Thread by @FintechKristen

There was a lot of talk a few weeks ago about how this hard time would sort out bad startups and destroy those that are more vitamin than painkiller.

I understand that point of view, and I agree with part of it. Contractionary cycles are an important part of strong growth.

1/

I also was stunned by ridiculous valuations and companies whose products seemed cheap copies of each other raising hundreds of millions of dollars after a few short months of existence. Almost all of which were founded by (mostly white) men.

Scooters come to mind.

2/

So now we are supposed to be slashing bubbles and pricing more closely to reality - whatever that is - and companies that were not solving real problems or had no product market fit will take their appropriate disintegration.

Some VC seem nervous. Many smell opportunity.

3/

But what I’ve seen in the last few weeks from these leaders scares me a bit. I’m worried we are going to go back in time, not forward, and we will call it efficient markets and a period of correction.

The cost will be higher than that, though.

4/

First, as others have said, I see product-market fit being conflated with pandemic-market fit. If the job is to be where the puck is going, it seems like a lot of VCs think what’s happening right now is not going to change. Not in one year or five. This seems odd to me.

5/

We can all acknowledge that this moment in time is extraordinary. And that things won’t be just like they were. But are they going to be like *this*? It seems a misunderstanding of human nature to believe that. People will socialize. Evolution is bigger than this pandemic.

6/

So funds rushing into the pockets of (mostly white male) founders right now who serve an acute need of the moment, but a niche need of the future, feels counterintuitive to me. Is this the painkiller we talked about? What’s happening here?

7/

It may not be insight of the year, but we are continuing to see how disconnected VC is to the majority’s needs.

Tens of millions need nothing more than a job and an income, but you’re focused elsewhere. On you.

(Clubhouse amplifies your privilege to deafening tones.)

8/

It’s always been a problem that VCs think of themselves as customers first and are hard to be convinced of products where they are not a target customer, but it is particularly dangerous as inequality explodes.

They decide what gets innovation dollars and focus. Scary.

9/

Second, I see some of the early stage startups being hit hard right now are those who had a social mission built into their operations.

- Accessibility
- Climate
- Diversity and inclusion
- Ethical supply chain
- Fair wages
- Underserved segments

Seen as luxuries now.

10/

Data isn’t out yet but I’ll take a guess this is not going to be a breakout year for women and POC raising funds.

Department of Labor has already rolled back affirmative action requirements for contractors.

What does this mean?

11/

Social impact will show up as a casualty in the same way fluffy, mediocre products do. Not urgent. Not what VCs call a painkiller.

The mission-oriented companies who had space to flourish in a bull market risk being decimated in the name of ruthlessly decisive business.

12/

UNLESS we check ourselves. Right now. We can recognize that not everything that is about to die deserves it. And that investing in companies that are still good for the long run is a very good business decision.

Some of those companies’ metrics may take a hit right now.

13/

But think about where we’re going. The impact of d&i, a11y, climate, and serving the underserved will be massive. Our society depends on building equality and future wealth for all.

Let’s keep funding for the future, even if the whole world seems frozen in the moment.

14/

I have high hopes that such smart people who have proven their ability to move mountains will insist we build for that world, and put their dollars towards it.

It’s time to grow up and realize that we can’t live on painkillers.

We need vitamins to truly thrive.

/end.