Tech's Tough Year 💥

This is The Startup Breakdown, the newsletter where we learn, laugh, and love startups. By joining this growing community of hundreds of future startup aficionados (think i spelled that right?), you're getting a beachside view of the ocean that is the startup and VC scene. This ain’t your grandpa’s newsletter, so prepare yourself for an inbox full of 4/20 jokes and Succession references.

Happy Thursday, folks.

Gotta do something to keep things entertaining, so I used a random word generator to come up with one word to include in hte newsletter. First one to guess which one and reply gets a mention in Tuesday’s newsletter and the next Premium newsletter for free. Go 👀

Stexit and Texit: Navigating the VC Maze as We Bid Adieu to 2023

I feel like it was just yesterday when I was telling you guys about giving my keyboard one (1) day off for New Year's, and now here we are, wrapping up 2023. There's a lot to unpack about the year that zoomed by, so let's dive in without delay, recapping some of the pivotal trends from this past year and deciphering what they mean for the annum on the horizon.

First, let's pour one out, a glass of Nitro Cold Brew, to be specific, both for the WeWorks that provided this deep work fuel and for the multitude of startups who realized that the bottomless snacks at home wasn't doing their sweatpants band any favors.

In a sobering tally, more than 3,200 VC-backed startups logged out of their corporate emails for the last time, sinking over $27 billion in the process. This might explain the too-good-to-be-true deal on our downtown SF apartment, as properties desperately beckon anyone to just, well, live there.

No Jurassic Park music or mosquito-extracted DNA are going to be enough to bring back IRL, the social platform whose actual user count turned out to be far smaller irl; Vedere Bio, the vision loss prevention biotech company which just couldn’t envision any way to overcome trial failures; or Cana, the personalized bev company which found operating without capital a bit too hard to gulp down.

I wish I could say that things are clearly trending upwards, but I’d be pulling a page out of IRL’s book: Q3 marked the lowest venture investment in 6 years, totalling $72.9 billion globally. This figure could have been even sadder if not for a buzzer beater from Andy Jassy to sign the biggest deal of the quarter, Amazon’s $4 billion investment in Anthropic.

The sluggish rebound in venture might seem incongruous with the state of public markets, but remember, news from the equity sphere often takes time to ripple into private dealmaking. Recent flurries of IPO chatter (see last week’s article and Skims and Panera's not-so-rosy headlines) might soon signal a more robust exit environment, potentially reinvigorating startup investors.

I’ll be closely watching the beginning of 2024 for a sign that we’ve reached an inflection point so founders stop scheduling five-minute “cry breaks” in their calendars during fundraising szn.

Now, let's two-step over to the Lone Star State, where the cliché of Silicon Valley's demise and Austin's rise might be facing its own reality check. For the first time, Austin's tech scene is showing signs of retreat. Techstars, the famed accelerator, is exiting Austin faster than a Northeasterner after trying the Chuy’s salsa.

Venture funding in Austin plummeted by 46% in 2023, and the city is seeing more tech talent leaving than arriving. The Texas dream of outshining Silicon Valley is starting to resemble a desert mirage, and this redistribution of talent will likely persist until venture dollars begin flowing again, beckoning founders and their teams towards the locales where the piggy banks are being cracked open.

2023 wasn’t a great year for the startup scene, and as fears over a recession continue to cast gloom on the landscape, it’s not even certain that we’ve reached the trough. Even so, great companies always seem to find a way. Whether you’re a founder working on some world-changing technology or an investor trying to find a needle in the haystack of “AI for x” companies, keep ya’ head up.

Or, down, as that' tends to be when the real work gets done.

You know what I mean.

In the words of Marc Andreesen, “software is eating the world.”

Looking to hear about the next batch of unicorns before they grow their horn?

Check out my favorite newsletter, Venture Scout, for in-depth looks at the software companies that are poised to go “napkin in lap” on the business world.

Cheers to another day,

Trey