• Y-Combinator (YC), a US venture capital fund, is expecting even more economic turmoil in 2023.
• YC advises project leaders to revert to “survival” mode as fundraising could be challenging in the next few months.
• YC suggests that the best move forward is to plan for the worst and to cut costs, anticipating that the upcoming economic downturn could be worse than the last two of 2022 and the Great Financial Crisis (GFC) of 2008.
The US venture capital fund Y-Combinator (YC) is expecting even more economic turmoil in 2023. This news comes as the global financial markets have been in tatters since early last year. Governments including the United States initiated quantitative easing programs and slashed fund rates to record lows in an effort to stimulate the economy during the COVID pandemic of 2020, resulting in a surge of the stock and crypto markets.
In response to a deluge of requests from teams seeking advice on how they should proceed on spending, hiring, and more, YC has issued a warning to its portfolio companies. They advise that the best move forward is to plan for the worst and to cut costs, anticipating that the upcoming economic downturn could be worse than the last two of 2022 and the Great Financial Crisis (GFC) of 2008. “No one can predict how bad the economy will get, but things don’t look good”, YC warned.
The group also noted that the liquidity providers are expecting more discipline, and that fundraising could be challenging in the coming months. This news is particularly concerning for startups who rely heavily on venture capital investments to fuel their growth. As a result, YC is suggesting that project leaders revert to “survival” mode.
YC is not alone in its assessment of the current economic climate. The Federal Reserve (FED), Bank of England (BoE), European Central Bank (ECB), and other central banks have been warning of a global economic downturn for months. Inflation is expanding, rising to the highest level in 30 years in the United States last year, and the stock and crypto markets have been struggling to regain the momentum they had in 2020.
It remains to be seen what the future holds for the global economy, but YC’s warning serves as a reminder that startups must be prepared for the worst. Companies should be mindful of their spending, and focus on strategies that will best position them to weather any upcoming economic storm.