Le billet of Monocle

It's the end of vacations 🌴

14 June 2022

Y Combinator (YC), the world's most prestigious start-up incubator (with Airbnb, Coinbase and Reddit on its roster) is raising the alarm with its partners:

"For those who have started their business in the last five years [...], your fundraising experience was probably not normal and future fundraising will be much more difficult.

Enough to make the start-up nation shiver.
We explain.

What's been going on for several years:

Fundraising is easy. Too easy.

Each seeming project raises plenty of millions of dollars. Then spends those dollars on its "topline", which means anything that can help grow your revenue: Instagram ads, subway exit flyers, Tiktok influencer campaign and everything else.

No need to say that the vast majority of these companies are heavily loss-making. And few have a plan to ever become profitable.

In just two years, the amount of money spent on funding start-ups has grown from $60 billion to over $150 billion. Companies raise huge amounts of money, spend them immediately, and raise huge amounts of money again, and so on.

You can understand better how Lola, 19 years old, earns 20,000€ per month by filming herself on Tiktok with a Shein swimsuit.
 
What will happen: 

The return of selectivity in finance. Finally.
Investors will ask start-ups to propose viable and profitable projects.

Enough to form a storm on the horizon, according to YC: "Many of your competitors will fail to anticipate, maintain a high spending rate and only realize they're screwed when they try to raise new funds."

The rest you have guessed: slowdown on fundraising and slowdown on marketing expenses.

Lola will have to find a real job.
Finally, inflation has its benefits.

Great week,

Pierre

Disclaimer

This presentation is a promotional document. The content of this document is communicated by and is the property of Monocle Asset Management. Monocle Asset Management is a portfolio management company approved by the Autorité des Marchés Financiers under number GP-20000040 and registered with the ORIAS as an insurance broker under number 10058146. No information contained in this document should be construed as having any contractual value. This document is produced for information purposes only. The prospects mentioned are subject to change and do not constitute a commitment or a guarantee. Access to the products and services presented here may be subject to restrictions for certain persons or countries. Tax treatment depends on individual circumstances. The fund mentioned in this document (Monocle Fund SICAV) is authorized for marketing in France and possibly in other countries where the law permits. Before making any investment, it is advisable to check whether the investor is legally entitled to subscribe to the fund. The risks, costs and recommended investment period of the funds presented are described in the KIDD (key investor information documents) and the prospectus, available free of charge from Monocle Asset Management and on the website. The KIDD must be given to the subscribers before the subscription. Past performances are not a reliable indicator of future performances. Monocle Asset Management cannot be held responsible for any decision taken or not taken on the basis of information contained in this document, nor for the use that could be made by a third party. The investor may lose all or part of the amount of capital invested, as the funds are not capital guaranteed.

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