Sahil Lavingia of Gumroad entered the venture world as one of the early testers of the rotating fund, an AngelList product that allows investors to raise capital on a subscription basis. That’s 2020. Fast forward to 2022 and a lot has changed.
One of those changes? The number of pitches from founders wants to increase. “Since March, it’s down about 90%,” Lavingia told TechCrunch. “I’ve probably seen more than most – about 20 to 40 well-tested decks per week – and that number is now down to about two to four decks a week.” He also noticed an increased quality of talent for people who want to work Gumroad — which he attributes in part to the constant layoffs — and the decline of founders starting companies.
The decline in the number of founders raising capital suggests that early-stage startups are not as immune to macroeconomic changes as some investors claim; conversely, the explosion of new startups will support the idea that the downturn – and the series of layoffs that come with it – is the time when startups are born.
“I think the total number of founders we will see will be less, but the quality bar is going up.” Redpoint CEO Annie Kadavy
Lavingia breaks down the status of founders into three groups: “travel founders, immigration founders, and “born and raised” founders.” Travel founders, he said, are people who just started their companies in a bull market, a cohort that he says has fallen about 100 percent.
“They can rarely be funded in a bear market,” Lavingia said. “They need to hire other people to make the furniture.” Meanwhile, immigrant founders are less concerned with the reputation and status of founding a company, and weigh its risks and benefits. This group of founders has been cut in half, according to Lavingia. In the end, “born and raised” founders are market-defying founders: “They all survived and therefore raised money between 2020-2021, so neither did they. establish a company and raise money at the same rate”.