan for the worst”.

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Crashing tech stocks in public markets, record inflation levels, the prospect of rising interest rates and a wider economic slowdown set the scene for difficult times for startups. Therefore, Y Combinator, a Silicon Valley kingmaker, is advising its portfolio founders to “plan for the worst”.

The investment firm — whose early backings include investments in Dropbox, Coinbase, Airbnb and Reddit — this week suggested startups cut their expenses and focus on extending their runways within the next 30 days showing the urgency of the message. In this Tech Crunch article you can read the recommendations Y-Combinator gives to their founders.

One other consequence is that startup valuations will start to come down. Sifted looked at the European situation and have seen valuations come down to 60% leading to more consolidation.

In Europe US investors contributed 49% of the capital in rounds of $250m and above and with the warning coming from the US based Y-Combinator this adds to the concerns.

Clearly IPO’s are down with for example the file-sharing company WeTransfer cancelled its IPO citing unfavorable market conditions.

It will be interesting to follow the developments here