Speaker 1: But Jess Wild markets are still open. Here, we're going
Speaker 1: to have a great talk with Marlee's Van Romberg, editor
Speaker 1: and chief at crunch Base. She's joining us on zoom
Speaker 1: from San Francisco to talk all things tech and an
Speaker 1: outlook from crunch Base for the second half of the year.
Speaker 1: Marlee's thanks so much for getting on a call with
Speaker 1: us on this half holiday. Here. You have a report
Speaker 1: that your organization did on the outlook for twenty twenty
Speaker 1: three that I found so interesting. One of the results
Speaker 1: saying that companies only have six months of runway left
Speaker 1: in the bank. That's according to almost a third of
Speaker 1: your company respondents there. What are the other big standout
Speaker 1: data points for you when it comes to that midyear
Speaker 1: report from crunch Base.
Speaker 2: Yue, good morning, Thank you for having me so. Yes,
Speaker 2: we actually just published we do a quarterly reader survey.
Speaker 2: So these are mostly obviously people in tech and venture
Speaker 2: capital who are taking that survey and sort of telling
Speaker 2: us that they're thinking. And some of the things that
Speaker 2: we've been tracking since the beginning of the year is,
Speaker 2: as you mentioned, runway. That's a big hot topic right
Speaker 2: now is how much money do startups have before they
Speaker 2: start running out of cash. And what I thought was
Speaker 2: really interesting this time around was, as you mentioned, about
Speaker 2: a third of respondents who answered that question said that
Speaker 2: they actually have less than six months of runway, which
Speaker 2: is definitely, you know, sort of red alarm status for
Speaker 2: your company, particularly given that venture funding is very difficult
Speaker 2: to come by, so you know, that's really an emergency
Speaker 2: situation for those companies. What was also interesting is that
Speaker 2: it seems to be kind of a barbell, about the
Speaker 2: same percentage who answered the question said they have more
Speaker 2: than twenty four months of runway. So it seems like
Speaker 2: there's almost these two classes of companies that are emerging
Speaker 2: right now. Those that are doing pretty well on managing
Speaker 2: their cash and can probably you know, kind of survive
Speaker 2: the current environment if if nothing else big kind of
Speaker 2: comes along. And then there are those that are really
Speaker 2: in a difficult situation right now. And I think that
Speaker 2: might be where we start to see uh more mergers
Speaker 2: and acquisitions. It's something we've sort of been anticipating in
Speaker 2: the startup world for a while and haven't quite seen
Speaker 2: that come along. But there were actually quite a few
Speaker 2: larger deals announced last week, including the Big Data Breaks
Speaker 2: purchase of another venture back startup, so you know, we
Speaker 2: might start to see some of those trends emerge.
Speaker 3: Now, what's been the catalyst for why there's been a
Speaker 3: divergence between those that are still doing well and then
Speaker 3: you have on the opposite side of that those that
Speaker 3: are struggling to get that funding?
Speaker 2: You know, I think I think there are a lot
Speaker 2: of factors at play. In general, funding is hard to
Speaker 2: come by for all companies right now, with you know,
Speaker 2: some obvious exceptions like AI. Investors are very very interested
Speaker 2: in what's going on. Then, you know, I think when
Speaker 2: money was easy to come by, a lot of startups
Speaker 2: dig over higher. And that's why we're seeing a lot
Speaker 2: of layoffs in the sector right now, as you know,
Speaker 2: some of those corrections are being made. I think, you know,
Speaker 2: some companies were really kind of trying to grab as
Speaker 2: much market share as they could when when things were hot,
Speaker 2: and as the market slowing down now, you know, maybe
Speaker 2: didn't manage the cash they had as well as they
Speaker 2: could have.
Speaker 3: How much of this could be repercussions to what happened
Speaker 3: with SVB and some of these other banks that we
Speaker 3: saw earlier in the spring.
Speaker 2: Yeah, I think we you know, really can't overstate the
Speaker 2: impact that the collapse of the SDB had on this sector.
Speaker 2: You know, partly it was really an impact to the
Speaker 2: confidence in venture backed startups, but you know, it's also
Speaker 2: just SVB was was by far the largest source of
Speaker 2: venture debt for a lot of startups, So that's something
Speaker 2: that's become even harder to come by and for a
Speaker 2: lot of companies as venture funding became more difficult, venture
Speaker 2: debt was was sort of a plan B, so that's
Speaker 2: become more difficult as well. Well.
Speaker 1: Even though that space has been a challenge, AI is
Speaker 1: certainly alive and well here when it comes to funding
Speaker 1: for these AI firms, what are you hearing people look
Speaker 1: at and question when sussing out which firms to invest in.
Speaker 1: I think about the difference between the guests that we
Speaker 1: have on who talk about betting on a C three
Speaker 1: AI versus you know, a qual Calm or an Intel
Speaker 1: some of these names that are AI adjacent but a
Speaker 1: little bit more stable. What are you hearing when it
Speaker 1: comes to that decision making.
Speaker 2: Yeah, you know, obviously there's a lot of interest and
Speaker 2: hype kind of around generative AI, but what we're also
Speaker 2: seeing is investors are really interested in more of those
Speaker 2: kind of infrastructure companies that are going to be powering
Speaker 2: a lot of what's going on in AI that are
Speaker 2: sort of you know, adjacent or tangential to the core
Speaker 2: AI companies. There's a lot of interest in that. I
Speaker 2: think one investor who spoke with us kind of, you know,
Speaker 2: described it as looking for the nuts and bolts that
Speaker 2: are going to be powering the AI revolution. There's a
Speaker 2: lot of money going into that as well, you know.
Speaker 2: I think, as with anything startup or venture capital, we
Speaker 2: are also seeing a lot of companies that are sort
Speaker 2: of just grabbing the AI label and sort of trying
Speaker 2: to affiliate themselves with that. And I think with time
Speaker 2: we'll sort of see a bit of a sorting there
Speaker 2: of what's real and what's not.
Speaker 3: We only have about a minute left, but what's next
Speaker 3: that you're keeping your focus on on your radar as
Speaker 3: far as what the trajectory could be. When we're talking
Speaker 3: about these companies that are going through angel investment or
Speaker 3: these seed funding grounds, you.
Speaker 2: Know, I think seed funding at the beginning of this
Speaker 2: venture downturn had held out fairly well, and that's not surprising.
Speaker 2: It was really the late stage startups that were the
Speaker 2: most impacted, but we are starting to see that downturn
Speaker 2: trickle down through to the earliest stages, and that's, frankly,
Speaker 2: that's worrisome because that's you know, the next class of
Speaker 2: companies that are going to be unicorns, you know, five
Speaker 2: ten years down the road. And so I think we
Speaker 2: will see this decline really kind of extend for quite
Speaker 2: some time, with exceptions around some of these sectors that
Speaker 2: really get a lot of funding, but right now we're
Speaker 2: seeing venture funding down across all stages of funding.
Speaker 1: All right, MARLEEZ, thank you so much for joining us
Speaker 1: to talk about your outlook and some of the picture
Speaker 1: when it comes to funding for startups in San Francisco
Speaker 1: and more broadly in the tech space. Really appreciate it.
Speaker 1: That was Marlee's Van Romberg. She is editor in chief
Speaker 1: of crunch Base.