Raising the right amount of capital after a correction

Welcome to TechCrunch+ Tuesday

If you want to launch a startup in the middle of a downturn, don’t be spooked.

Not only is it easier to hire during a correction, founders are under less pressure to deploy blitzscaling tactics that can mask underlying problems in product and marketing.

Investors are dialing back sky-high growth expectations for seed-stage startups, which gives founders more freedom to develop customer relationships and customer acquisition strategies.

According to Andy Stinnes, general partner at Cloud Apps Capital Partners, the current “valuation reset” isn’t a crisis — it’s an opportunity for early-stage founders.

Right now, Stinnes says VC firms are prioritizing “the high-growth B- and C-stage companies that raised substantial cash and operate at high burn rates.”

But for companies in the $4 million-$5 million ARR range, a $15 million Series A might still make sense, he writes.

“Conversely, if you raise a $4 million-$6 million Series A at a more modest valuation, it gets much easier to reach the goal for a 2x-2.5x valuation step up to the Series B.”

Ignore the gloomy headlines; a founder’s goal should be building something that lasts, not reading about your Series A announcement in TechCrunch.

Thanks very much for reading,

Walter Thompson
Senior Editor, TechCrunch+
@yourprotagonist

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Twitter Space: "How to Pitch Me," with Mayfield Partners' Arvind Gupta

This afternoon at 2:30 PT/5:30 ET, I’m hosting a Twitter Space with Mayfield Partner Arvind Gupta to discuss pitch strategies and techniques for early-stage founders.

More than just a discussion of basic best practices, we’ll also talk about some of the most common mistakes first-time founders make, and how investors prefer to be approached these days.

Even if you’re not starting up at the moment, this chat will be a great opportunity to pick up some useful information. I hope you’ll join the conversation!

To get a reminder, click here.

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4 critical relationships that will help your startup succeed

Every founder understands the importance of getting closer to investors and mentors, but that’s not the whole story.

Reaching out to people “who truly need what you’re offering but are unhappy with your product” will uncover actionable feedback, says TMV Partner Darshan Somashekar.

To better understand how your products and services fit into the marketplace, he recommends forging relationships with computer science department heads, bootcamp directors, Twitter’s tech community, and finally, your nearest competitors.

“I believe in building a relationship with my rivals,” Somashekar says.

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International startups shrug off US insurtech meltdown

Insurtech has had a rocky time lately. Publicly-traded companies have been hammered, and early-stage startups are seeing their valuations decline accordingly.

But as a whole, the pace of investments in the sector isn’t falling behind, as highlighted recently by the number of insurtech startups in emerging markets in YC’s W22 batch, wrote Alex Wilhelm and Anna Heim in The Exchange.

“This also explains why startups hoping to write their own policies shouldn’t be dismissed too quickly after all — if they are focusing on emerging markets and improving access to insurance.”

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3 things you can do right now to support Ukraine’s IT sector

Since Russia invaded Ukraine on February 24, many startups based in the war zone have found ways to continue operating.

Emmy Gengler, CEO of Softjourn, which has offices in California, Poland and Ukraine, identified three ways the international community can help sustain Ukraine’s technology ecosystem:

• Continue looking to Ukraine for your IT and tech needs
• Purchase or license Ukrainian products and services
• Amplify awareness of Ukraine’s vital tech sector

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Better.com teaches us how not to downsize a company

In the last few months, digital mortgage lender Better.com conducted two mass layoffs: In December 2021, CEO and co-founder Vishal Garg laid off approximately 900 employees, just one day after they were informed that Better.com had $1 billion on its balance sheet.

Soon after, Garg said many of the separated workers had been so unproductive, they were “stealing” from customers and co-workers.

Last month, 3,000 of the remaining 8,000 employees were laid off, with many learning the news only after finding unexpected severance checks.

“This is an example to all companies of what not to do,” Lisa Calick, director of HR advisory services at Wiss & Company, told Mary Ann Azevedo.

“Communication around involuntary terminations should always be handled with tact, respect and consideration for the affected individuals.”

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Q1 crypto losses spike 695% on year following massive hacks

The total value of cryptocurrencies reached nearly $2.3 trillion last year, but as that total soared, so did interest from malign actors looking to exploit bugs, poor code and social engineering hacks.

The web3 ecosystem “lost” $1.23 billion to exploits in just the first quarter of 2022, a nearly eight-fold increase compared to a year earlier, and that number is likely to continue increasing as the space expands, reports Jacquelyn Melinek.

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