Startup Valuations Drop
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Shaan Puri and Sam Parr discuss the current state of startup valuations during a market downturn, highlighting the need for founders to adjust their expectations and timing for fundraising.
Key Points:
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Current Market Reality:
- Valuations are coming down week by week
- What used to be valued at $50M is now $22M
- What used to be $20M is now $8M
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Founder Response:
- Some founders haven't "gotten the memo" about valuation changes
- Many aren't budging on their previous valuations
- Smart founders are taking available funding now for buffer
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Investment Strategy:
- Sam is temporarily pausing investments
- Waiting 2-3 weeks for valuations to adjust further
- Seeing portfolio companies with concerning cash balances
- Predicting companies might go out of business in 6 months
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Market Opportunity:
- Next 2-2.5 years could be an "awesome vintage" for startup investing
- Core tech trends remain strong:
- World becoming more tech-enabled
- Tech penetrating more industries
- Machine learning improving
- Benefit: "Same opportunities at half the price"
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Historical Context:
- Similar to post-2000/2001 crash period
- Those next 3 years produced great companies (LinkedIn, Facebook)
- Market crashes often precede strong startup vintages
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Current Investment Climate:
- Companies raising extra money for buffer
- Uncertainty about how much worse market might get
- Opportunity to invest at better valuations
Sam Parr
Host of MFM and fitness influencer
Sam Parr is a serial entrepreneur and business media pioneer.
In 2016, he founded The Hustle, a business news media company that started in his kitchen with just $12 and grew to eight figures in revenue.
Sam led the charge in making newsletters popular when few believed in their potential.
After four successful years, he sold The Hustle to HubSpot, a publicly traded company. Now operating as HubSpot Media, The Hustle reaches 3 million readers daily, employs a team of nearly 100, and has been the launchpad for dozens of its staff to found their own media companies and newsletters.
Sam remains the host of the popular business podcast, My First Million, and continues to start and sell companies. He also co-founded Hampton, a highly vetted community for entrepreneurs, founders, and CEOs, and teaches people to write better through his platform, Copy That.