“It must be very tempting for the small tech companies to go on a hiring spree this year.”
In a recent YouTube video, Matthews offers a quick RevTech Roundup on “The Conundrum of Venture-Backed Tech Companies.”
He notes that there have been over 100,000 recent layoffs by big tech companies, “All of a sudden there’s a bumper crop of available talent,” Matthews says. “But on the other hand, venture funding tightened by almost 60% last year, as VCs tightened their grip on their dry powder. The current message from VCs to their portfolio companies is: ‘Preserve cash and get to profitability as quick as possible.'”
“Valuations are dropping—that’s the driver,” Matthews adds. “And no one likes down rounds, especially VCs. VCs hate them just as much as entrepreneurs because down rounds make fundraising difficult for a VC firm, and they squeeze management fees.”
“So staffing up this year comes at great peril to VC-backed companies with large burn rates. And those tech companies that have found their way to profitability will be the ones that benefit the most.”
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