Alright, startups: The coast is clear. Well, almost.
Tom Loverro, general partner at IVP, says now’s the time for startups to act. Whether the market bottoms out in six months or tomorrow is irrelevant.
The point is, things won’t get much worse. For founders, it means time to “land grab and beat your competition.”
Loverro, known for his knack for predictions, invested in giants like Coinbase, Datadog, and HashiCorp. In January 2023, he foresaw a “mass extinction event” for startups.
Data backs him up: In 2023, around 3,000 startups shut down globally, according to PitchBook, with Carta estimating 467 closures in 2022 alone.
If “mass extinction” brings to mind dinosaurs and asteroids, we’ve now moved to the recovery phase. Lovers calls this the “Great Reawakening.”
Founders need to shift from defense to a “reasonably aggressive” stance to leverage new opportunities.
“We’re in this time that’s kind of not a boom and not a bust,” Loverro recently posted.
“We have to get out of our Stockholm Syndrome, and get back to thinking: ‘Hey, maybe it’s okay if my startup burns a little more money.’ On average, now I have to convince other directors: ‘You know what? Let’s be a little aggressive again.’ There’s still some fear around the table.”
Loverro’s advice for CEOs: Set performance-based budgets, innovate with AI, and quickly double down on what’s working while discarding what isn’t.
Loverro’s perspective resonates because it taps into human nature. You touch a hot stove, you get burned, and you hesitate. Building startups is inherently painful, sometimes requiring one to defy this instinct.
He cites Podium, a small business software firm, as an example. Podium cut costs and reduced its sales team but is now growing again.
Podium CEO Eric Rea agrees. “I totally agree, I think everybody’s once bitten, twice shy,” said Rea. “So, it feels weird to go back and say: ‘Hey, we’re going to take a big risk, and we’re going to invest in this thing that’s new.’ That didn’t pan out for a lot of companies in 2021, and I say that as someone who’s done it, who’s touched the stove.”
The AI boom tests startups’ ability to balance caution with boldness. Some see AI investments as setting up for another failure. Loverro, however, views this cycle as a feature, not a bug, of the venture industry.
“The venture narrative is the boom and the bustling—the dotcom era to the dotbomb era, great crashes, extinction events,” said Loverro.
“Somebody will say: ‘But AI is crazy expensive, you VCs still don’t have a clue. Did you learn any lessons?’ And I’ll say: ‘Name a year where there wasn’t some obsession.’ That’s part of the cycle, where we have something we’re obsessed with. That’s actually normal for venture capital.”
If Loverro is right, it’s time to reach for the stove again—hopefully with oven mitts this time.
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