VC Market 2023-2024 Outlook, Tough Fundraising Decisions vs. <6 Months Runway Reality and Board vs. CEO Scenarios & Discussions - E280

· VC and Angels,Start-up


"The struggle I'm seeing is in the middle-stage startups that raised several rounds of capital over the past five years. With this new structure, there are challenges such as layoffs and reevaluating the operating model. I've realized the importance of being thoughtful in understanding their current business and discussing their challenges. Moreover, it's crucial to communicate the higher expectations they need to meet. In previous rounds, the bar wasn't set as high. As long as we make significant progress, the next round of funding will come." - Jeremy Au, BRAVE Podcast Host


"The tricky part I've seen this with multiple founders is that they're fundraising with less than six months of runway. They have a plan, projection, and forecast with a target growth rate. They've also heard stories about how some people barely make it through fundraising with just one month of payroll, surviving near-death experiences. So there's this tension between constantly engaging with investors, keeping them in the loop, and working through the process. Some investors move quickly and professionally while others take their time, but then you reach this stall zone where you're not progressing as fast as you'd like. It's like dropping out of the sky because you can't make significant cuts. Cutting risks the progress you've made in fundraising, but if you don't cut, you'll hit a wall in three months." - Jeremy Au, BRAVE Podcast Host



"How do you decide which line of action to take? Let's play out the scenarios. Scenario one: you keep spending on marketing, but you're unable to raise. Two: you cut marketing, growth plummets, and you still can't raise. Then, the golden scenario everyone desires is you keep spending on marketing and can raise, or you cut marketing and still manage to raise. So, for me, it also depends on the founder's mindset. If they're ready to throw in the towel if they can't raise, then it's a guns-blazing scenario, spending until the end, but if there's an asset they've built and they're willing to cut marketing spend to preserve it, then that's a different approach." - Shiyan Koh, Managing Partner at Hustle Fund



In this discussion between Jeremy Au and Shiyan Koh, several key insights emerged regarding the challenges faced by founders in the startup ecosystem. The conversation revolved around the difficult decisions founders have to make when their companies are struggling. One central theme was the importance of being realistic and taking decisive action. Founders need to assess their situation objectively and make tough choices, even if it means cutting costs, letting go of employees, or winding down the company. The focus should be on preserving the core asset and finding a path to sustainability. The role of boards and investors also came into the discussion. While investors may keep the conversation going and offer support, founders should ultimately take charge and make informed decisions. The founder's vision and commitment are crucial, especially during challenging times.

Both of them emphasized the significance of community and support networks for founders. They highlighted the value of founder communities that provide a space for shared experiences, advice, and a sense of camaraderie. Engaging with like-minded individuals can help founders navigate transitions and explore new opportunities. The conversation concluded with a mention of upcoming events, such as the Phoenix community's virtual offsite and Camp Hustle Asia in Bali, where founders can connect, learn, and build meaningful relationships. Overall, the discussion offered a pragmatic perspective on the realities of being a founder, emphasizing the need for clear-eyed decision-making, community support, and resilience in the face of challenges.

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Jeremy Au: (00:42)

Hey, morning Shiyan. You flew in at what, 5:30 AM this morning? So crazy. And what’s the strategy for the morning?

Shiyan Koh: (00:52)

Stay awake. My strategy is to keep going.

Jeremy Au: (00:56)

Keep going. That's a bonkers strategy. I'm the kind of person that's like, go home. I just take a nap.

Shiyan Koh: (01:00)

No. The actual key is on the flight, I don't eat. That's my strategy.

Jeremy Au: (01:05)

This is a weird life hack. Okay, hit me. Why does it work?

Shiyan Koh: (01:10)

Cause you're trying to convince your body that you're in the destination time zone, right? And so your body gets a lot of cues based on your blood sugar levels and when you eat. And so if you don't eat for the whole time and then you land and you eat according to your destination schedule, it's easier to reset. So I landed, and I took a shower, and I ate. Sometimes I'll be incredibly unhealthy and I have my vaping.

Jeremy Au: (01:42)

Oh, wow. You're a stronger person than I am. I'll be happy to sleep right now, but, let's power through.

Shiyan Koh: (01:48)

Yeah, let's do it.

Jeremy Au: (01:49)

I think what we were discussing was, right now, a lot of folks are asking what is going on in venture capital. I mean, obviously, everyone's very bearish, and then after that, things started exploding and imploding and then people are just saying, it's a tough market. I think a lot of founders are like, how long? How are we getting better? Have we hit the bottom yet? When does it get better? And I think you and I have some thoughts. You've done some travel talking to capital allocators at other VCs in Silicon Valley outside of my point of view. So I'd love to discuss and say, where do you think the venture capital and startup market is today?

Shiyan Koh: (02:26)

Yeah. VCs are almost congenitally optimistic, right? Otherwise, they wouldn't get into the business. So, I think when you talk to VCs, myself included, generally you're a pretty positive person but I think, I just got back, as Jeremy mentioned from two weeks in the US talking to a range of both fund managers and allocators, and I would say the mood is pretty tempered. So there's sort of a high level, like yes, we believe in innovation, we believe in this asset class, but we also recognize that, hey, the market was insane over the last two years and people got a little bit out over their skis, paid too much, and that's all kind of coming to a head. And so while there continues to be a lot of excitement around AI and those use cases, people are also busy dealing with what's going on in their portfolios. That's like helping people shut down gracefully.

We talked about Acquihires and I was talking with another manager and he was like, yeah, we helped a couple be able to get Acquihire. I was like, what is the market for Acquihires right now? It doesn't seem like there is one. He's like, yeah, it's more of a safe-faced, face-saving move. They get slightly better packages than if they had just applied for jobs. No one made money on that, and I think if you think VCs are optimists, founders even more have to be optimists. It's sort of, I always kind of say that, entrepreneurship by definition is a little bit insane because the expected value and outcome of entrepreneurship are probably not higher than some cushy job somewhere, but people do it anyway, and so I think maybe coming into the year, there are a lot of people who are like, I think I can raise and they're running into a few things, is their existing investors don't necessarily want to bridge them or don't have the appetite to bridge them or their own. And they're not sort of reading that signal, like, hey, either need to like to revise my expectations or change course.

And so they continue to go out into the market and get sort of lukewarm responses and get very long drawn-out processes. And so I think that's still taking a bit of time to funnel through. And so people are still working through that. I don't think we've seen the full impact of that yet. We've started to see the recaps. We've started to see people have sort of reality realization moments, but I don't think it's gone all the way through yet. So that’s kind of the mood, right? On the one hand, I think investors are like, this should be a great vintage to invest because valuations are all down, but on the other hand, you have stuff from your prior funds that you are managing and you still need to help all those guys. There's sort of, I think, a bifurcation between people who sort of, either they were always pretty frugal and so they have planned accordingly, or they got the memo early and they cut and adjusted fast. But those who didn't, I think they're facing a much worse fundraising environment. And that's just reality.

Jeremy Au: (05:46)

Great. Yeah, I think there are two parts, right? Which is what's market and then obviously what founders should do. And let's put the second part a little bit down the road and let's kind of sit with this feeling about what the market is today. I agree with you that the market is tough. And I think one way that I see it is that a lot of funds, and I hear this through a grapevine, I talk to other folks is that, what is the majority of their time, the partner's time doing, right? Are they talking to new companies or are they working with their current portfolio companies? Right. And I think that many funds in Southeast Asia are very focused on their current portfolio, right? Kind of helping them, the operations layoffs, the next round, et cetera. And so I think, It's not what you say that you do, right? It's about what your time and allocation are, and I think I agree with you.

I think there are a lot of VCs who are very busy working with their portfolio companies, and I think they have also their associates and portfolio support folks also working very deeply with their portfolios as well. And so I think that contributes, I think to a lot of, like you said, mind share which is that. Right. And so how much mind share is that left to look at new companies and new deals? I think that's also driving some of the folks who are leaving venture capital, in terms of teammates, et cetera, because they wanna do deals, right? But their focus is on their portfolio and management. So I think it's been interesting to see that play out actually.

Shiyan Koh: (07:06)

Although like it's all part of the job, right? Writing checks aren't the whole job. Writing checks is like step zero.

Jeremy Au: (07:16)

The past two years, was this all the strategies? Was this just write checks, let your winners ride, do no work and keep finding new deals? I think that was like you said, the MO for the past two years was that the best founders don't, I don't know. It's consistently up, there's no down, there are no sideways.

Shiyan Koh: (07:34)

I don't know. I mean, as a business is never consistently up, right? The whole thing is a rollercoaster and I feel like most of the time something is deeply wrong. You're just trying to stay afloat. So, I mean, I think the mood is measured and I think alongside, the sort of startup funding cycle, there's also the fund funding cycle. So I think there's also the feeling that like a lot of funds got started kind of the last three years and it's unclear for those funds. What their trajectory and prognosis are gonna be and whether they're gonna be able to raise second funds, yeah.

Just given kind of what that environment was at that and so, I mean, there's this crazy stat, right, which is if you take the top, I think 10 or 15 large-cap technology stocks in the US and that is like more than the combined capitalization of the London Stock Exchange and the Tokyo Exchange. Yeah. And so basically people pay more if you're listed in the US. But also that you could get a lot of the returns you wanted in technology just by holding the top 15 traded tech stocks, which then you're like, okay, what does that mean for the private markets? And then the other thing is that if you look at publicly traded companies with market caps of over 10 billion, that's only 10% of the total capitalization of the market.

So there's like, there's 90% that's under 10 billion, and so like, which is most of the private markets, right? So do you believe that the long tail outperforms on a multi-year horizon relative to the risk-reward ratio of holdings for the top 15 publics? So anyway, that's like the bear case, I guess. But having said that, I think most people's allocation to privates still needs to be higher, right? And so they do all have room to like increase on the private side. But it's just, where, when are they gonna do that? Did they already get burned and have they soured on the asset clause altogether?

Jeremy Au: (09:48)

You know the VCs are writing the decks, right? It's like, hey, valuations, they return to normal. Great companies are founded in good times and bad. We have a proprietary excess of deal flow and approach that lets us pick the winners. And we're super confident our fund, one returns are gonna crush it. Just look at the paper valuations today. Can you please let us run, and raise fund two? No, not good. Not good enough these.

Shiyan Koh: (10:16)

TVPI and DPI are very different things. Do you know how many venture funds there are? Like 4,000. Yeah. For a very niche asset class, that's a crazy number. I think when I was in when I was working. And on Sandhill 15 years ago, I think there was probably a thousand plus the NVCA directory. So there has been a huge explosion. I was at another event last week called Capital Camp and it was a much broader sort of investment management type of conference and like, VCs, just put one segment of that, right? There's a lot of people like yeah, small middle market, private equity, real estate, all this sort of stuff that is, much more established, much larger asset classes.

Jeremy Au: (11:13)

I think there's also a bit of a power law in the sense that there are a lot of small medium, and then large ones that have very large fund sizes. So I think there's a dynamic where it's not just a number, but also I think I haven't seen the numbers for myself, right? But what are the top 10%, what is the number of employees or AUM or could be a very disproportionate size as well? Interesting times. Yeah so does that mean we're at the bottom? Yeah. Is the worst already over? Would things get better? That's what people want to know.

Shiyan Koh: (11:49)

I mean, I'm kind of worried about this dead ceiling thing. The headline was like, they've extended from June 1st to June 5th, and you're like, okay, it's not much better. It's already May 27th.

Jeremy Au: (12:00)

You got a record, you're like, we're only five and then the US is defaulting on the debt. The entire global financial, system implodes.

Shiyan Koh: (12:06)

Although the market is up. Did you know the market is up because they think they're going to have to do something? But like, I don't know.

Jeremy Au: (12:15)

It's like when people shit on Jim Cramer, right? And then Jim Cramer says like, I don't expect America to default. And everyone's like, oh, we got a bet on the other side.

Shiyan Koh: (12:22)

Yeah, it's the opposite. The Inverse Cramer Index or whatever it is. Yeah. So, I don't know. I mean, I think there are two countervailing forces, right? I think there's like the excesses of the last two years need to like to work themselves out of the system. As you said, a lot of VCs are occupied with their current portfolio and like trying to fix and say stuff. And then, on the other hand, you've got this amazing AI wave and excitement and new applications and people jumping in. So, that's kind of like something to get excited about. The macro stuff inflation was accelerating in April, which then makes me worried about the June rate meeting.

Jeremy Au: (13:10)

So let's talk about the macros, right? So at least what are the, cause we're not going to predict, we're not macroeconomists in that sense, but what are the key things or factors that require, or that would help the situation? So one is inflation dropping. To some extent, it's linked to the perception that this will lower interest rates you lower interest rates, it increases the future time value of money versus, well, not increases, but at least it drop doesn't drop as much.

Shiyan Koh: (13:35)

Improves the DCF calculations. Improves, but also credit. It just makes credit cheaper, which allows people to invest more.

Jeremy Au: (13:44)

Like DAP and capital expenditures. That's a big piece. I'm going to say the US elections I would say is a big one as well to some extent because I think. There are different visions for the economic future, between the three of them, I think they impact different categories, different verticals, and different regulation targets, right? For example, so for example, the FTC right now is doing a lot of work to, stop acquisitions, right? Of many companies. And that lowers the exit potential, right? For so many companies that were going for a trade sale, a hundred million dollar sale, even a billion dollar sale.

Shiyan Koh: (14:18)

Yeah, but I don't think FTC is going to stop a hundred-million-dollar sale. It is much more challenging to make the sort of monopoly arguments.

Jeremy Au: (14:25)

Well, I think the tricky part is that certain buyers are very cash rich. So your Fangs, so and so forth. Your Google, your Alphabet, who historically just did love those acquisitions, and we're happy to pay for the talent and the know-how and approach, right? And now because of the regulatory site, I think they slowed down there, I think, cause they don't want to trigger more of that, so I think you're right to say it's not as if they're blocking, but I think there's also a self-deceleration, right of those deal flows as well.

Shiyan Koh: (14:59)

It's an interesting question. I don't know.

Jeremy Au: (15:02)

Caterpillar's doing very happy right now because they never could get technology talent for their tractors and farm equipment cause it wasn't hot. But turns out, with the current techs and everything, they're kind of like moving towards there. But yeah. So what other macro stuff? We don't go to war globally.

Shiyan Koh: (15:19)

I mean, yeah, there's the China-US conflict and whether we can like reduce the temperature there.

Jeremy Au: (15:24)

Yeah, that is a big one, sentiment-wise, because it's not even a Black Swan event. It's this unknown scenario that people are planning for slash planning around. What else? Is there anything else? I think those are major ones, right? I think those are major thresholds. Like in a world where interest rates are dropping, inflation is dropping US-China relations improve. I think that would be the macro bottom.

Shiyan Koh: (15:59)

Yeah. So things can swing back up. But right now I think it's just all predicting that things will get a little bit worse.

Jeremy Au: (16:06)

Yeah, so we're not at a bottom yet, but you're like nearing the bottom like it can't get much worse.

Shiyan Koh: (16:12)

I mean, it doesn't change what people need to do. Right.

Jeremy Au: (16:15)

Ooh. What do people need to do?

Shiyan Koh: (16:18)

Find customers to make money.

Jeremy Au: (16:21)

I thought it was fundraising and making a deck anyway.

Shiyan Koh: (16:24)

I mean, I think we talked a little about this before, right? This is like, if you want a venture scale return, can you imagine this thing being at a hundred million of revenue within kind of like five years. And what do you have to believe for that to be true? Yeah, and so like for founders, I don't think it changes the equation much, right? Yes. Well, it changes the equation in terms of how easy you think it's to fundraise. But in terms of what you're you need to validate in your business, the changes you have to validate are faster than you thought probably. But I assume that you'd want to validate those things anyway, right? Because you're spending your time on it. But I made a joke to one of my friends when I was in town and I said, if I ever own a horse or a boat, I'm going to name it operating leverage because I think this is a very important idea. Wait it is also a bit ridiculous, because a horse or a boat is the opposite of operating leverage but because you would just spend money maintaining it, but I think in terms of like, things that I think are.

Jeremy Au: (17:44)

Okay. I thought the joke was goint to be that our boat lets you move more staff over water.

Shiyan Koh: (17:51)

It's a joke that it does not, is the opposite, but as an idea that, like, I think more people should think about is operating leverage, which is like, what is my theory of how my business gets better over time. Like it can't only be a thing that you put $1 in and only 80 cents come out. Right. Over time, it has to be okay. $1 in a dollar 20 cents comes out, a dollar 50 cents comes out. So like, where's the operating leverage in my business and what's my theory of it? And when do I see it? When should I see it? Because in the beginning, everyone's like, oh, like I don't know what CAC is. I don't know what LTV is. Like, it's too early. I can't tell fine. But like you should want to know at some point the math has to work. And so like, I think that's why, yeah, I'm never going to own a horse or a boat, but if I ever did, if I won one at a fun fair, like when you win a goldfish, like that's what I would name it.

Jeremy Au: (18:55)

So I think the question now is what founders should do, because, yes, they got to sell customers.

Shiyan Koh: (19:02)


Jeremy Au: (19:04)

Let me add to that, which is when there's a lot of capital availability, there's a lot of time, and therefore money that can be spent on your experiments, right? But I think when you have a capital staff environment to some extent, then you have to validate on a much tighter, much faster cycle, and I think you talk about it in a previous episode about the rate of learning. And so I think what happens is that I think people got used to a certain like, okay, we're going to spend a hundred thousand dollars on this channel to figure out if your works and you can't, you should be like, I think I spent a thousand dollars. What does it tell me? Let me change it. Let me spend the next $1,000 and I can't go from there. So the efficiency of that learning is key.

Shiyan Koh: (19:44)

Yeah, and sometimes like I can't tell whether people are slow because they don't know how to be faster, or they think they're going fast. Do you know what I mean? It's like, is it, you just don't know what fast looks like or you've picked the absolute slowest way to try to test something.

Jeremy Au: (20:00)

Different folks, right? I mean, I think there are folks who just like said, come from a certain background, maybe slower, consulting or those big companies. They tend to be a little bit more of a, I wouldn't say infinite budget.

Shiyan Koh: (20:10)

It is time and money. In a startup's lifetime is money, you're going to die.

Jeremy Au: (20:16)

Exactly. And so, I think people just end up being way optimistic about, and they're like, and I think especially for folks who do a successful first fundraise, they expect a second fundraise to go well, or just as easily as they did. And so they have this, like I said, small adjustment, and they're like, yeah, the money will come as now just show these learnings. And I did all this work and all this stuff, that stuff happened, but yeah, I fixed it and that may still not be good enough. You know what I mean? Fundraise the next round, and so I think that's the awkward reality.

Shiyan Koh: (20:51)

Yeah, and then, I mean, I think there are just so many tools now that make it pretty easy for people to validate quickly and cheaply, and I feel like I don't see them used enough. You can throw up a landing page, you can use Zapier, you can use Airtable, and you can track with UTM codes. Like, it doesn't have to be a huge thing to test ideas. So I think having kind of orientation around that is important just to be like, okay, I think it's working. I think the clue is just that if you have to work hard to sell everything, then you don't have a product market fit. You haven't yet defined the problem or the solution in a way that has people being like, give me this. Here's my credit card. ready to buy.

Jeremy Au: (21:43)

At the early stage, folks have absorbed that because they grew up in this downturn effectively. So, I think they're more cash efficient.The struggle I'm seeing is really like the middle-stage startups, those that raise several rounds of capital, say over the past five years. And now they have this new structure, and I think we'll talk about it in terms of layoffs, the operating structure. I think what I realize is that I've had to be very thoughtful in understanding where the current business is and helping them discuss what their challenges are. And more importantly, know, like talking about how high the next bar is because I think in the previous rounds, the bar wasn't that high. So I think as long as we meet some amount of progress, the next round will come. But I can't get loud into that. It's not complacency, but as an expectation, as long as I hit these milestones, as long as I double my revenue across two years, for example, I could raise my next round and is that a very fast rate of growth? Not tremendously in today's market versus the bar of what people want it to be.

Shiyan Koh: (22:56)

I mean, I think this is just, you need to have a backup plan, and so the backup plan is just like, let's say I can't raise, or the raise that I taught is going to take six months is going to take nine months or more because I think that's the reality. Everything is just gonna take longer and you kind of don't wanna be left with three months of runway and not have a term sheet on the table and then be scrambling, because then you just put yourself in a way, worse situation.

Jeremy Au: (23:24)

Let's talk about that. I know a bunch of companies that are fundraising with about three months of runway for sets of reasons. So what advice would you give to someone who's kind of like in that situation. Let's say, below six months of runway.

Shiyan Koh: (23:37)

I would just like to try to do a zero base budget and understand what is essential or not, and I think the struggle is always if I don't spend money on marketing, then I don't show growth, and then no one will wanna fund me. But if I do spend the money on marketing, then I have less cash. Like damned if you do, damned if you don't. But I think this kind of goes back to the, like, what is your theory of the business? Like if you didn't spend any money on marketing would growth go to zero? Like, do you have no recurring element in your business? Like what have you been doing basically for the last two years? In terms of like what about your business is ultimately real and sustainable that someone would actually wanna buy and value? I think that's the question, right?

It can't just be that you're good at spending marketing dollars. So I think that's the, I think that's the sort of thing is just like you need to come up with a plan B budget and plan that accounts for a really slow fundraising market and be real about expenses right because you know how it goes, right? It's like everybody always wants to save someone on their team, if you went round robin and asked people who they cut, they're gonna try to do the minimal amount of things, so you have to go like initiative by initiative and be like, does this move the ball forward for us in the timeframe that we need it to? And how much does survival matter to you? Or are you tired and you're okay, let's just throw the towel in. It's other people's money anyway.

Jeremy Au: (25:18)

The tricky part, and I've seen this for multiple founders now, is that they're fundraising with less than six months runway. So they have a plan and a projection. They have a forecast, there's a center rate of growth they're trying to execute against, and they've also heard the stories about how people squeak in that fundraiser with like one-month payroll. Most near-death experiences, right? So there's that tension between this is to keep talking to investors, keep investors, keep working the process. Some are fast, which is professional and some people are slow injecting out, and then you end on that stall zone. You're not flying, kind of like dropping out the sky a little bit because you can't cut because we cut. It seems to risk the fundraising progress or traction that you have right now, but if you don't cut, you're gonna hit the brick wall in three months.

Shiyan Koh: (26:13)

You have to draw a line, right? There has to be a date where you have to make a decision and you have to be honest about what the fundraising progress is. Having a first conversation is not progress. Are people doing work? Are they in the data room? Are they spending time? Because if they're not, then I think it's not, it's not going to lead to a quick term sheet.

Jeremy Au: (26:41)

Yeah, I think people also under-appreciate that, right? Which is that, I think funds take time to write a term sheet, and funds take time to wire the money after due diligence, right? So if you have three months of runway and a fund takes three months to issue a term sheet and wire the money after due diligence, that's cutting close. There's not enough time a nd I think VCs often say like, don't catch a falling knife.

Shiyan Koh: (27:07)

I mean, I think there's practical stuff too, which is like, try to defer your payments as much as possible. Take advantage of all the sorts of payable terms that you can and try to collect faster, right? I think when things are going well, people sometimes are not that disciplined on collections right. and so there's some booking number, but the cash collected number is like really far behind. Yeah. And you should kind of sit on top of your cash cycle.

Jeremy Au: (27:37)

Cash is important. One zero base budget. I agree. But I think you said something earlier, which is like, but if I cut marketing, I'll cut growth, and if marketing doesn't drive growth, you'll cut it. But at some level, cutting that stuff is going to lower your growth rate. So the bullet that the founder is struggling with is.

Shiyan Koh: (27:58)

Okay, so I mean, so that's, but that's the question, right? Which is like, okay, so you spend and you hit the wall and you don't raise money. So that's scenario A right, you cut gross lows and you don't raise money. That's scenario B. So wh which one leaves you in a better place?

Jeremy Au: (28:17)

I mean I agree with you entirely. I think it's quite asymmetric, right? Which is that I think from a founder's perspective, one is at the end of it, you have no business and at the end of it, you still have a business as a going concern. Right? So to me, I agree with you that there's that, but it doesn't. But I think my frustration is that I think from an investor perspective, especially for a lot of current investors, is that it feels like there's a lot of advice to like, keep going, keep fundraising. Right. Keep, you get it right. I don't know.

Shiyan Koh: (28:47)

As you said, right, it's really hard because so how do you decide which line of action you're going to take if we played out the scenarios? Scenario one: you just keep spending on marketing, but you don't race, you're unable to race. That's an error, and you hit the wall. Scenario two: you cut marketing, growth falls off a cliff and you can't race. Then, of course, the golden scenario which everybody wants is like, hey, you just keep sending on marketing and you can race, or you cut marketing and you can raise. So for me, it also hinges on what the founder's, where the founder's head is at, which is, is it that if they cannot raise, they'll throw in the towel, then hey, scenario guns blazing spent to the end, or is it like, actually there's some asset you've built here and you are willing to cut marketing spend because you need to preserve the asset. You want to be in default, a life state, even if you cannot raise.

And actually, that's my preferred scenario, which is like we have a clear understanding of what our asset is. So let's say our asset is today something that if we spend $0 on marketing, it'll grow organically at 10%. But what we've been doing is spending on marketing to try to like to push that number, while telling a story of some sort of increased LTV over time, because we're gonna put more stuff into that. I would rather cut all of that future spending. That spend that's going to pay off in the future and be like, okay, this thing grows at 10%, I'm at a positive contribution margin and I'm gonna be default alive. And either you believe in the asset I've built or not, but I can go back to the market in six months, right? That's kind of my sort of old-fashioned view, but I think the concerns are real because what's going to happen? Okay, so you cut people, right? In that scenario, then morale is going to be in the toilet.

Maybe even some of the founders are like, oh, we've been at this for a while. Like, For now, we have to cut the founder's salary. Like, not fast growing anymore, like, is this still sexy? Whatever, so like, those are real concerns but I do think it kind of boils down to like, what's the founder in the game for? And a lot of stuff just is kind of shitty right now.

Jeremy Au: (31:19)

Yeah, I agree with you. I think the cause of action to me is quite asymmetric, in terms of risk and reward. One is you have a company and the other one is you don't have a company, right? And so I think the one that gives you a company lets you live to fight another day. Especially in an environment and all these other reasons. I think what I'm frustrated about is I think a lot of founders are getting suckered by, I don't know what's the word. Like investors are very nice and kind of keep the conversation going, but also to some extent maybe like I've noticed startups who have had boards that are not doing that conversation that users had, right? Which is we got to be face up to this and manage it super tightly. And get it under control. And so, as a follow-on investor to somebody else, is it my spot to say like, yo, like what is your board?

Shiyan Koh: (32:14)

I don't think you need to involve the board. I think whatever your relationship was with the founder is like, hey, look like I'm not at the board. I don't know what's going on there, but here are my thoughts, but at the end of the day, as I said, it, all boils down to the founder and the founder's the boss and if you've been operating here in the last four years, you've gone through the global pandemic. You know that crazy boom. And then now you're this like the flip side of that, and I don't blame people if they're tired. It's very tiring.

Jeremy Au: (32:51)

It's super tiring. I think I like what you said, right? At the end of the day, whatever the board is, I think the founder is the boss at the end of the day, and the founder has to make a decision, like you said, to see reality as it is, and to know what to make the hard decision about, like I say option A, option B, There's a mathematics, right? The math has to work eventually, right? The gravity will kick in. And you gotta make a decision I think it's okay to keep the options open and to keep that there. But as you said, there is a date where the decision has to be made and you got to make a decision.

Shiyan Koh: (33:25)

Yeah, because if you don't make a decision that is making a decision right?

Jeremy Au: (33:28)

Ah, Ooh. Don't wanna make, I don't wanna make a decision, like, I don't even, I don't make a decision then. No decision is made. Right.

Shiyan Koh: (33:37)

Yeah, then you're running as hard as you can towards that wall, and you're trying to figure out if you're hoping that somebody's going to come and save you, but that's something you don't have control over.

Jeremy Au: (33:47)

That's the tough part, right?

Shiyan Koh: (33:51)

We need to end the episode on a more positive note. Jeremy cannot all be doom and gloom.

Jeremy Au: (34:02)

Okay, fine. Let's work on it. Okay. Well, it's like the Doom and Gloom episode. I would say that one thing that founders can do is, okay, I'll say this. I would say that if you have to shut down your company, your life is not over. That's what I would say. You are not a company and the company is not you, even though a lot of it's dependent on your decisions and your team, but a shutdown of a company does not mean that your life is over. So in fact, Silicon Valley is full of those stories. So on that note, I think if you are a founder and you are departing a team because of disagreement or because you're going to search for something new, your company's winding down or you manage to sell the company. We do have a community called the Phoenix community under BRAVE. This is a small group of about 2000 founders who are currently transitioning to the next stage.

And what we do is that every six months we have kind of like a virtual offsite where we do journaling, we talk to staff, and we also hear from a panel of other founders who have kind of like already successfully transitioned to the next chapter in their lives. The next one is in June, but we have another one in November, December. So check out, to sign up for details it's a good group of folks and we have a WhatsApp group and we just help each other there because at the end of the day, like, like look, if you build a company, you're crazy. You're brave, you're entrepreneurial, you care about the future, and you're taking initiative. And now you've eaten shit and you're building something for the future again. I think there's only success in the future for you. The question is how do we get there in a way that's thoughtful, humane preserves, your honour and preserves your reputation for the community, but also do the right thing at the end of the day?And I think that landing can be hard to stick. So I think that's how I think about it.

Shiyan Koh: (36:02)

That's awesome. I think founder communities are super important for the ecosystem, so it's great that you're doing this. And these are the people who hike as well every Sunday, Jeremy.

Jeremy Au: (36:11)

We have another group that's called current active founders who kind of like hike every month. Just get some nature and just chit chat, get some steps in. And those are two different communities, you can imagine. And I think, actually I've noticed that some folks who are in the hiking community are now slowly transitioning to the Phoenix community, right? I look at it as complementary in that sense, because it's just different stages in life. I've been a founder, then I stopped being a founder, and then I was, had no idea what to do with my life as a student, and then I was a founder again, and I'm a VC. Right? So I think these identities are transitional.

Shiyan Koh: (36:45)

I'm gonna pitch an in-person event. So we are hosting Camp Hustle Asia in Bali the week after F1 in Singapore. Is that September 18th and 19th? I'm pretty excited about it. It's an investor-focused event. We've got a group of pretty interesting speakers. But the focus of the event is not so much sitting and listening to people but interacting with everyone who attends. We just had it last week in the Bay Area for the US-based folks and it was awesome. It was super chill. It was outdoors. People had great conversations. We had fund managers fly in from Latin America, Europe, and all across us.

And so it was just a really kind of a no-BS chill hangout. And we wanna replicate that in Bali we've got a handful of confirmed speakers. I think people will enjoy Moses from Xendit. Arthur from Gold Bell. So he's like a second-gen CEO who took over his family business but has also launched his technology startups as well as a mobility-focused venture fund. We have Ethereal's GP, Min. Says Singaporean GP. It's the fund with Joe Lubin. It's one of the co-founders of Ethereum. We've got Gabby, who's the founder of YGG and a couple more kind of up our sleeves. And so I think it's gonna be a really good crew.

We're gonna be there, we're gonna be grabbing people recording snippets. Jeremy's gonna be running around with his headset and his like microphone. But yeah, I think entrepreneurship, investing, it can be a lonely journey. And so I think building community with people is a really important part of that, and it's part of the fun. And so, We are doing a sort of early bird discount code. So if you want, "Shiyan's Friends" is the discount code. Okay. But it's only valid until June 1st. So, I think this will be published on, May 29th? So you have like two and a half days or something to use this.

Jeremy Au: (39:02)

If you are listening to this on your overcast queue and over the weekend, I'm sorry, you missed it.

Shiyan Koh: (39:09)

But I think it's going to be a good time. And then a lot of people I think are gonna hang out afterwards. So I know there's a bunch of Angel Squad members who are planning a dive trip in Bali after the conference. And so I think it's just gonna be chill and relaxed after the madness of milking F1 token 2049, the week before.

Jeremy Au: (39:29)

On that note, let's call it a show.

Shiyan Koh: (39:35)