The article discusses the challenges faced by startups during an economic downturn. The conversation with Gokul Rajaram, former Pinterest and Google executive, highlights several key points:
- Pressure to return capital: The pressure on founders to give back money is self-imposed due to high expectations after raising large amounts of capital.
- Options for companies without product-market fit:
- Companies that have not raised much money will likely need to exit due to lack of funds.
- Those that have raised a lot of money may attempt to pivot once or twice, but this can be exhausting and may lead to acquisitions, wind-downs, or small acquisitions.
- Down rounds:
- A down round occurs when the valuation of a company decreases after it has already raised capital at a higher valuation.
- According to Jeff Richards from GGV, companies that raise a down round often have high employee Net Promoter Scores (NPS), indicating a sense of relief among employees once the pressure of maintaining an inflated valuation is lifted.
- Treatments for employees:
- Companies should prioritize treating their employees well and consider shutting down early to provide more severance pay during a transition period.
Overall, the conversation emphasizes the need for empathy and understanding towards founders facing challenging economic conditions.
