With fears before economic hurricane Approaching US economy, venture capitalists advise technology companies to cut costs and expand runways as the boom times stop.
But for the Pacific startup ecosystem of the Northwest, there is reason to be optimistic.
That’s the word from Chris Devormanaging partner of the Seattle venture capital firm Cooperative of Founderswho said the region’s focus on enterprise software could provide some resilience in an uncertain economic environment.
“Whether it’s cloud infrastructure, developer tools, business process automation – technologically we’re building plumbing infrastructure,” DeVore told GeekWire this week. “We solve problems that people know are problems and are willing to pay for them – and I feel it’s the best place to sit down to finish.”
Seattle has long been known for its influential businesses. It’s home to cloud giants Amazon and Microsoft, and startups that sell other companies – also known as B2B companies – make up half GeekWire 200our ranking of the leading private technology companies of the Pacific Northwest.
“Companies here are making business better and stronger, smarter and faster with software,” Devor said. “It may not be so much fun when the market is frothy and a lot of money goes to shiny, glamorous things. But when the world becomes real again, plumbers are still being called. ”
This is a similar thread laid out longtime investor in the technology industry Hadi Portavi in February 2020, just as fears of a recession began at the start of the pandemic.
Seattle Startups in 2021 there was an explosionwith record funding and several new unicorn births – part a surge in venture capital for startups around the world.
Read more from DeVore about the downturn and what it means for startups. The conversation has been edited for brevity and clarity.
Thanks for talking to us, Chris. Let’s talk about what everyone is talking about: the recession.
Chris Devor: The end of easy money was about to end at some point, and that’s probably a good thing. It’s going to be uncomfortable and painful and people are going to lose their jobs and it’s all very shit. But the endless ascent up and to the right creates all kinds of unhealthy dissociation with real value. We are not just trying to increase the value of the enterprise through private investment. We try to create companies that work and solve problems for money. And I think we lost sight of that. I am therefore grateful that the economy has shifted to creating real value for customers.
How is this decline different?
The situation in Ukraine, especially after the pandemic and upheavals in the supply chain. The emergence of this new exogenous factor of war and the impact on energy prices in the supply chain – it gives him a certain level of uncertainty and anxiety.
How long do you think it will last?
It’s hard to see a V-shaped recovery here. The government cannot stimulate our way out of this. It will be difficult for the lever that anyone can pull to speed up the reset to normal operation. By the end of the year, we may have clarity on inflation and interest rates, but there is still uncertainty about supply chains and refactoring the geopolitical situation. There’s just a lot of long tail potential uncertainty.
How about the impact on specific verticals or sectors?
I’m very curious to see how this cycle settles in the crypto market. The engineering ideas behind the crypt are really elegant and interesting. But it was difficult for me as an investor to understand where the price is.
I am also very interested in the geopolitics of trade and what it means for companies that rely on equipment production. When there is a cooling of US-China relations, in particular, what happens when nationalism plays a role in the innovation industry? I think this will open up interesting opportunities for how goods and ideas move across borders.
Is the founders’ cooperative changing its investment strategy?
No. In our business we collect the fund every three years, you deploy it for 3-5 years, and the fund lasts 10-12 years. We are in the middle of a fund deployment cycle that we closed in the first quarter of last year, so we have plenty of time. But I’m glad you don’t need to raise money now. Even if people like our income, it is a very troubled time to ask people for money.
What do you advise the founders?
It is useful that we are at the bottom of the capital market stack because we are the start-up and investor before sowing. The life cycle of the companies we work with is probably 10 years before liquidity. These watches are conveniently located outside the typical business cycle.
I just talked to an entrepreneur who asked if it was a bad time to start a company. My short answer was this I.There is never a bad time to set up a company if there is a problem you are sure you need to solve right now and if you have a deep belief in a problem that you can solve better than anyone else.
Now there is no shortage of capital for venture capital. There’s still a lot of money floundering, especially for small checks. And there is never a bad time to start a business if you are sure it is a business that should exist today.
What worries you most about this downturn?
The reset will incur ugly human losses. It’s like 12 years of expectations around people’s careers, employment and compensation. A lot of people are losing their jobs. And many large companies that could pick up that talent are freezing hiring. Human casualties of recession should never be underestimated, even if it is healthy for the economic situation. It’s real life and livelihoods for affected families, and it’s the hardest part of it.