Is it really startup Armageddon out there?

May 20, 2016 at 8:43 am Leave a comment

Last week our CFOs and controllers responded to 5 simple questions on the market sentiment here in Silicon Valley. As much as our consultants acknowledge we are going through somewhat of a correction, and specifically the fundraising environment has become more stringent on early stage companies, they don’t see the sky falling down any time soon. In fact there was more optimism in the beginning of Q2 2016 than we saw at the beginning of Q1 2016.

chart1

Here is why: We weren’t sure how sharp and deep of a correction we were dealing with in Q1. Now it appears that in Q2 of 2016 the common view amongst our CFOs and controllers is that valuations have come down, and startups with no clear path to returns will fail, but the sun will rise in the east and life will go on. Undoubtedly certain startups are facing difficult conditions to raise their next round. Investors are no longer looking for ‘promise’ but for ‘performance’. A path to profitability, meeting and exceeding budgets and KPIs have become requirements (again), as they should.

chart2

For those startups that are showing traction, meeting targets, and have a proven execution track record, there continues to be lots of desire to invest. Keep in mind “the best time to save is when you have money”. Avoid shenanigans and leverage the shared model. Share an office, share your dev ops, share a CFO/controller, share the cloud, share the sun – spring is in the air!

Andries Verschelden is the Managing Director of The Brenner Group, one of Silicon Valley’s premier professional services firms.  He has held a variety of consulting and management roles throughout his career, including work in New York, Brussels, Shanghai, and San Francisco.

Entry filed under: Executive Search, Financial Advisory, Interim Management, Restructurings, Shareholder Services, Valuations.

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Silicon Valley finance and accounting issues, trends, and commentary from The Brenner Group.   (more)


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