Hi friends, 

I'm feeling momentum approaching the end of Q1. Time is passing, the passage of time feels heightened with external environment dynamism, and there is never enough time. 

Despite everything going on in the world, every week gets better and better. As time has gone on, I've enjoyed writing this newsletter more and more and, for me, this ritual and the conversations it sparks feel like a real driver of relationships and a nexus for pushing critical thinking forward.

What do I mean? Well, I'll explain. First, with the first anonymous submission I've received for Declarative Statements. I hope it's not the last!  Second, with the power of serendipity that comes with putting your beliefs out in public. That's for next week. 

Today's Contents:

• Batten Down The Hatches: An Anonymous Submission
• Good Reads: Emerging Trends
• Good Reads: Sensible Investing
• Weekly Song: Daylight

Batten Down The Hatches: An Anonymous Submission

**Editor's Note**

I received this Letter to Founders as an anonymous submission to the newsletter last week. I love the idea of anonymous submissions - the fact that someone took the time to write out their thoughts and share them with me (exclusively) is thrilling. I've edited parts of the article for brevity and clarity - you can read (and share) the full submission here or in the link below. 

As for the message itself - I largely agree. Not because I think we are entering a 'shit storm' but because in some sectors of the economy it has felt like the Roaring 20s for the last several years and we have been over due for a correction. 

 

Dear Founders,

There appears to be a major disconnect between many early-stage founders and economic reality, so let me just rip the band-aid off: the startup world is headed straight into a Category 5 Shit Storm, and it is time to batten down the hatches at your startup, now.

Like you, I am a venture-backed founder of an early-stage company. If you've been following the news, then you may have heard about a downdraft in the public markets. Based on recent interactions I've had with fellow early-stage founders, most of us seem to think (or worse, are being advised to think) that this is just a temporary fluctuation. Sorry to be the bearer of bad news, but it is not. Early-stage venture funds have raised record amounts of money and they have to deploy it right so we are insulated right? Wrong.

What is going on in the public markets is not a fluctuation.

We are in the midst of a structural paradigm shift in market psychology and early-stage companies are not immune.

Given the extreme focus that it takes to build something from scratch, it is easy to tune out the noise but that only works while the music is playing. The music stopped playing in the public markets last November. What happens in the public markets typically shows up in private markets (i.e. VC) with a 6-12 month lag.

There is currently zero fear among early-stage founders or prospective employees.

Zero! Why? Because demand is still strong! There is a labor shortage! Engineers have 5 different job offers! This might be true currently, but unfortunately, markets are reflexive. Investors don't base their decisions on reality, but rather on their perceptions of reality instead. The actions that result from these perceptions have an impact on reality, or fundamentals, which then affects investors' perceptions and thus prices.

The economy may be strong today, but the mere fact that investors view the future as being bleak makes the future bleak.

When a public company sees its valuation cut in half (or more) it is forced to start cutting costs whether they had planned to or not. That means they reduce their spending on products and start laying people off. That crushes demand for your startup's products which in turn forces you to lay off people and it spirals from there.

Here is the playbook I am implementing at our startup to survive:

1. Effective immediately, you are the founder of a bootstrapped startup. Operate on the assumption that there are no new rounds of funding coming for the next 12 months.
2. No new hires for the next 12 months. Make a ranked list of who you would lay off and plan contingencies for who will take over responsibilities.
3. Cut all nonessential company expenses immediately. The extra month of runway could prove crucial. 
4. Product Market Fit >> Narrative. Do whatever you have to do to get there.
5. Partner attention will be focused on the winners in their portfolio and/or their next fund. If your calls stop getting answered, don't take it personally.
6. Study this chart:

This chart is taken from an infamous deck entitled RIP Good Times that Sequoia sent their founders on the eve of the Great Financial Crisis. Slides 40 onwards contain advice that is relevant to us today.

IF THIS ESSAY SEEMS ALARMIST TO YOU - IT IS BECAUSE IT IS MEANT TO BE. 

The time to act is now, not in 12 months when it is too late. It will be hard, and it's going to get ugly. Remember, however, that great companies are forged in the fire. 

If you do persist however and your company gets chewed up in this macro carnage, remember not to beat yourself up. Separate the process from the outcome. At least you tried, and that's already more than most ever had the courage to do.

Good luck, god speed, and see you on the other side.

— STARTUP CASSANDRA

Good Reads: Emerging Trends

Possible Outcomes of the Russo-Ukrainian War and China's Choice. Here. An optimistic article written by Hu Wei, the vice-chairman of the Public Policy Research Center of the Counselor's Office of the State Council, the chairman of Shanghai Public Policy Research Association.

He says that China should choose to align itself with West, and use its influence over Putin to end the war and promote peace.

Lands of Lorecraft: A Millennial management science is being born. The latest here from Venkatesh Rao. What is it? (I'm copying his sentences) 

1. Lorecraft is the first truly internet-native school of management and organizational thinking
2. Lore, you might say is the feedstock of both stories and world-building, but is neither. It is raw cultural phenomenology.
3. Lorecraft is the evil twin of marketing - Marketing is the story insiders tell outsiders to influence them in some way and Lore is the story insiders tell themselves to manage their own psyches
4. Lorecraft is clearly a strikingly millennial school of management thinking. All the thinkers who belong in this tradition are firmly middle-of-the-pack millennials.
5. When “HR” to you mainly means a bunch of cloud apps rather than Toby from The Office, when even your boss is potentially an app streaming tasks and bounties at you rather than a person, when your world of work does not exist in the reality distortion field of a Steve Jobs, but in the inanimate reality distortion field of a stack of cobbled together SaaS tools, you end up thinking very differently about traditional questions of supervision, authority, tasking, and coordination.

Good Reads: Sensible Investing

Thread on how to talk to employees about what it means to enter a period of potential stagflation and recession. Here. In the thread, is the chart below showing that SaaS multiples have reverted to their historical average. 



Where is VC headed in 2022? Article by DS member and my friend Suzanne Fletcher, GP of Prime Mover Labs. She writes:

• Funds and companies hang onto cash longer
• Valuations come back into check
• Battery manufacturing will have an exciting year
• More mature, better-capitalized companies will go public
• Venture market becomes more decentralized
• Bio and health startups continue to garner attention
• Consumer values will drive corporate change

Weekly Song: Daylight

I love this song, Daylight. It's a classic 'get up and get going', enjoy the present, and allow yourself to enjoy the whimsy of the day. 

Great song for the a weekend of daylight savings time, too. 

Daylight by Matt & Kim
I have five clocks in my life
And only one has the time right
I'll just unplug it for today
I'll just unplug it for today

Open hydrant rolled down windows
This car might make a good old boat
And float down grand street in daylight
And float down grand street in daylight

Thanks for reading, friends. Please always be in touch.

As always,
Katelyn