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Craft Ventures: Operating During a Downturn Part II — Transcript

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0:00um
0:01jeff and i are gonna say a few words and
0:03then we'll we'll take questions um
0:05we're gonna cover you know what's been
0:07happening in the public markets over the
0:08last few weeks and really the last six
0:10months
0:11uh how that's translating to what's
0:13happening in venture markets
0:15um i'm going to take those first two
0:16second sections and then jeff's going to
0:18talk about
0:19uh you know we've seen this movie before
0:22what it what it looks like and
0:24and what you guys can do about it
0:27in terms of what's happening in the
0:28public markets um
0:30in terms of underlying causes
0:33um
0:34i just don't want to spend too much time
0:36on macroeconomics but just so everyone
0:38understands like why
0:40you've seen this huge downturn
0:42in the stock market
0:44that really began all the way in
0:46november of last year
0:48um basically starting last summer we
0:50started getting inflation prints
0:53as measured by cpi that were really high
0:55so if you go back to last summer there's
0:56this huge shock inflation report that
1:00inflation was over five percent suddenly
1:02you know it's been
1:03two two and a half percent for many many
1:04years and so all of a sudden
1:06inflation reared its head after seem to
1:08be a non-factor for a long time by the
1:10end of the year it was about eight
1:12percent you saw just um a few days ago
1:14there was another report
1:16uh that inflation was at 8.3 percent and
1:19so it keeps hitting
1:20new highs and you can see that
1:23uh in the red line on this chart that
1:27you know this chart goes all the way
1:28back to 1954
1:30but if you look since 2020 at the far
1:33right edge of the chart you can see that
1:34inflation is spiked
1:36all the way up to 8
1:38the purple line represents the fed funds
1:40rate which is the
1:42basically the interest rate
1:44that the fed sets and you can see that
1:46the fed funds rate tracks
1:48inflation very closely because the fed's
1:50mission
1:51is to combat inflation and so what it
1:53does it raises the fed funds rate
1:56to reduce inflation and that
1:58historically has work but it does
2:00require the fed to raise interest rates
2:02you can see here
2:04that cpi and the fed funds rate have
2:06gotten wildly out of sync with each
2:07other the fed waited way too long to
2:10react to inflation and as a result
2:13the expectation now is that the fed fund
2:16rate may have to move up substantially
2:18they've already moved it up to about one
2:19percent it was at zero after the great
2:22financial crisis of 2008 but
2:26uh recently it's up to about one percent
2:28uh but with an expectation that there
2:30may have to be a lot more
2:33and you can see just uh the other day
2:35powell who's the fed chair finally came
2:37out
2:38and admitted that they were slow in
2:40reacting to inflation he basically said
2:42that he's willing to do whatever it
2:44takes to
2:45uh to stop inflation even if it hurts
2:48the economy basically even if he mean
2:50even if it means there's no soft landing
2:53meaning that even if it means there's a
2:55recession he's committed to stopping
2:57inflation so you know you're going to
3:00see more pain ahead
3:02in terms of interest rates uh increasing
3:05and you can see this already
3:07in the 10-year treasury which is traded
3:09on the open market the fed doesn't
3:11set this interest rate it's really set
3:13by markets and you can see that the
3:1610-year t-bill the interest rate has
3:18basically gone from
3:19uh half a percent during covet
3:22uh to over three percent today so the
3:26markets are already adjusting very
3:28rapidly now i think one thing to
3:29understand about this is that the
3:32anomalous period is not now in terms of
3:34interest rates the anomalous period
3:37was after uh was basically after covet
3:40hit so in the early months of 2020
3:43in response to covid the fed basically
3:45slashed interest rates to zero
3:48and so rates went down for a period of a
3:51couple of years they were you know the
3:53fed had this
3:55zero interest rate policy or zerp and um
3:59and as a result of that um people start
4:02to believe that interest rates would be
4:04extremely low forever
4:06um
4:07but but the anomalous period was was
4:09sort of this 2020 and a 2022 period
4:12where rates were extremely low what's
4:14really happened is rates have gone back
4:17to something more normal
4:19and they could still increase quite a
4:21bit more
4:24the the bad news for stocks is that they
4:27generally move in the opposite direction
4:29as
4:30as interest rates and you can see it
4:32here there's a very obvious inverse
4:35correlation here between say the s p 500
4:39and the 10-year treasury yield
4:41this would also be true for the nasdaq
4:42even more extreme basically this the um
4:46the stocks that all stocks get hurt by
4:49rising interest rates but
4:51uh the long-dated stocks the stocks that
4:53have their
4:55earnings and revenue in the distant
4:56future get hurt the most
4:58because
4:59the higher interest rate means that
5:01those future earnings of revenue get
5:02discounted down to
5:05a lower number today so even companies
5:07that are hitting all their revenue
5:08earnings targets if they're growth
5:10companies they go down relatively more
5:13than value companies
5:16and so that's basically what what's been
5:17happening in the markets is that
5:22growth stocks have been getting the
5:23hardest the um
5:25the dow jones the nasdaq and the s p are
5:28all down but it's the nasdaq that's down
5:30by far the most and then within the
5:31nasdaq
5:33uh it's been all the growth stocks
5:35especially the recent ipos the newer
5:37listings the specs
5:40the more growth oriented they are
5:42the more they've gone down over the last
5:44six months and a lot of the carnage has
5:46been hidden
5:48by the fact that if you just look at the
5:50indices um you you you know the indices
5:54are so weighted to the large caps like
5:57the nasdaq this is weighted to you know
5:59the
6:00the googles and microsoft's amazon and
6:02so forth and they're down but they're
6:03not nearly down as much as growth stocks
6:06so just to give you some examples this
6:08was done as of last night
6:12a firm is down 89 percent off its
6:1552 week high
6:17asada and i'd say many many software sas
6:20companies down 86
6:23shopify and zoom are down 79
6:25zoom is lower today than it was before
6:28the pandemic which is pretty stunning
6:30you think about how much zoom grew
6:33during the pandemic it's now
6:35valued lower than it was
6:37uh in early 2020.
6:40uh monday lycasana down 78
6:43toast docusign twilio
6:45and then even the very best sas
6:48companies
6:49companies like octa and snowflake which
6:51are growing very fast
6:53do billions of revenue
6:55very strong franchises down 68 65
6:58so all of this is due to the fact that
7:02um
7:03that again that valuation multiples are
7:05compressing because interest rates have
7:07gone up significantly
7:09um
7:10today there was a bounce in the stock
7:12market and you know so for example a
7:14firm was up 30 that's good to see
7:16hopefully that's a bottom but it doesn't
7:18change this analysis and the reason why
7:21is i mean if your stock is off 90
7:24and then you get a 30 bounce all that
7:26means is that instead of losing 90
7:28you've now lost 87
7:31so it takes a much bigger increase
7:33after a loss to get back to where you
7:35were
7:37and i should just note that
7:39generally speaking
7:40all these companies are doing quite well
7:42they are reporting significant
7:45revenue growth
7:46uh
7:47you know there have not been giant
7:49misses
7:50uh most of them are growing very
7:52strongly they're doing well it's just
7:53that the company sorry the market is now
7:56choosing to value growth stocks in a
7:58fundamentally different way
8:00and you can see that here
8:03so this is just for the sas index
8:06and the chart goes back five years
8:08you can see
8:10um
8:11let's see how do we get the uh
8:13well i'm gonna i'm gonna tell you what
8:15some of these numbers are um
8:19yeah
8:21okay so
8:22you can see here this is the um
8:25the multiples
8:27the valuation multiples that the public
8:28markets have put on sas companies
8:31and it's broken the companies out by
8:35uh
8:36by basically whether they're high medium
8:37or low growth
8:39and then the blue line is sort of the
8:41average of the whole category
8:43and you can see that
8:45uh if you go back
8:47uh
8:48five years
8:50these uh averages were these companies
8:52were trading at you know roughly
8:56five to seven times arr you know this is
9:00enterprise value divided by next 12
9:02months revenue which is sort of close to
9:04arr
9:05but but during the pandemic because of
9:08the zero interest rate policy
9:10uh and the belief that interest rates
9:12would stay low forever these companies
9:15went
9:16you know the ar multiples went through
9:17the roof and you can see that especially
9:19for the high growth companies
9:21you know they went from
9:23you know roughly five times all the way
9:25up to as high as 35 times during the
9:27pandemic they have come all the way down
9:29back to the high growth now is about
9:31eight times and then the average is
9:33about 5.6 so the average during the
9:36pandemic was about 15 times so it's gone
9:39from 15 to 5.6 so you're talking about
9:42roughly a two-thirds
9:45correction
9:46in the valuation multiple that's applied
9:47to these public companies
9:51let me just see if i can
9:55okay for some reason
9:58we can get you those exact numbers um
10:02so just i thought this is a good tweet
10:04by matt turk so just to put the depth of
10:06the reset in context to justify a one
10:08billion dollar valuation a cloud unicorn
10:11would need to plan on doing 178 million
10:14in revenues in the next 12 months if you
10:17were to apply the current
10:18median cloud software multiple so again
10:22the current multiple that the public
10:23markets are putting on sas companies is
10:26a 5.6 times forward revenue
10:29so now that that's for the median sas
10:32company which is growing about 20
10:34if you were growing 40
10:37this number would be closer to eight
10:38times but it's still you know
10:40way down from
10:42you know where it was before so again
10:44the average has gone from 15 to 5.6 the
10:47high growths have gone from 35 to
10:507 to 8 something in that range
10:53so you can see now just how
10:55incredibly hard it is to justify even
10:58like a single digit unicorn valuation if
11:00you were to use the public comps you'd
11:02have to do again if you're growing the
11:05at the average you would need to do
11:07178 million in revenue um if you're
11:10growing faster than that you can sort of
11:11discount it down
11:12but this is sort of the the new
11:15new reality
11:19you saw jason lemkin had a tweet that
11:21sort of um
11:23shows the
11:26implications of this he said if nothing
11:28else expect a fraction
11:30of the new sas unicorns we saw in 2021
11:33with so many amazing public sas
11:35companies now worth just 2 billion you
11:37really really got to be epic to be worth
11:391 billion so you know what he's saying
11:42is there are public sas companies that
11:45are doing hundreds of millions of are
11:47that are only worth say two billion
11:50so
11:50you know how many startups actually get
11:53into the hundreds of millions of are you
11:55have to believe
11:57that to be the case and you're going to
11:58get a lot closer
12:00to
12:00delivering those actual numbers in order
12:02to be worth in order to have unicorn
12:04status in the coming years
12:10so that's what's been happening in uh
12:12the public markets this has been a
12:14fundamental evaluation reset of
12:17all growth companies and then also sas
12:19companies
12:20in particular
12:21um
12:22how does this trickle down into venture
12:25markets well there's three ways so
12:27number one vcs take their cues from the
12:29public comps those are the exit prices
12:31for vcs right so vcs know
12:34that a company
12:35that used to have a
12:3710 billion unicorn outcome or decacorn
12:40outcome is now only worth say 3 billion
12:43then they can't pay the same prices they
12:45were paying before and that does trickle
12:48all the way down to the series a stage
12:50the second reason is that liquidity has
12:52left the venture ecosystem there's just
12:54a lot less capital available to invest
12:57i'm going to speak to that in a second
12:58and then third you're seeing many firms
13:00are frozen
13:02in the market while they're awaiting
13:04clarity um we're not but a lot of vc
13:07firms are basically just risk off
13:09they're just not investing right now
13:11and the reason is there's just so much
13:12uncertainty you have
13:15the uncertainty in the economy there
13:16could be a very severe recession coming
13:18you've got the geopolitical uncertainty
13:21of this war and does it escalate and
13:24spin out of control and then of course
13:26you just have the the fact that the
13:28markets
13:29have adjusted so rapidly that a lot of
13:31vc firms are awaiting clarity on where
13:34the new valuation levels are going to
13:35land
13:37so for all those reasons
13:39venture markets basically
13:41have followed the same trajectory as the
13:43public as the public markets
13:46and you can see this in terms of the
13:47liquidity effect that the crossover
13:50investors
13:51are basically out of market um they're
13:54either
13:55temporarily gone or gone forever if you
13:58think about like where the liquidity
14:00over the last couple of years in venture
14:02came from it's true that vc firms had
14:04bigger funds but also and they were
14:06deploying them faster but also you had
14:08these huge crossover investors who are
14:10public market investors who had come
14:11into the venture space thinking there
14:13was an arbitrage they were looking at
14:15the public comps
14:16and seeing oh wait if we invest in the
14:18last couple of private rounds we could
14:19eventually
14:20uh you know there's a huge spread
14:22between public and private valuation
14:24since they bid up
14:26all the private evaluations based on the
14:28public comps unfortunately those public
14:30comps were inflated
14:32so you would think okay well don't these
14:34guys have huge funds that were already
14:35raised recently that they can still
14:37deploy and there's a really stunning
14:39article in techcrunch just a few days
14:41ago
14:42saying that even tiger which just raised
14:44a massive new 12.7 billion dollar fund
14:48they didn't even announce this till
14:49march of this year i think it was
14:51largely raised in september of last year
14:53they even deployed that fund it's gone
14:55already something like 65 deployed so
14:58even these huge funds that were raised
15:01and announced in the last year because
15:03the pace of deployment was so high a lot
15:05of that money is gone
15:07and um and then of course the vc funds
15:10who still have funds they're slowing
15:12their pace of deployment they're going
15:14from one year pace of deployment to more
15:16like two or three if even if the same
15:18amount of capital was available in the
15:20ecosystem
15:21if people if vcs just slow their
15:23deployment from one year to three you're
15:25looking at a two-thirds annualized
15:27reduction in the amount of capital
15:29available
15:33you already started to see this in q1
15:36in q1 venture funding dropped 20 percent
15:39and q1 really wasn't that bad i mean the
15:41market was in the process of going down
15:43but it had not hit the levels it sat
15:45today there was not sort of a panic
15:47uh and yet
15:49even because of what was happening in
15:50the markets in q1 vc funding was down 20
15:53i think in q2 it'll be it'll fall off a
15:56cliff and you'll see something similar
15:58in q3 and q4
16:02again just showing that this doesn't
16:05just apply to growth funding it goes all
16:07the way down to the early stages
16:09obviously if you're the first thing to
16:11happen is the growth investors
16:14reduce their evaluations because they're
16:15looking at exits that are
16:18have much lower valuations but then the
16:20series a investors have to look at what
16:22growth funds are paying to mark up their
16:24deals in a couple years and if those
16:26prices are way down then early stage vcs
16:28have to pay less as well and you've
16:30already seen just in q1 again
16:33uh series a deals were off um from 2669
16:37to 23 64. and again you'll continue to
16:40see more of this
16:43so just like what i was saying q2 expect
16:46will be uh
16:48also the nuclear winter slide don't be
16:50overly dramatic but funding
16:52uh patient deployment's gonna fall for
16:54cliff all right let me kick it to jeff
16:56to talk about
16:57the next steps here
16:59okay great uh thanks david so i'm gonna
17:01share my screen now um
17:04here we go
17:09all right uh
17:10whoops
17:12okay everybody can see that
17:15yep great okay
17:17um so the the you know we've been here
17:19before this is not unprecedented um go
17:22through a little bit of historical
17:23context here
17:24so the last two um you know kind of
17:27major recessionary periods uh were the
17:29dot-com crash of 2000 2002
17:33um
17:34this one lasted about two and a half to
17:35three years um you know it was really
17:37driven by this excessive speculation of
17:40internet companies um really fueled by
17:43the bull market of the late 90s
17:45there was an abundance of venture
17:47capital
17:48the uh at the time all these companies
17:50were being valued off of eyeballs how
17:52many eyeballs did companies have was
17:53sort of the metric uh didn't matter how
17:55much revenue you had or profit but it
17:57just mattered how many eyeballs
17:59um when the market corrected in april of
18:022000 it was sort of the beginning of a
18:04like i said two to three year period of
18:07um
18:08sharp declines in the stock market and
18:10also mass layoffs and bankruptcies and
18:13companies that sort of um were going
18:16going out of business including
18:17companies that went public so you know
18:18several public companies folded at that
18:20time period um it was pretty dramatic it
18:22was very tech and internet focused
18:25um
18:26we also then had the great recession of
18:282008 and nine um this this one lasted
18:30about a year and a half to two years
18:33this was really an asset bubble that was
18:35um concentrated in the real estate
18:36market in the housing market um you know
18:39driven by sort of overly aggressive
18:42lending and mortgages um it kind of
18:44created the whole economy the
18:46interesting thing about this one
18:48is that it actually didn't affect the
18:51tech sector as much as some of the other
18:53sectors
18:54um so now we have you know this current
18:57crisis um which we believe is uh you
18:59know the beginning of a recession and
19:01the next kind of significant down period
19:04you know 2022 to you know or maybe we'll
19:07even say it started in 21 but um as we
19:10look back uh you know in retrospect but
19:13when it ends we're not sure yet we think
19:14it'll be at least you know year and a
19:16half to two years
19:18um
19:19and this one's also like largely being
19:20driven by sort of tech and growth uh you
19:23know companies um
19:25you know we had sort of inflated
19:26valuations driven by like 10 years of
19:29very low interest rates and now this
19:31correction is being caused by this
19:32expectation as david described of of
19:34higher uh of higher of higher interest
19:37rates um and inflation obviously being a
19:40big input there
19:41um the one that i would say about this
19:43this most recent um downturn is it feels
19:46a little bit more like the the 2000 to
19:482001 internet bubble bursting because
19:51again it's very tech centric um so kind
19:54of in the work that we all do and the in
19:56the in the types of companies that
19:58you're all building and in the venture
19:59capital space it feels a little bit more
20:01similar um to the 2000 and 2002 uh
20:04downturn
20:06um this is just sort of these are the
20:08types of headlines that we saw back then
20:10you know um you can see here this chart
20:12of
20:13the sort of rise and fall of the market
20:15um you know dot com bubble bursting
20:17companies sort of you know um having you
20:20know struggling um the dot bomb was was
20:23one of the terms that people were using
20:24back at the time or the bubble bursting
20:27um
20:28and uh we even had this this um this
20:31site called [ __ ] company back then um
20:34where every day you would sort of go to
20:35[ __ ] company and you would see different
20:36companies that were either doing big
20:38layoffs or
20:40um shutting down or um you know had
20:43other problems um you know i think the
20:46the the real silver lining of this time
20:48period is that
20:49there were some amazing companies built
20:51um either that were started right before
20:53this time period or even started during
20:55this time period including companies
20:56like paypal amazon salesforce google
21:00those companies all started either right
21:02before the kind of 2000.com bubble
21:04bursts or even you know in some cases
21:06during um during during the downturn
21:09so okay what what can you know what can
21:11you guys all do about this um
21:13you know i think the good news is
21:14there's a lot you can do about it you
21:16can control your own destiny and you
21:17really have um you know have the ability
21:19to you know
21:20we're early enough in this
21:23in this kind of period that um
21:25there are things you can do today to
21:27kind of um
21:28you know
21:29help position yourselves for success in
21:31the next couple years
21:33um
21:34you know the funding markets are
21:36definitely tighter but they're not gone
21:38completely so that the bar is higher but
21:40it's still possible
21:42you know these are some metrics that
21:43we've laid out growth metrics gross
21:45margins net dollar retention you know
21:47pack payback burn multiple
21:49um
21:50you know that we think are sort of great
21:52good and danger zones so growth if
21:54you're growing you know 3x that's great
21:56if you're growing two and a half x
21:57that's good if you're under 2x that
21:59starts to be in the danger zone
22:01gross margins of 70 are great 50 is good
22:05under 20 the danger zone net dollar
22:08retention 140
22:09is great 120 is good um under 100 you
22:13know it's the danger zone your cac
22:15payback six to 12 months great 12 to 18
22:18good over 24 months you know in the
22:20danger zone and then again burn multiple
22:22one or less is great one to one and a
22:24half is good the danger zone is over two
22:27if you haven't read david's blog post on
22:29the burn multiple i would encourage you
22:30to check it out this great blog post uh
22:33back to 2020 i believe um about
22:37about this concept of burn multiple way
22:39before anybody was you know talking
22:41about being capital efficient and so
22:42that's that's definitely something to
22:43pay attention to
22:45um
22:47in the market we're in right now you
22:49really have to sort of be in this kind
22:50of great column um to uh to attract
22:53capital um
22:55and then the only other thing i would
22:56say is
22:58as it relates to growth and capital
23:00efficiency if if you have the option to
23:03not raise capital by growing a little
23:05slower so if you can extend if you have
23:07the option of saying you know having a
23:09year of runway at a at a 3x growth rate
23:12versus having two years of runway
23:15um at a 2x growth rate i would say that
23:18extending your runway trumps growth rate
23:20right now and i would choose that second
23:21option because the best
23:23the best scenario here is to not have to
23:25raise capital at all and really this
23:26slide is about um what you need to do if
23:28you do need to raise capital
23:31um all right next slide here so um so
23:34things to think about that are in your
23:35control um that you could be you know
23:37doing now um you know if you if you do
23:40um you know top up if possible if you do
23:43have that option to raise more capital
23:45be open to lower valuations if there
23:47were investors that were interested in
23:49your last round that didn't get their
23:50full allocation or didn't you know
23:52didn't get an allocation at all
23:54um you know those might be folks who may
23:56be interested in putting some money in
23:58um
23:59there are adjustments now that you can
24:01make to have uh 30 plus months of runway
24:04you know we we thought about what um
24:06what the right amount of runway is and
24:08we were thinking 24 but you know the
24:10problem with 24 months of runway is that
24:12if you you really need to raise capital
24:15about nine months before you run out of
24:17runway six months is pretty tight
24:19because it doesn't give you an
24:21opportunity to course correct if that
24:22fundraise doesn't go well so the
24:24advantage of 30 months of runway is that
24:27you know you can
24:29so so to finish the 24 months point if
24:31if you have to start at nine months
24:32before you run out of runway that means
24:34you have to start in 15 months and the
24:36problem with raising in 15 months is
24:38that that's like just barely over a year
24:40from now and our view is that
24:43this market could still be pretty choppy
24:45you know 15 months from now so
24:47really you know looking at 30 months of
24:49runway is i think a better um
24:51you know a better goal for for folks to
24:53have and um
24:54you know and if you if you don't have
24:56that maybe maybe it's it's a good idea
24:58to try to raise um
25:00or if you can make some minor
25:03modifications um whether that's you know
25:05modify your hiring plans
25:07consider a hiring freeze you can have a
25:10hiring freeze and still hire a few of
25:12the kind of key crucial roles but
25:14generally have a hiring freeze across
25:16the company um you know or and also
25:18think about trimming any sales and
25:20marketing spend that is not you know
25:22immediately measurable
25:24and uh and has a near-term roi um so
25:27those are some of the things that we
25:27would recommend thinking about to try to
25:29extend your runway to 30 months or as
25:31close to it as possible um you know aim
25:33for a burn multiple of of two or lower
25:36um and i think you know acting faster
25:38the sooner people act especially in
25:40things like cutting cutting burn the
25:41more impact it has uh because the less
25:44the less
25:44cash you burned um waiting
25:47um and i think the good news just to you
25:49know i think leave everybody on a
25:50positive note and then we'll open it up
25:52to q a is you know again as i touched on
25:54before some of the most iconic companies
25:56have been built in these in these times
25:58it's actually a great time to build a
26:01company in a lot of ways because
26:03if you the one thing that's harder is
26:05access to capital but actually a lot of
26:07other things get easier
26:08um you know you you have an easier time
26:10hiring people that's been one of the
26:11most challenging things in the last five
26:14years
26:14as the market got
26:16really hot but in in these markets it
26:18actually tends to be much easier to hire
26:19people you start seeing companies doing
26:21layoffs you see fewer companies
26:23aggressively hiring so
26:25um hiring does get easier
26:27marketing customer acquisition sometimes
26:29gets easier because the competition
26:31in in marketing spend so things like you
26:33know google paid search or um facebook
26:36ads can sometimes be cheaper uh in these
26:39times
26:40um so you know again some of these
26:41companies like google amazon salesforce
26:43airbnb stripe paypal were all built in
26:46these um sort of tougher times so um you
26:49know and i think you know we companies
26:52have an opportunity to course correct
26:53right you can focus on the fundamentals
26:55you can make some of these changes we
26:56talk about it's still pretty early to be
26:58able to make those changes um you know
27:00we are super excited about you know
27:02being in business with all of you we
27:03think you can do it we're here to help
27:05um and uh you know the world the world
27:08will keep we'll keep going um the world
27:10is not going to end
27:12so um we want to leave you on that you
27:14know positive note i know there's been a
27:15lot of negative negativity in the
27:17markets and on twitter and in this
27:20presentation so i think there's also a
27:21lot of stuff to be excited about i think
27:23that's sort of the end of our um
27:25prepared comments so we will open it up
27:27to q a and um and kind of go from there
27:34jeff i've been um
27:35i've been compiling a bunch of the
27:36questions so
27:38let me just hit hit a few first so one
27:40is and dave you can comment on this too
27:43um there may be a misconception that the
27:45tldr here is to get to break even asap
27:49um and maybe that's like a
27:51misunderstanding of what a one burn
27:53multiple is so if you guys can comment
27:55on
27:56are you are we saying that they need to
27:57get to break even or what are what is
27:59the guns here
28:00well if you can that's amazing i
28:02wouldn't discourage anyone who could
28:04operate
28:05in a cashflow positive way i wouldn't
28:06discourage them from doing it but i that
28:08that's a super high bar that i don't
28:10think most startups could get to a burn
28:12multiple of one
28:14means that the amount of money you're
28:15burning equals your net new arr
28:19so
28:20you know if in a given quarter you add a
28:23million dollars of net new arr ideally
28:26your burn is not more than a million
28:27dollars even that's pretty tough to do
28:29historically but definitely doable you
28:31know that that's what efficiency looks
28:33like
28:34i think the the way to think about
28:37um
28:38your spending
28:40is that the first thing you have to do
28:42is honestly assess
28:44uh your eligibility to raise a new round
28:49in these conditions
28:50and jeff can we here we throw up that
28:52slide again on like what great looks
28:54like yeah
28:57if you have
28:58great
29:00um
29:01i think this slide's really important
29:03oh and i just i think that's fantastic
29:05there it is there it is
29:07so
29:07if you have
29:09great
29:10metrics i think you're gonna be able to
29:12raise it may not be the valuation you
29:14want
29:15um
29:16you know i don't know what your
29:17valuation was last year and so forth but
29:19you'll probably be able to raise um
29:22but if you're merely in the good column
29:24you might have trouble i mean we're in
29:26kind of a nuclear winner
29:29now if you're like great on
29:31three or four
29:33variables and good on one or two
29:36probably you can raise but if but i
29:37would say just merely good numbers may
29:40not may not be good enough
29:42so
29:43and if you've got danger zone numbers
29:46then i'd say that's a real problem
29:48you're probably not going to build a
29:49race so if you're in the danger zone you
29:52have to fix those variables like asap
29:56and the sooner you do it the better off
29:57you're going to be
29:59and the one that's probably most often
30:01for a lot of companies can be the burn
30:02rate the burn multiple the amount of
30:04money you're burning
30:06um
30:07so so again you got to be realistic
30:09about where you stand in relation to
30:11your ability to raise capital in this
30:12environment and
30:14if
30:15you have
30:16a danger zone variable that's basically
30:19disqualifying your future funding
30:21you need to give yourself adequate time
30:23to fix that
30:25and like jeff said adequate time really
30:27is more like
30:28two and a half years not even just two
30:30years because again you got to go out
30:32and raise before you run out of money so
30:34even if you had two years a runway that
30:36doesn't give you two years to fix your
30:38company it gives you maybe maybe a year
30:40and a half
30:42so giving yourself the time
30:45to address all the issues in your
30:46business is the
30:48most important thing you can do right
30:50now to make sure you survive
30:53don't wait to take the hard steps
30:56because the sooner you rationalize your
30:58burn the more money you have in the bank
31:00on the other side of that decision
31:04sometimes people will leave it way too
31:05late i mean
31:06they'll say okay if we don't hit this or
31:09that number we'll make changes in six
31:11months or a year the problem is
31:14you know a year later
31:16now you're down to 12 months of runway
31:18and then you make the decision and you
31:20buy yourself a little bit more time but
31:22if you had made that decision a year
31:23before you could have had three years of
31:25runway now you only get you know a year
31:26and a half or whatever it is
31:28so um just the luxury of time it's the
31:31it's the greatest luxury you can have as
31:33a startup is the time
31:35to um
31:37to to make all the changes in your
31:38business that you need
31:41there's a bunch of questions about how
31:43this applies to marketplace businesses
31:45that jeff you should touch on but before
31:46we do that um
31:49there's a few other follow-up questions
31:50to this point um one is
31:53if everyone takes this advice does that
31:55imply that getting new and more budget
31:57so selling is going to get harder
32:02i think it's a i think it's a great
32:03point and
32:05and so i would say yeah that's
32:07definitely a possibility and it kind of
32:09depends on
32:12your exposure so so here's what's in the
32:14process of happening is that until now
32:16for like the first
32:17four months of the year
32:19the stock market correction was mainly
32:21driven by value evaluation multiples
32:24resetting and resetting back to their
32:26historical means as opposed to this sort
32:28of anomalous covet period
32:30so it was driven by multiple compression
32:33most of the stocks were actually doing
32:34well in terms of revenue and earnings
32:36except for a handful of coveted stocks
32:38so
32:39this is not being driven by bad results
32:41now what's we're in the process now of
32:44happening is going into recession i
32:45think and in the startup world there's
32:47definitely a recession because
32:49everyone's getting hearing these these
32:51signals and they're basically going to
32:53reduce their burn
32:54so we don't know what the impact yet is
32:57going to be of the recession the
32:58impacted date's just been again in
33:00multiples not
33:02revenue but
33:03but yes it could get harder to perform
33:05during the downturn i don't think that's
33:06a great excuse for startups by the way
33:09because the market for your product the
33:12addressable market for your product is
33:13so large
33:14that there should always be somebody to
33:16sell to but there could be yes it could
33:18get a little bit harder
33:22um
33:23yeah let me take that one about the
33:24marketplaces um yeah so good question i
33:26would say that
33:27the framework on this slide is sort of
33:29generally applicable to marketplaces
33:31with a couple of tweaks and i'll kind of
33:33go through each one of these so on the
33:34growth
33:36concept you know i think it's pretty
33:38much applicable as the numbers are shown
33:40here um
33:42but as i said earlier and i think this
33:43again this to me is both true with
33:45marketplaces and sas i would the one
33:48thing i would say about growth in
33:49general is if you again this slide is
33:51about what you need to raise capital
33:53it's even better to not have to raise
33:55capital so if you can grow only 2x by
33:58extending runway to say 24 or 30 months
34:01versus growing 3x and need to raise in a
34:04year i would say it's even better to
34:06just extend your runway to 24 or 30
34:08months even if you're only growing 2x
34:10because that will allow you to not have
34:12to raise at all um so with that one
34:13caveat i think this um
34:15this growth
34:16row applies to marketplaces as well
34:19gross margins
34:20same thing um the only thing i would say
34:22on gross margins with which is important
34:24to think about in the context of
34:25marketplaces is this is
34:27you know the denominator here should be
34:29net revenue not gmv or gtv so some some
34:33marketplaces you know present their p l
34:36um where they've got sort of you know a
34:38gross merchandise value gross
34:40transaction value then they've got a net
34:41revenue which is the take rate times
34:43that so this would be the gross margins
34:46that are below net revenue um that that
34:49um you know net revenue minus those
34:51variable costs that get you to gross
34:53margins so this would be the gross
34:55profit divided by the net revenue not
34:57divided by gmv so i know that i know of
35:00a couple marketplaces in our portfolio
35:02that have presentations slightly
35:04different different from that so that
35:05with that one caveat i think these are
35:07generally these percentages are
35:08generally uh also true for marketplaces
35:11um the net dollar retention i would say
35:13is the one thing on here that's probably
35:14not relevant for marketplaces
35:17um
35:18you know we don't net dollar retention
35:20in this context is much more relevant
35:21for sas businesses and we don't really
35:23see
35:24many marketplaces that have net dollar
35:26retention you know transactional driven
35:28marketplaces where you know there's
35:30there's sort of there is no subscription
35:31there's just kind of a transaction
35:33concept and people come in and out um to
35:35do transactions there are high frequency
35:37marketplaces there are lower frequency
35:38marketplaces but even the high frequency
35:40marketplaces tend to you know not hit
35:42these sort of metrics so i would i would
35:44say that's the one
35:45uh that's the one row here that doesn't
35:47um apply as much
35:49cat payback you know very very relevant
35:52um you know these these cap payback
35:54numbers i would say can be thought of
35:56with with marketplace business is
35:57generally the way we think about tax
35:59payback in the context of marketplaces
36:00is you take all your sales and marketing
36:02spend um you know and you
36:04you uh divide it by usually the demand
36:07side um participants that you acquire in
36:09a given period and that's your cac and
36:11then your you know your payback is your
36:13um
36:14you know is based on the amount of that
36:16the cohorted amount of gross gross
36:19profit that that cohort of users uh
36:21provides over the period of you know six
36:23months 12 months 24 months and you want
36:24to make sure you're getting that cac
36:26paid back in ideally six to 12 months um
36:29as as shown in the great column here and
36:31then burn multiple
36:33the one burn multiple i think is very
36:35relevant the one caveat is you know
36:38because sas businesses tend to just grow
36:40revenue right they don't really you
36:42don't really see sas there's healthy sas
36:44businesses that sort of shrink revenue
36:45month over month whereas in in
36:47marketplaces and in transactional
36:49businesses you can have you know months
36:51that are actually higher than months
36:53that come down seasonality oftentimes
36:55you'll see like q4 and you'll see a
36:57spike in q4 so you may have
36:59you know a year where there's you know
37:01trending up for sure hopefully at this
37:04kind of 3x kind of multiple um but there
37:07could be months where it actually comes
37:08down so because of that concept you
37:11can't always look at burn multiple in a
37:13um aperture of just one month because
37:16you're actually going to have negative
37:17growth in a month sometimes so sometimes
37:19you have to open up the aperture to look
37:21at a quarter or even a year of how much
37:25incremental annualized revenue did you
37:27generate you know quarter over quarter
37:29or even year over year and if you look
37:30at that annualized revenue growth um
37:33relative to the amount of burn you had
37:34say in that one quarter or one year you
37:37should still be hitting these types of
37:38burn multiples so it is also relevant
37:41with that one caveat i think those are
37:42really the primary tweaks that i would
37:44make to the slide in the context of
37:45marketplaces
37:47uh let me let me address a couple of
37:49these other questions about burn
37:50multiple so um
37:53when asked you know um you said that
37:56you should aim for a burden multiple of
37:58two or lower
38:00um especially given probable customer
38:02softness even if we're not seeing it yet
38:05that
38:06probably calls for immediately offset
38:08many companies
38:09and that is correct
38:11that's correct
38:13um if your burn multiple is above two
38:15you really now let me this is not
38:17necessarily true for seed and series and
38:20let's come back to that in a second um
38:23so
38:24if you're burned multiple let's say
38:25you're sort of at this like
38:27um you've already raised a series a or
38:29series b
38:31and you're sort of in this like growth
38:32stage or your next round would be a
38:34growth round
38:35the availability of growth capital has
38:37massively dried up and you really need
38:40to have the the great metrics and even
38:43if you have great metrics you know if
38:46your the deals were the rule of thumb
38:47for deals last year was 100 times ar now
38:50maybe it's 20.
38:52so
38:52you know if you don't want a down round
38:54you're going to need to grow 5x just to
38:56get a flat round this is just
38:58like sort of rough math i mean every
39:01case is different but that's the rough
39:02math so you've got to give yourself time
39:04to grow into your evaluation and um
39:07so
39:09yes i mean if you're in that situation
39:10and you don't have
39:1230 months of runway let's say
39:15uh and your burn multiple's over two i
39:17would be cutting
39:19you know now if you've got like three
39:21years plus a runway because you raised
39:23so much money last year we have a lot of
39:24companies who are in a great who are in
39:26great shape because they raised a huge
39:29round from tiger last year or one of
39:31these other growth funds but i would
39:33just preserve that cash as much as you
39:34can because
39:35the availability growth capital is
39:37fundamentally different now and so it's
39:40wonderful if you made a while the
39:42sunshine but you just realize the
39:43environment's different now i would so
39:45if i were you know
39:47under two years of runway or two and a
39:48half years of runway and had a burn
39:50multiple above two i would personally i
39:52would be making cuts right away
39:55at a minimum
39:56i'd be freezing spending to grow into a
40:00burn rate that was more reasonable
40:02um
40:03but and that again that would come down
40:05to how much runway out right now if i
40:06had like over three years of runway
40:08i would be
40:09i might be more okay just kind of
40:11freezing my cost structure
40:13and maybe you don't have to cut but if
40:15you're under two years definitely
40:17um now colin asked a question how these
40:19numbers apply to a cedar series a stage
40:21company we still need to build and scale
40:22so seed um
40:24you know burma doesn't really work for
40:25pre-revenue companies right because the
40:28denominator is net new a or r so if your
40:31pre-air doesn't even make sense
40:34similarly if you're in the early stages
40:36of selling
40:37um your r d is just you're gonna have a
40:39lot more um product development expense
40:42than um than revenue
40:44so it's okay in the earliest stages to
40:47have a higher burn multiple um but i
40:49would be looking then at just how much
40:51run weight you have
40:53and you need to be asking questions
40:54about do i have enough runway to achieve
40:57the results that i'm going to need to
40:59raise the next round
41:01so
41:03you know at some point you have to make
41:04your burn multiple make sense and the
41:06question is can you get there
41:09you know and can you can you raise money
41:11before you run out and
41:13i would just say for these early stage
41:14companies to stay as lean as possible
41:18um you know your job is is in those
41:22early stages to find product market fit
41:24you don't necessarily need a ton of burn
41:26to do it
41:27anybody doesn't really help you find
41:29product market fit like shouldn't be on
41:30the team yet
41:32um just give yourself the maximum amount
41:34of runway
41:35um and remember that by the time you do
41:37raise your series a round the bird
41:39multiple then becomes important so you
41:41need to be trending towards a burn
41:43multiple that makes sense even if
41:45at for example the seed stage it doesn't
41:47yet
41:49on that note there's a lot of questions
41:51about more tactical advice on the types
41:53of customers that people should be
41:54pursuing
41:56um
41:57if you're if you're selling to other
41:58startups does that put you in a riskier
42:00position if you have the ability to move
42:02up market should you do that are there
42:03sectors that are less affected by this
42:05than others any comments on the topic
42:08yeah i mean this is the yahoo banner
42:10advertising problem is during the dot
42:13com crash it was believed that yahoo was
42:15then the most valuable um internet
42:17company in the world and it was believed
42:19that it would be fairly insulated from
42:21um the dot com crash because it had
42:23plenty of cash it was public company all
42:25that stuff but it wasn't because all
42:27those customers were startups and as all
42:29those startups ran out of money and died
42:31there and started cutting costs yahoo's
42:34business basically dried up so yeah you
42:36do have to be aware of who your customer
42:38base is and startups
42:41are the most exposure than s b second
42:43most enterprise customers generally are
42:45considered to be the best customers
42:48now that being said
42:50you have to
42:51pursue customers where you have product
42:52market fit this isn't like your customer
42:54mix is not something you can change
42:56overnight and in general
42:59it's good to be able to move up market
43:01over time but that takes time because
43:03you have to address
43:04product objections and enterprise
43:06customers are more demanding and they
43:08have more complicated
43:10product requirements
43:12and they generally want your product to
43:14be more comprehensive and they have more
43:15complicated sales cycles so the idea
43:17that you can just all of a sudden
43:19overnight
43:20change your customer mix from s b to
43:21enterprise i've seen companies try to do
43:24that forced march too quickly and they
43:26just it doesn't work so it's something
43:28you want to evolve towards
43:30if you can but that was probably a
43:32business strategy anyway but yes i mean
43:34if you have a significant startup
43:36exposure you just want to watch that
43:37pretty carefully what what it may mean
43:40is that over the next two years you have
43:42more churn than more logo churn than you
43:44expected not because your product is bad
43:46but just because those companies are
43:48going out of business at a elevated rate
43:53uh jeff there's a question about um
43:55is the financing environment the same at
43:58the growth stage as the seed in series a
43:59stage or is the um there's like rumors
44:02going around that seed and a uh rounds
44:04are are more insulated still easier to
44:06get done yeah i think um
44:10my view on this is that uh it's it's all
44:13it's all affected by this downturn and
44:15um and we're already seeing that david
44:18shared the numbers earlier of just like
44:20bc dollars being put to work and it's
44:22we've seen a dip in q1
44:24uh both in in the growth in both overall
44:27and in the early stage and um
44:29and i and i think we all believe that
44:31that dip is going to come down even more
44:34in q2 um and it's going to be affecting
44:36the early stage as much as you know kind
44:38of every other stage i think it probably
44:40started in the growth stage but it sort
44:43of it kind of it kind of uh
44:45get gets uh you know kind of catches
44:48everywhere else as well so and i think
44:50we've already kind of crossed that chasm
44:51so i think it's like i think that the
44:53narrative that this is only affecting
44:56growth stage and it's not affecting c
44:57dna is like that's not true
45:01um another interesting question
45:03one of the ways that series a's can be
45:05affected is that the bar goes up i mean
45:08not everyone here may remember this but
45:10really even just a few years ago like
45:12when
45:13craft started in 2017 and i remember the
45:16sas
45:17rules of thumb back in 2017 2018 2019
45:21the the the rule of thumb was that you
45:23needed a million dollars of ar to raise
45:25your series a and and series b was like
45:28four to five million
45:29and those rules kind of got thrown out
45:31the window over this last two year
45:33period during covid when
45:35you know everybody was basically gaslit
45:37by like zero interest rates um they
45:40started to think that that's what the
45:41world would look like is that
45:43you know all these future years and 10
45:45years 20 years you could
45:47basically
45:48start to put a value on them without a
45:49discount rate in any event um
45:52you know the old rules were one in five
45:54so um you know
45:56in the last couple years you could raise
45:58a series a with say half a million or
45:59300 000. we were seeing people do not us
46:02but firms would do crazy series a's over
46:05pre-revenue you know i think those days
46:07are kind of over as well so you have to
46:09remember that you don't only need time
46:11to if you're a seed company
46:13to find product market fit you gotta you
46:15gotta have time now to start stacking
46:17enough revenue to meet those series a
46:18criteria
46:22there's a question about acquisitions so
46:24you both started companies uh paypal and
46:26stubhub
46:27in downturns and then you guys both went
46:30through acquisitions
46:31um does the acquisition environment
46:34change in the same way that the funding
46:36environment is changing
46:39yeah it's hard to say how it's going to
46:41cut i mean look if you're a company
46:43that's lost 80 to 90 of your market cap
46:45in the last few months you're not going
46:47to want to use your stock to buy you
46:48know in an acquisition
46:50so there's going to be a chilling effect
46:52there
46:52maybe the big companies that have a lot
46:55of cash get back into the market
46:57although they're somewhat stymied
46:59because of the regulatory environment in
47:01washington is like we have the toughest
47:03anti-trust
47:04um
47:06you know
47:07policy coming out of washington at the
47:09ftc that we've had in a long time
47:11so i'd say probably the net of this is
47:14is a chilling effect on m a
47:16um
47:18maybe quite a bit um
47:21yeah i mean yes the the problem is just
47:24that the companies who
47:25could buy you for cash
47:27and would like to do that
47:29you know again there might be someone
47:30stymied by washington whereas the
47:32companies that would buy you a stock
47:35are going to be less willing to do that
47:37with price now eventually prices may
47:39return to some more normal level
47:41and then maybe the m a market picks back
47:43up
47:44um
47:45and of course you know the exit prices
47:47will be a lot lower now too so you know
47:50we'll see what happens there i don't
47:52want to overstate it jeff what do you
47:53think
47:54i totally agree with that i think m a
47:56definitely will cool off you know
47:58companies get exp when
48:00uh you know acquirers get excited about
48:02doing m a when when times are good when
48:05their stock prices are high when they
48:06have a currency in a stock price that
48:08they can use to do the acquisition
48:10um and uh and so and that's not the case
48:13right now um and i think just in general
48:15even big companies you know publicly
48:18traded companies i think are and even
48:20companies with lots of cash like are um
48:22you know looking at this environment i
48:24think are also being more cautious um
48:26and uh and less aggressive and i think m
48:28a tends to happen
48:30when the you know when when people are
48:33more aggressive
48:35yeah so stevie has an interesting point
48:37here what happens when founders don't
48:39want to raise money at current prices
48:40good companies with strong fundamentals
48:42won't raise ever such a problem with
48:44those raising funds need to deploy
48:45capital let's have an upward pressure on
48:48valuation in order to find the actual
48:49market clear prices for private fines
48:51and good companies um
48:52so
48:54uh it's true that
48:56right now part of what's happening in
48:59the market is that if if you're a
49:01founder and you don't need to raise
49:02you're not out there raising i mean it's
49:04a terrible environment right so
49:06there's
49:07this is one of the reasons why you'll
49:09see in q2 a huge fall off in the number
49:11of deals
49:12is that if you could raise last year
49:14especially in the second half of last
49:15year you probably did
49:17so there aren't like as many companies
49:19that need to fundraise right now and so
49:22if it's optional for you you're probably
49:24not doing it but what you're going to
49:26see is
49:27towards the end of this year and
49:28certainly going into next year there's
49:30gonna be more and more companies that
49:31can't wait anymore and they're gonna be
49:33forced to raise and then we're gonna get
49:35a lot more data points on valuations
49:37um and
49:39the the new price levels will sort of
49:42completely gel because founders won't be
49:44able to resist those levels anymore i
49:46think we already kind of know where
49:47they're going to be but
49:48um but yeah you're going to get a lot
49:49more data points later in this year in
49:51terms of is there pressure on vcs to
49:53deploy capital
49:55um
49:57you you just have to remember that the
49:58pace of deployment over the last couple
49:59years was the anomaly so you know these
50:02one-year pace deployments these funds
50:04that's going to slow way down you know
50:07two years plus used to be the old pace
50:09of deployment so even funds
50:11that have capital are going to be
50:12deploying it more slowly
50:14also there are going to be a lot of new
50:16vcs in the market who simply can't raise
50:19new funds
50:20um you know lps are their portfolios
50:23have been hammered too
50:24and they may be allocating less money to
50:27bc in the next year or two and they may
50:30be
50:31getting more selective about which
50:33managers they're going to choose and
50:35then of course finally like i said
50:37the amount of crossover money from
50:39non-traditional investors that's going
50:40away completely so there will be
50:43a lot less money coming into the
50:44ecosystem over the next two years
50:46and it's going to be deployed more
50:48slowly so
50:49yes we're in the job vcs are in the job
50:51putting money to work
50:52but they're going to be much more
50:54selective about it over the next two to
50:55three years and the only other thing i
50:57would add to that and i think we might
50:58have touched on this earlier in the
51:01slides is
51:02you know there's a narrative about how
51:03like all this money's been raised by vcs
51:05in the past couple years and so it's so
51:08it's there it needs to be deployed and
51:10you know that's partly true but the
51:12piece of that that is um you got to
51:14remember is because because the pace of
51:16deployment in 2020 and 2021 was so fast
51:20that even if you raised a fund you know
51:23even in 2021
51:25many of those funds are you know 50 60
51:2770 deployed already
51:29and the remaining 30 or 40
51:32is reserves for the portfolio companies
51:35especially at the earlier stage where
51:37funds you know keep reserves for
51:39existing portfolio companies and if
51:41anything
51:42you know the funds want to keep more
51:44reserves right now because they're
51:45looking at this environment saying
51:47they need more reserves for their
51:48existing portfolio companies um you know
51:50so
51:51there's
51:52so there's
51:53you know there may be less money than
51:56than people think um that that's already
51:58been raised so so part of it has to in
52:00order for there to be more venture
52:02capital it needs to be raised in the
52:04future which you know which is which is
52:06going to be more challenging for you
52:07know for some for some newer venture
52:09firms yeah i mean remember that slide on
52:12tiger the 12 billion dollar fund that
52:14they just announced in march it's
52:15already gone
52:18and we have a bunch of companies that
52:19raise growth routes from tigers so god
52:21bless you
52:22but um i mean those those giant tiger
52:25rounds were a beautiful thing but i you
52:27can't assume that the money that they're
52:29going to be there in the future um by
52:32the way there's you know a lot one of
52:33the objections that that you always hear
52:35in vcs talk this way is um
52:38is you guys are just talking your book
52:40you want prices to be lower all that
52:41kind of stuff i think it's important to
52:42understand here that
52:44um
52:45the market really sets the the prices
52:47and valuation levels in good times or
52:49bad times we're price takers the markets
52:52that's we just choose we want to be in
52:53business with
52:54and our only motivation here in doing
52:57this call today is making sure our
52:58portfolio companies survive
53:01we do not want you to go bankrupt that's
53:03100 of our motivation and reacting to
53:06the new realities
53:07on the ground as quickly as possible and
53:10i think vc's this is one area where i
53:12think we are better positioned than
53:14founders to see what's happening because
53:15we are in the market
53:17for capital uh every day whereas you
53:19guys kind of only you know poker heads
53:22up every year or two as you need money
53:24so you know we're telling you what's
53:26happening and you'll you know you can
53:28read similar things online from other
53:30people are in the capital markets but
53:32our goal here is just to give you guys
53:34the information obviously it's your
53:35companies you run them but giving you
53:37the information so you can
53:39adapt as quickly as possible and then
53:42you know survive this downturn
53:45okay one related point to end on since
53:47we only got one more minute there's kind
53:49of this implication that q2 is going to
53:50be rough and that maybe this is going to
53:52last for two years what are some of the
53:54leading indicators that we'll know we're
53:56making our way out of this period
54:00well i think you want to
54:02pay attention to at the macroeconomic
54:04level interest rates are going to matter
54:06a lot and inflation is going to matter a
54:08lot so um and then you know you can look
54:11at like stock market prices and
54:13valuation levels um
54:15you know you can look so so i mean in
54:17the same way that the vc market took us
54:19cues from the public markets on the way
54:21down they will take their cues from it
54:23on the way up as well
54:25remember we still have a recession
54:26that's likely coming
54:28in the next six months so we gotta you
54:30know
54:31there could be more shoes to drop here
54:33and i would i would only add to that um
54:35you know gdp growth uh company revenue
54:38and company like public company revenue
54:39and earnings um you know
54:41we'll probably see
54:43you know gdp growth be negative again in
54:45q2 maybe beyond q2
54:47and as that starts to recover
54:49and start to be positive again as well
54:51as um you know just companies companies
54:53you know p l um
54:55and uh and there'll be some bellwether
54:57uh companies that i think will start to
54:59you know start to sort of show the
55:01performance of the broader economy
55:04okay we're out time this was a great
55:06david jeff thank you and um we'll fall
55:09with everybody thanks for joining
55:10hopefully this was helpful and um
55:13yeah just everybody at craft wants to be
55:15helpful in this time so make sure to
55:16talk to your point of contact or anybody
55:18else on the team yeah and actually the
55:19only other thing i want to add to that
55:20about the craft being um helpful is you
55:23know we do have a large platform team
55:25now um
55:26including people that can be helpful in
55:28um you know in lots of these different
55:30types of questions including things like
55:31layoffs so you know if you have any
55:33questions about that or want our input
55:35we can certainly you know connect the
55:36dots on that and try to be helpful there
55:40great
55:41okay that's it thanks everybody
55:43thank you

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