After Sequoia, Y Combinator Waves Red Flags To Startups

Photo by Zachary Keimig on Unsplash

Weeks after top investor firm, Sequoia, raised fraud allegations at some of its portfolio startups for fraudulent practices, venture giant Y Combinator has now fired warning shots at startups. The message is loud and clear – good times are dead.

Survival Advice

Y Combinator also said that its portfolio companies have reached out for advice on how to react to the current economic climate and stuttering stock values. Its advice to the help-seekers is to buckle down for the long haul; ‘before you thrive, you have to survive.’

Stayin’Alive

Known for investments in tech titans such as Apple, Uber, and Google, Sequoia presented 50 slides to its 250 founders, demonstrating what sounded like a warning of a “crucible moment” of uncertainty for the venture market. The blame was put on inflation, the markets, and geopolitical issues worldwide.

No V-Shaped Recovery

In addition, Sequoia told founders not to expect a “swift V-shaped recovery,” as seen at the outset of the pandemic. Monetary and fiscal policy tools have made capital costlier. Founders should examine their businesses for excess costs.

Babies Under Fire

Amid fears of a looming recession and significant capital flow slowdown, startups today are grappling with cutbacks, layoffs, and capital constraints. The Great Resignation is taking a toll even as the country crossed the century-mark for housing unicorns

The record-breaking year of 2021 for Indian startups also saw $42 Bn being raised and 1,436 startups being launched. Across the globe, an all-time high of $330 Bn was notched in US venture deals in the same year.

Too long? Here’s a one-liner: VC firms Sequoia and Y combinator warn startups of upcoming ‘Crucible Moment’, no ‘V-shaped recovery, and advise how to survive the rough times ahead.

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