WORKWEEK

It was so interesting meeting younger operators and builders in fintech and crypto yesterday. A lot of folks had the same question, or something similar to it:

I’m a pretty experienced operator at X and have built Y. I have an idea about Z and a few other smart friends and I are thinking about building it. But is now the right time to raise a round and start a company? 

Obviously that answer is highly personal—there are so many variables that come into factor that it’s extremely complicated to answer. I’ll try to abstract out my thoughts and share them here, since I have a feeling a lot of other people are wondering the same thing. 

I know, most VC’s will say “YES you should start a company!” because the entire VC industry needs more operators to become founders in order for the checks to keep flowing and the ecosystem flywheel to keep going. So I’m kinda negotiating against myself here. But starting a company is one of the toughest things to do and ideal circumstances make it a lot easier. I had a ton of self-doubt about going full time on Fintech Today or looking for a PM job, and tried to talk myself out of building FTT for about 6 months. And I think one of the worst things is to start a company and get stuck in purgatory, and I would hate to see talented folks make that mistake and set their career back a few years. 

First, some background. Over the past 3 years building Fintech Today, I was lucky enough to be in a position to meet founders before they got started. A lot of people would email me, or hit me up to hang IRL, to talk about different fintech or crypto ideas they were thinking about to see if it made sense. I always try to be helpful and wasn’t investing much when I first started Fintech Today, so I would try to help by introing folks to VC’s or helping them find customers or hires. Some companies turned out to be rippers (like my homie Jordi Hayes at Party Round.) 

But the past 3 years were a VC anomaly: a lot of investors were I think the market has been overflooded with “2 on 20” deals ($2 million at a $20 million valuation for pre-product ideas.) My founder friend (who’s now starting something else and therefore shall remain nameless) and I used to joke that it seems like you just fly to Miami, go to E11even, and get a 2 and 20 term sheet from Miami VC’s. It did seem that easy for awhile. 

In a tighter, less frothy, VC market, the biggest change is that the bar is significantly raised: metrics and traction need to be much higher than it would have been. It might have been easy for your ex-Robinhood homie to raise in 2019 for an embedded fintech product, but the market’s shifted dramatically now. 

So, you should know that going in to this process: if you’ve heard stories about how easy it is to raise, they’re probably not that relevant now.

BUT I do think now is a great fucking time to raise—everyone keeps talking about how bear markets are a great time to build (even I did a few weeks back, specifically talking about the crypto market), but it goes a bit deeper than that too:

1. Talent Is Itching To Go Earlier

I think everyone is talking about how operators from publicly traded companies or late stage companies are thinking about leaving and starting their own thing. If you got a job at a Shopify or Block in late 2019, the value of your stock package has decreased significantly. I keep hearing from friends in those position about how dire things seem to be—people who are further along in life and have families and shit tend to look for stable jobs like public companies, and they’ve seen a lot of their net worth disappear. If they were wondering about where to buy a second home 2 years ago, they’re now wondering about how they can afford their kid’s college tuition in a few years. 

What’s interesting is that this is also happening at early stage companies right now too. Many operators inside of a lot of fintech or crypto companies that may or may not be overvalued are thinking about leaving too. These companies seem to be mainly in the Series A or B range, but even folks at startups that raised a massive seed round are trying to do an opportunity cost analysis too. When you know how the sausage is made it makes it slightly less appetizing; if you’re a builder with experience at an early stage company, and you don’t think the company can live up to its current valuation or increase it in the next round, then does it make sense for you to stay, or start your own company and take your fate into your own hands? 

Most of my discussions with early stage operators, particularly in NYC, have revolved around this. Lotta folks that were hyped about working at “hot” fintech startup a year ago are having existential doubts about that company’s future. IMO the opportunity is ripe to poach a lot of these talented folks with early startup experience and make them into a cofounder or early team member as you’re getting your company off the ground. 

2. Less Competition = More Time To Build A “Real” Product

Why are bear markets such a great time to build? It’s a lot easier to be a stealthy company and build, iterate, and fine tune your product without having to worry about copycats. Yes, you’ll see copycats eventually; every company does. But in a frothy bull market, VC’s are extremely happy to bet on competitors if they lose out on a deal; they’re betting on the thesis and the problem, not really the team. But in a bear market, my bet is that VC’s are going to be less eager to back copycat companies that don’t have much validation or traction yet; the risk is just too high. 

One of the worst things I’ve seen over the last 3 years is that the pressure to distinguish yourself from competitors has shifted a company’s vision or product roadmap, negatively. Sometimes it works well, but building based on your competitors is never a good idea. I think now, with less money flowing in the ecosystem, it’ll be easier for early companies to stay extremely focused on solving problems for their customers, finding product market fit, and scaling that. 

3. Capital Is In It For The Long Term

My wife and co-GP Stevie made a great point last night when we were walking around NYC at 2 AM: if you’re able to raise capital for a company now, your investors are really in it for the long haul and wholeheartedly backing you. 

Everyone knows it’s a bear market right now. I’ve literally written it like 5 times in this essay alone. VC’s know it too. I’m not saying that VC’s are super understanding folks (most aren’t at all, actually), but they understand that getting traction with customers and getting product market fit is harder now. Obviously rocket ship growth is great, but that stuff happens at later stages, post product-market fit. 

VC’s that are writing checks now are eager to help and be active in the company building process, from my perspective. Unlike frothy markets, they’re not just betting that the TAM is big and the team is interchangeable; VC’s now are betting on everything from the team, problem, and the solution. As an ex-founder, I think that support and confidence in founders will have a net beneficial effect for companies.