A Silicon Valley kingmaker, Y Combinator is advising its portfolio founders to ‘plan for the worst’ as startups across the globe scramble to navigate a sharp reversal after a 13-year bull run.
As the tech industry grapples with a market downturn that has significantly slashed the value of numerous tech companies, including giants such as Shopify and Netflix, Y Combinator (YC) is taking steps to ensure its portfolio founders are prepared for the worst.
Cut Expenses and Extend Runways
In an email obtained by TechCrunch, YC advised its portfolio founders to cut their expenses and focus on extending their runways within the next 30 days. For those who don’t have the runway to ‘reach default alive,’ YC is strongly suggesting that they consider raising money.
"If your plan is to raise money in the next 6-12 months, you might be raising at the peak of the downturn," the firm warned in its letter, titled ‘Economic Downturn.’ "Remember that your chances of success are extremely low even if your company is doing well. We recommend you change your plan."
The note from YC serves as a signal that the market downturn that has significantly impacted tech companies is now trickling down to early-stage startups.
YC’s Thoughts on Economic Downturns
In its letter, YC shared some thoughts for its portfolio founders to consider:
No one can predict how bad the economy will get, but things don’t look good.
The safe move is to plan for the worst. If the current situation is as bad as the last two economic downturns, the best way to prepare is to cut costs and extend your runway within the next 30 days.
Your goal should be to get to Default Alive.
If you don’t think this message applies to your company or you are going to need someone to tell you this in person to believe it… please reassess your beliefs on a monthly basis to make sure you don’t drive your company off a cliff.
YC’s advice is backed by the firm’s experience with past economic downturns. As the industry leader in startup acceleration, YC has seen numerous startups successfully navigate market fluctuations.
Why Some Founders May Need Guidance
While some founders may already be aware of the market trends and have contingency plans in place, others might need guidance on how to adapt to this new environment.
In such cases, YC encourages its portfolio founders to reassess their company’s financial situation regularly. The firm also reminds them that they can always reach out to their group partners for additional support.
Conclusion
As the tech industry continues to face challenges amidst a market downturn, Y Combinator is taking proactive steps to ensure its portfolio founders are prepared for the worst. By cutting expenses and extending runways within the next 30 days, startups can increase their chances of success even in uncertain times.
With over two decades of experience in startup acceleration, YC’s advice serves as a valuable resource for founders navigating the challenges of economic downturns.
Related Topics
- Economic Downturn
- Y Combinator
- Startup Acceleration
- Market Trends
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