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Failure is complex, especially in the world of startups – TechCrunch


Welcome to Startups Weekly, a fresh human-first take on this week’s startup news and trends. To get this in your inbox, subscribe here.

As I hear about more startups struggling amid shifting market conditions, the great resignation and the general inflection point that begins once a company hits growth stage, it’s worth addressing an elephant in the room that comes around often in the tech versus media debate. How do we cover failure?

There’s the argument that startup tensions are inevitable and common, so should we spotlight every time something bubbles to the surface, especially at the cost of an underrepresented founder who may just be doing their best? There’s an argument that the business is messy, so we should report on the issues as we hear about them; and there’s the narrative of the female takedown story, in which people believe that women are targeted by the press more than men due to unreasonably high standards.

The tech world has preconceived notions of how a historically overlooked individual should act, and I use that reality to influence my reporting. For example, I once remember asking a prominent female founder about a drama that I was hearing about from her ex-co-founder. She essentially said, “It’s not that I don’t want to tell you, it’s that I can’t afford to show vulnerability at this point in my career.” It was a key moment that highlighted why certain people are able to speak up and why certain aren’t empowered in the first place.

My opinion here is that you can believe that any powerful founder, especially those with millions of dollars at their disposal, should be held accountable for the company they create — but you can also believe that tips from sources can sometimes be inherently biased. Rigorous vetting — from deciding what a former employee’s incentives are to understanding who can afford to comment — matters.

If we track a startup’s upward trajectory, we should track them falling apart. But framing matters, contextualizing matters. If a founder lies to consumers or harasses employees, it’s pretty clear how to identify the individual as the source of the issues; but how we cover it is important. Failure is complex, and it’s hard to attribute failure to a certain moment.

Sometimes a startup falls apart because the founder leads a shitty culture, but sometimes venture capital’s incentives can lead to a messy product spree. Who is to blame in this case? The founder for taking money, or VCs for too much pressure? Or the ever-fickle market? We talk about startup failure in a macro sense, but when we do write a window into a specific example, the nuance is important. Diverse newsrooms and patient editors are key to making sure we’re asking the right questions, and not falling subject to tired tropes. It’s also key that founders treat their staff like humans.

In the rest of this newsletter, we’ll talk about All Raise’s new CEO, funds to back other funds and Ukraine. As always, you can support me by sharing this newsletter, following me on Twitter or subscribing to my personal blog.

Fintech and Ukraine

The startup story within the war in Ukraine continues to evolve, with companies in the financial services sector having an especially crucial role and set of decisions to make. This past week, PayPal expanded services to allow users to send money to Ukrainians, Ukraine’s president signed a law to legalize crypto amid a slew of digital donations and data showed that nearly 7,000 apps have left Russia’s app store since it invaded Ukraine. Some big tech apps remain.

Here’s why this is important: I mean, it’s pretty self-explanatory. Our own Romaine Dillet interviewed Mykhailo Fedorov, Ukraine’s vice prime minister and minister of Digital Transformation, about different ways technology is moving during wartime. One key part of the interview was when Fedorov talked about Ukraine’s tech strategy, otherwise known as a digital blockade:

We call this project digital blockade. And we believe that this is a very crucial component to winning this war. And I think that, in the future, governments will resemble tech companies, not classical governments.

Digital platforms provide some vital services. They have become so embedded into the fabric of society. Once you start removing these services from the aggressor, one by one, you actually damage their fabric of society and you make it very uncomfortable for them to go along with their daily lives.

We’d like to think of this as a completely new and unexplored battlefield. And this is a complementary measure to sanctions which we expect is going to push the development of Russia back decades.

Other coverage about tech and Ukraine:

Image Credits: Anna Fedorenko (opens in a new window) / Getty Images

Deal of the week

All Raise, a nonprofit that focuses on increasing diversity within venture capital deals and decision makers, has named Mandela Schumacher-Hodge Dixon as the new chief executive of the company. Dixon has spent more than 10 years working to increase representation in the startup world. Prior to All Raise, Dixon was running Founder Gym, an online training center for underrepresented founders that ran 18 cohorts across six continents. A few weeks ago, Dixon announced that Founder Gym’s current cohort will be its last graduating class, as it’s shutting down.

Here’s why it’s important: Even though All Raise is a nonprofit born specifically to increase representation in tech, Dixon wants to bring a new level of inclusivity to the organization’s mission. Dixon was one of the first Black women in Silicon Valley to raise venture capital and to work at a venture capital firm, she says. The entrepreneur also had two children during the pandemic, which she says added another “expansion” of who she has evolved to as a leader.

“I also live these experiences of exclusion bias whether unconscious or conscious — being an only, being one of a few,” Dixon told me in an interview this week. “I understand it because I have been very intentional about wanting to understand it. For All Raise, you can absolutely expect that to carry through in my leadership as we make sure that what we are capturing who we are supporting is really a more inclusive space for a realm of identities.”

Honorable mentions:

Image Credits: All Raise

Everyone is going to launch a fund to back other funds

I wrote a piece this week about the surge of funds created explicitly to put money into other funds. As we talked about on Equity this week, investors are broadening how they invest in money, whether that is backing other emerging fund managers or finally giving Series B rounds the attention they deserve.

Here’s why it’s important: The startup financing market is changing on a daily basis, which means that we’ll see investors continue to innovate at a similar clip. New data from Carta shows that shifts aren’t hypothetical, they’re happening and impacting U.S. Series A, B and C valuations.

As Alex gets to in his piece, from November and December 2021 to January and February 2022, Series A rounds posted the largest average decline in round size in the United States. Still, he continues, “Series A rounds on both a median and average basis in the starting months of 2022 remain over the $10 million mark. Slowdown or not, the market is still hot.”

Looking at valuations, Series C is a sharper example. Alex reports that “average valuations for Series C investments in the United States startup market fell sharply at the start of 2022, with median valuations also taking a firm whack. From a near-unicorn average valuation of $884 million, the average Series C in the first two months of the year was valued at a far lower $467 million. That’s a huge change, one that backs up our general grousing about the changing public markets and how those price shifts should impact startup valuations, especially among companies that are on a clear path toward an exit.”

Funds want funds want funds:

Different colored wires coming together to create a ball in mid air on white background

Image Credits: PM Images (opens in a new window) / Getty Images

Across the week

We get to hang out in person! Soon! Techcrunch Early Stage 2022 is April 14, aka right around the corner, and it’s in San Francisco. Join us for a one-day founder summit featuring GV’s Terri Burns, Greylock’s Glen Evans and Felicis’ Aydin Senkut. The TC team has been fiending to get back in person, so don’t be surprised if panels are a little spicier than usual.

Here’s the full agenda, and grab your launch tickets here.

Also, if you missed last week’s Startups Weekly, we continued the conversation with Equity this week, asking: “Can Tiger’s second act live up to its first?”

Seen on TC

Why aren’t VCs funding more startups focused on menopause?

Casey Neistat’s David Dobrik documentary explores what happens when creators cross the line

What Shift’s acquisition of Fair says about the online used car market

Bored Apes NFT project gets official ‘ApeCoin’ token

Amazon completes $8.5 billion acquisition of MGM

Seen on TC+

Dear Sophie: Is there an easier route to L-1As and STEM O-1As?

When raising at a 40x multiple makes sense

How to hire great engineers when you don’t have any technical expertise

Tortoise co-founder Dmitry Shevelenko: ‘You can’t do too many things at the same time’

Until next time,

N





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