Thread by @fintechjunkie

2022 was more of a body blow than a knockout punch to #Founders and #VCs.

Most Founders will stagger to their feet and strategize with their Investors.

So while the next 12 months will feel like 12 more rounds, it’s a fight that can be won.

8 predictions for 2023: 🧵👇

2023 Prediction #1: Many important macros will stabilize

“You have to learn the rules of the game and then you have to play better than anyone else.” – Albert Einstein

Uncertainty freezes markets. Certainty liberates them.

It’s highly likely that we’ll see the end to rate increases by mid-2023.

It’s highly likely that the drivers of inflation will flatten and/or start to improve by mid-2023.

It’s highly likely that housing prices will settle into a new norm by mid-2023.

Right now consumers’ perceptions of inflation exceed the rate of inflation itself and businesses don’t know how to respond.

But once the new rules of the game are understood, businesses can adjust their models and consumers can re-optimize their lives accordingly.

2023 Prediction #2: Staging ambition will become the new norm

“Being realistic encompasses the negative, but it by no means excludes the positive.” – T.K. Coleman

The fundamentals of how to fund, build and scale startups efficiently will be relearned in 2023.

Great businesses need to be built on top of foundationally good businesses.

Going directly from “zero” to “great” is a fantasy standard that 2023 is going to stomp out of the belief system of Founders and Investors.

Discipline will be rewarded in this new world.

2023 Prediction #3: More regulation is coming

“Only two things in life are infinite – the universe and human stupidity – and I’m not certain about the former.” – Albert Einstein

Regulation ALWAYS follows complaints and damages, both of which are in high supply right now.

Regulation is the imposition of rules and penalties that are intended to modify the behavior of individuals and firms in the private sector.

If people can’t protect themselves then Regulators will. And with the recent meltdowns in crypto, it’s an obvious place for them to start.

One shouldn’t underestimate the power and momentum good regulation can unlock.

Unfortunately the opposite is also true.

One shouldn’t underestimate the friction that bad regulation can impose.

Prediction: Incremental Regulation in 2023 will be net positive.

2023 Prediction #4: Investors will be allergic to bargains

“Don’t bargain shop for parachutes or plastic surgery” - Anon

Investors will be very open to investing in great startups but price won’t turn a “no” into a “yes” for an average startup.

“Team and TAM” investing will retreat to the pre-seed stage.

Positive progress will govern the availability of downstream capital.

Darwin has returned from vacation and he only likes the good things in life.

And if Darwin doesn’t like you extinction might be around the corner.

The startup ecosystem has years of catch-up work to do flushing out marginal business models and teams that were propped up by undisciplined Investors.

2023 will without a doubt be the year that capital dries up for these businesses and natural selection starts working again.

2023 Prediction #5: Buyers aren’t interested in liabilities

“An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket.” – Robert Kiyosaki

Buyers are going to value the results of today more than the promise of tomorrow.

2023 is going to be a tough year for startups that can’t attract capital if they’re burning cash.

Sales processes will rarely result in a great outcome. Most will end up being fire sales, acqui-hires or no-bids.

It’s a tall order for tech and team to justify owning a liability.

2023 Prediction #6: Layoffs will fuel innovation

“When you have a large amount of the workforce being laid off, some of them have no other choice but to go out there and invent something.” – Daymond John

Startups that need to cut are cutting now. Cutting later is too late.

For most startups the downstream impact of layoffs will be positive.

They’ll be leaner, move faster and make better choices.

Money will last longer. The learnings per dollar deployed will be greater. The companies being built will just be better.

Layoffs typically come from the “experienced middle ranks” because “doers” are necessary and Executives rarely fire themselves.

This could kick start a new cycle of innovation because many in the “experienced middle ranks” will use this opportunity to become Founders themselves.

2023 Prediction #7: What’s old will be new and what’s tried will be true

“You may have lost your way more than a little bit, but I believe you can find your way back. That’s the trick. Finding your way back.” – Elanor Brown

2023 will be a grand reset to known norms.

Valuation multiples will collapse to reasonable levels.

Blitzscaling will be replaced by smart scaling.

Round sizes will shrink as startups re-learn the power of capital efficiency.

Startups will have to materially de-risk between rounds to attract capital.

Fundraises will no longer feel like shotgun weddings and instead will return to mutual dating exercises.

LPs will have less capital to allocate to the VC asset class which will hurt new managers and underperforming established funds.

Liquidity for employees and early investors will be hard to come by until a startup is fully de-risked and on a glide path to profitability.

Controls, governance and reporting will once again become important to Investors and in many cases will be non-negotiable.

2023 Prediction #8: Geographic boundaries have been smashed for good

“If you don’t get out of the box you’ve been raised in, you won’t understand how much bigger the world is.” – Angelina Jolie

Talent, capital and ideas are the fuel of startups and all can be sourced globally.

Until recently, most VC backed startups were HQed in specific cities that were known “talent hubs”.

And until recently, most Investors preferred investing in startups they could touch regularly which meant they also HQed themselves around these “talent hubs”.

The combination meant that a handful of cities in a few countries dominated the rest of the world.

But the past few years untethered the sourcing and management of talent from geographic limitations.

Borderless Ideas + Borderless Talent = Global Opportunities.

TL;DR: While it’s true that the the current environment has turned everything upside down, it’s also true that when we get to the other side it will almost certainly be better than the side we've been on for the past few years.

I for one am looking forward to it!

And if you’d care to like and share (🙏), here’s a link to the first Tweet in the thread:

https://twitter.com/fintechjunkie/status/1602723757587828736?s=20&t=3OGcOGognP81gQgxM3ejOA