‘Everyone thought they were the exception’: Optimism start-ups meet harsh reality

This masthead may also confirm layoffs at police software maker Mark43 after former staff posted online that it had fired an entire team, payment company Zepto and medical management company Perx Health. (Mark43 did not answer repeated requests for comment and NSW police, who supplies it, declined to comment. Zepto CEO Chris Jewell said the downturn had forced Zepto to make the “heartbreaking” decision to lay off about 10 percent of its staff, whose contribution to the company he praised. Hugo Rourke, Perx’s CEO, said the company had made the difficult decision to cut a few layoffs at the end of May, but had since racked up a number of “customer wins.”)

The list doesn’t stop there. Solar company Brighte also recently cut jobs, while neobank Volt this week announced the closure

The cuts that have been published are widely seen as the tip of the iceberg, with many companies quietly cutting their workforces.

For founders, it’s a delicate balancing act. “The dance is that people have to grow to be great, but they have to be financially disciplined to get there,” said a Sydney start-up employee, who was not authorized to speak officially.

In other words, venture capital investors tend to support only companies that generate quick income. But unlike a few months ago, Australian venture capitalists are now suspicious of companies that are doing everything they can to get there.

Customer research startup Dovetail is one of many companies still eager to hire during the recession.Credit:

Outspoken American venture capitalist David Sacks, who was an early executive at PayPal alongside tech titans like Elon Musk and Peter Thiel, said of the influential All inclusive podcast last week that start-ups were heading in the wrong direction.

He recalled a recent industry conference where founders were told they needed enough money to cover their company’s losses for the next three or four years because if they had to raise more money in a year, the available money would increase by 75 percent. have fallen. † When questioned about how they would handle the situation, Sacks said, the results showed a contradiction.

“There is a common set of values ​​that go beyond company to company and that is very useful in challenging times.”

Jono Herman, co-founder of Earlywork

“On the one hand, the founders understood intellectually that we’re headed for a downturn, we’re heading into a recession, and so the polls reflected that,” Sacks said. “On the other hand, if you asked the founders how they’re going to react to it… are you going to cut your workforce or you’re going to speed up your business to beat competitors, everyone said, ‘Oh we’re going out — speeding up our competitors.’ So everyone thought they were the exception.”

Some Australian founders who have spoken with foreign venture capital funds in recent months confirm that US companies are being told to make tough choices quickly. Others seeking funding report a more positive picture.

Dany Milham, the founder of the fast grocery delivery company Milkrun, told this masthead that he had significant interest from foreign companies in another capital increase, despite the fact that the company lost $13 per order just a few months ago in one of its top retail stores. Another noted that the overseas market is more receptive than local venture capitalists, who, according to the founder, are wary of investments as they wait to see how severe the downturn is.

Local venture capital firms, such as Blackbird, Square Peg and AirTree, either refused to make any of their partners available or did not respond to calls for interviews. But the funds have previously said they are advising their companies to be more cautious but still have significant amounts of money to invest in good companies.

Marina Wu, Jono Herman and Dan Brockwell (LR) of Earlywork teamed up with a company called AfterWork to launch a free service that connects laid-off people with a new job.

Marina Wu, Jono Herman and Dan Brockwell (LR) of Earlywork teamed up with a company called AfterWork to launch a free service that connects laid-off people with a new job.Credit:Rhett Wyman

It indicates a multi-speed sector. Companies that have failed, raised and spent lavishly, or simply need a lot of money to grow, are in a difficult position. But many startups that were fortunate or strategic enough to raise money while the market was still advancing and have spent judiciously since then are sitting on tens of millions of dollars in dry powder, allowing them to hire aggressively.

Dovetail, a customer research startup that raised money at a valuation of nearly $1 billion late last year, has put up posters and a light rail ad in Sydney advertising its $5,000 bonus policy for every member of the public who uses it. a successful candidate.

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Investors at AfterWork Ventures, which puts money into start-up companies, and Earlywork, a platform that leads people into tech careers, this week quickly developed a free tool to match laid-off workers with companies still in employment. More than 100 companies signed up for the service, called Between Work, in less than 24 hours.

Jessy Wu, an investment director at AfterWork, says growing companies have seized the opportunity to access talented employees with experience that are normally hard to find.

“The golden edge here is the opportunity for early stage companies to capture some of the talent shed by later stage companies, and leverage the skills and experience of the employees as they scale,” says wu.

Jono Herman, co-founder of Earlywork, sees the way the community has gathered around Between Work as a demonstration of the industry’s collegiality at its best. It was born, he says, from a shared view of technology — much like Teo’s — as a fundamentally positive force in the world and an empathy for founders and employees facing a tough market.

“We didn’t spend a dollar on paid marketing,” Herman says. “It’s purely through the generosity of the ecosystem to get the word out, which is great to see.”

“There is a common set of values ​​that extend beyond company to company and that comes in very handy in challenging times,” he says.

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