20VC: Why This Time Will Be Worse Than The Great Financial Crisis, Why Down-Rounds, Firesales and Shutdowns Will Happen & The Ultimate Startup Survival Guide; 7 Steps to Ensure Your Company Survives The Storm

Posted on 13th February 2023 by Harry

Tom Loverro is a Partner @ IVP where he has led or was actively involved in investments in Amplitude, Coinbase, Hashicorp and Datadog to name a few. As a result of his investing success, Tom was named to Forbes Midas List in 2021. Prior to joining IVP, Tom was a Principal at RRE Ventures.

In Today’s Episode with Tom Loverro We Discuss:

1.) The Entry into Venture:

  • How did Tom make his way into venture first with RRE? How did the role with IVP come about?
  • Does Tom believe we will see many venture investors move firms with much of their existing expected carry cut in half with the changing landscape?
  • What is Tom’s biggest advice to someone looking to make their way into the venture world?

2.) The Calm Before the Storm:

  • Why does Tom believe now is the calm before the storm?
  • Why does Tom urge founders to go out and raise now before the storm hits?
  • Is Tom already seeing pricing coming down for both early and late-stage companies?

3.) When The Storm Hits:

  • When does Tom believe the storm will hit?
  • Why does Tom believe when it does hit, it will be worse than The Great Financial Crisis?
  • How will VCs respond when the storm hits? How will it impact their investing cadence?
  • How will LPs respond when the storm hits? Will they cut back their manager commitments?
  • Does Tom have hope that their will be a new class of LPs in this new economic cycle?

4.) The Rounds That Happen When The Storm Hits:

  • Does Tom believe we will see a wave of down rounds when the storm hits? Why are they less common than people think?
  • In the eye of the storm, will we see further layoffs? Will we see firesales? Will we see a tidal wave of shutdowns?
  • Will large multi-stage funds with huge amounts of dry powder change their deployment pace?

The Survival Guide for the Storm:

1.) Raise Now:

  • Why does Tom believe that startups should raise now, not later? What amount of runway should they raise for in this environment?

2.) Cut, Cut and Cut Some More:

  • What amount of runway should startups be cutting to get to?
  • How will this impact marketing spend? Why are your marketing dollars more powerful now than ever before?

3.) Focus on Survival Not Valuation:

  • What does Tom mean by this? How can founders gain leverage with VCs when raising today?
  • How can founders instil a sense of urgency in their raise with investors?

4.) Bring on Operators with Experience:

  • Why would operators with experience join a struggling startup?
  • Will operators with experience not have a flight to safety and stay at their well-paid FANNG role?
  • Does this potential operator not shorten runway even further as they are often expensive?

5.) Unit Economics over Growth:

  • How can founders show investors a superior profile of unit economics moving forward?
  • Do investors not want both unit econ and growth today?

6.) Play Your Cards Right and Then Go on Offense:

  • How does Tom advise founders on the right time to go on offense?

7.) Be Decisive, Half Measures Rarely Succeed:

  • How does Tom define a half-measure? What is so wrong with half-measures?

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