Zebeth Media Solutions

economic downturn

3 investors explain how finance-focused proptech startups can survive the downturn • ZebethMedia

In the early days of the COVID-19 pandemic, interest rates for mortgages dropped to historic lows. Predictably, home buyers made hay, taking full advantage of the favorable financial environment to pick up new homes and refinancing mortgages on their existing homes. Startups operating in the financial side of the real estate tech market suddenly faced a surge in demand, and many departed on hiring sprees to keep up. But as those interest rates, housing prices and inflation began to climb back up, demand slowed dramatically. This meant that the once high-flying startups were suddenly dealing with the opposite problem — too many employees and not enough transactions to make money. Layoffs became widespread. Shutdowns were a thing again. As interest rates soared even higher, the once frothy market morphed into an environment where only the fittest could survive. We’re widening our lens, looking for more investors to participate in ZebethMedia surveys, where we poll top professionals about challenges in their industry. If you’re an investor and would like to participate in future surveys, fill out this form. To get a sense of how investors who have backed proptech startups with a financial focus are dealing with the market shift, we reached out to three active investors. The trio shared their thoughts on everything from what types of startups in the home buying and lending space have the best shot at survival to the advice they are giving startups in their portfolios. Pete Flint, general partner of NFX, noted that the chances of survival are higher for proptech startups that let consumers fractionally invest in properties and increase access for those seeking a rent-to-own approach. “The best thing founders can do during a downturn is move quickly and efficiently, and evolve their offering to match the new needs of the market. This will help them capture more market share, which will give them the highest chance of survival,” he said. Nima Wedlake, principal at Thomvest Ventures, agreed, noting that agility is a critical trait. “Startups that survive this period will adapt their product offerings to meet the needs of today’s homeowners and buyers,” he said. In such a climate, companies that help others navigate tough times seem to be in special demand. “Companies that sell software that enables cost-cutting or additional lead-generation opportunities are seeing accelerating adoption as incumbent mortgage companies realize they need an edge to drive demand,” Zach Aarons, co-founder and general partner of MetaProp, pointed out. “If a startup can prove its users see significant savings, then they shouldn’t have a hard time being successful in this market,” he said. We spoke with: Editor’s note: For a more complete picture, we’re examining the proptech sector from three different angles. This survey covers proptech startups with a financial focus, and we’ll soon publish a survey that looks at upcoming tech in the space, and another that examines the environmental impact of proptech and what startups are doing to minimize their footprint. Pete Flint, general partner, NFX Startups doing anything related to home buying or lending have struggled this year. Which types of startups operating in the home buying/lending space do you think have the highest chances of survival? Resilient proptech companies have to be able to navigate the cyclicality of the industry. It is embedded in the category, and with the long housing and tech boom, many founders have underestimated this. In my view, it is less about the “type” of startup that is more likely to survive now and more about what the startups do to respond to this moment. The best thing founders can do during a downturn is move quickly and efficiently, and evolve their offering to match the new needs of the market. This will help them capture more market share, which will give them the highest chance of survival. The verticals that we think will be more resilient during this economy are:

Read this before you reprice your SaaS product because of the downturn • ZebethMedia

Torben Friehe Contributor Torben Friehe is CEO and co-founder of Wingback. No matter the circumstances, SasS pricing is always challenging and always will be. Underpricing your product, using a pricing model that is not working for your ICP, not offering self-signup or offering the wrong features as add-ons — all of these pricing and packaging issues (and many more) can cost you a lot of revenue. But the economic downturn has added another element to the mix. Common wisdom tells SaaS founders to adapt their pricing according to changing market conditions, but is that actually helpful advice for SaaS founders? As far as I can see, it isn’t for most. Undeniably, the economic downturn will change buying behaviors and decision-making processes for some of your potential customers. But it’s wrong to assume that this means you are overcharging for your product in the current market. In reality, most budget cuts right now, unfortunately, are the big ticket items (staff). SaaS is comparably just a drop in the bucket. However, that doesn’t mean SaaS is totally safe either. Companies are looking to trim the fat on their teams, often reconsidering entire workflows, and weighing which software can help fill in the gaps. This is especially true of low-code/no-code products where customers can make do with fewer pricey engineering resources. In this sense, SaaS products are just as much a part of the equation. Thinking through a pricing and packaging change right now can help you flourish when things are better again. When you see your numbers not picking up (or maybe plummet) it can get very tempting to frantically start changing your pricing, offer discounts or second-guess your strategies. But before you embark on a price-slashing journey, do some careful analysis. If your sales numbers are lagging behind what you expected, there is another question to ask: What’s actually wrong with your SaaS product or its pricing? It’s important to make a distinction here. Does the real problem lie in how you’ve valued (priced) your product? Is it the market’s impact on your product’s demand? Or is there a problem with the product itself? Each of these are entirely different diagnoses with different prescriptions. If the problem is how you’ve valued your product

Deliveroo confirms Dutch exit next month • ZebethMedia

Deliveroo has confirmed it’s exiting the Netherlands following an announcement this summer that it was consulting on pulling out of the market. In a statement today, the on-demand delivery app said its consultation had concluded that achieving and sustaining a top-tier market position in the market would require “a disproportionate level of investment with highly uncertain long-term potential returns” — with Deliveroo reiterating that the market represented just 1% of its gross transaction value (GTV) in the first half of this year. “The decision to end operations in the Netherlands reflects the company’s disciplined focus on continuing to maximise returns on investment of resources while meeting existing profitability targets against a challenging economic backdrop,” it said, making a reference to the downturn that’s been driving losses for on-demand delivery players. The decision to terminate operations in the Netherlands does not impact previously communicated full year guidance on Group annual GTV growth and gross profit margin, it added. Deliveroo’s final operating day of service in the Netherlands will be November 30. It also said compensation packages were agreed with employees and riders during the consultation. Commenting in a statement, Eric French, its chief business officer for its international unit, added: “We want to thank all the riders and restaurant partners who have worked with Deliveroo in the Netherlands, as well as our customers. The company is proud to have partnered with some of the Netherland’s best restaurants, grocers and riders. We are grateful to our employees for their commitment to the company and all they have done. We also thank the many riders who chose to work with us for their hard work and we are pleased to have agreed appropriate compensation packages for them as well as our employees.” As it exits the Netherlands, Deliveroo’s operational footprint will be trimmed back to ten markets — with service remaining in Australia, Belgium, France, Hong Kong, Italy, Ireland, the Netherlands, Singapore, United Arab Emirates, Kuwait and the U.K. Dutch app users in larger cities like Amsterdam have a number of rival options for ordering a hot meal or speedy groceries via their smartphone — from on-demand delivery players like UberEats, Gorillas and Flink — although, with the quick commerce space also weathering tough times, further near-term service flux can’t be ruled out.

Layoffs and H1-B visas, SaaS growth levers, blockchain startup tips • ZebethMedia

For cash-strapped SaaS startups trying to reach scale, the math doesn’t look great. A slump in the public markets has dragged the entire sector down, but customer acquisition isn’t getting any cheaper. In the meantime, runways are shrinking like a wool sweater in an electric dryer, and teams that hope to fundraise better have some good news to show potential investors. So, what’s the plan? “The key is to focus on scaling sustainably by tapping into more overlooked and underrated sources of revenue,” says Paddle CEO Christian Owens. Full ZebethMedia+ articles are only available to membersUse discount code TCPLUSROUNDUP to save 20% off a one- or two-year subscription In his TC+ guest post, Owens shares several tactics “SaaS leaders can use to supercharge their expansion revenue,” such as adding upsell tiers and charging customers for priority support. Just for a moment, forget about onboarding new customers. Seed-stage startups that demonstrate strong gains in expansion revenue, i.e., money “generated after the customer’s initial purchase,” will always get a second look from investors. And boosting expansion revenue during a downturn? Well, that’s even more impressive. I won’t be sending a TC+ newsletter on Tuesday, October 18, but will return a week from today with more resources for founders and early recaps from ZebethMedia Disrupt. Thanks very much for reading, Walter ThompsonEditorial Manager, ZebethMedia+@yourprotagonist Dear Sophie: How can I protect my H-1B and green card if I am laid off? Image Credits: Bryce Durbin/ZebethMedia Dear Sophie, I am considering leaving my current, steady job for a job with a big name in tech. I’m excited, but nervous. I’ve been hearing that you can lose your H-1B status if you are laid off. Is there any way I can protect my immigration status while making a bold job move? — Leap of Faith Dear Sophie, My early stage startup hasn’t been able to hire as quickly as I would like due to fierce competition. Now that we’re seeing some movement in the job market, we think we can probably finally compete for some top engineering talent in our budget. How can I hire people who were recently laid off on H-1B? — Strategic Sponsor DIY: 5 ways disruptive component startups can win over OEMs Image Credits: Alan Rubio (opens in a new window) / Getty Images Hardware startup founders have a uniquely hard time. Only a small fraction of tech investors will even take meetings with them, and building product pipelines is often an irregular, chaotic process. Instead of relying on sales and marketing teams to build a customer base for his hardware components startup, Ori Mor’s company started building devices that used his company’s tech. “There’s no point rushing when building a hardware startup,” says Mor. “Instead, start by making just a single prototype that you can use to show OEMs.” ‘Me too’ investing is eating returns Image Credits: Catherine Falls Commercial (opens in a new window) / Getty Images Considering the number of investors who are all-in on e-commerce, fintech, cybersecurity, cloud infrastructure, crypto and B2B SaaS, a room full of VCs might look like a crowd of Spider-Man clones pointing at each other. “Marc Andreessen once said that ‘software is eating the world,’” writes Alan Feld, founder and managing partner of Vintage Investment Partners. “Unfortunately, ‘me-too’ investing is eating returns,” he says, suggesting that investors get out of their rut and explore “four relatively underfunded areas that could produce huge winners over the next 10 years.” How to go from popular to profitable during a downturn Image Credits: Patrik Giardino (opens in a new window) / Getty Images Product-led growth startups are like a car with a manual transmission that needs a push to get going: one driver just can’t do it all on their own. According to Nick Mills, whose sales experience includes stints at Stripe, Facebook and CircleCI, “all companies eventually face a similar challenge: To keep growing, sales teams must be hired and a pipeline must be built.” After explaining how to calculate your serviceable addressable market, AKA “the piece of that pie you can win right now,” Mills shows how to define product-qualified leads that will get sales engines firing on all cylinders. “Telling investors about your viral user growth is no longer enough,” says Mills. “They want to know how it translates to revenue, resilience and runway.” ZebethMedia Disrupt 2022: Taking the BS out of your TAM Every founder must understand the sector in which they intend to compete, but calculating Total Addressable Market (TAM) is a daunting process, especially for first-timers. In reality, TAM just is a planning tool that gives potential investors a better understanding of a company’s upside potential. Next Wednesday, at ZebethMedia Disrupt in San Francisco, I’m moderating a discussion with three investors to find out how they approach TAM and what they’re looking for during a pitch: Kara Nortman, managing partner, Upfront Ventures Aydin Senkut, founder and managing partner, Felicis Ventures Deena Shakir, partner, Lux Capital I’ll ask them to share tactics and strategies for finding TAM, how to calculate it for new products and services, and the red flags they see most often from novice entrepreneurs. Make sure to bring warm layers if you’re visiting SF for Disrupt — if you can’t make it, please join us online. 6 tips for launching a blockchain startup Image Credits: Kinga Krzeminska (opens in a new window) It will take much more than a downturn in the public markets, record inflation and global instability to get between blockchain founders and their dreams. Unfortunately, “having a solid roadmap, real-world use cases and a war chest are only a small part of a blockchain startup’s survival strategy,” advises Wolfgang Rückerl, co-founder and CEO of Istari Vision and Entity. Although it’s true that many of the skills required to launch an early stage startup also apply to web3 companies, “the road to achieving success in the blockchain industry is paved differently,” he writes.

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