Dispatch from Disrupt

Observations on the current state of the tech sector after a week spent having conversations in San Francisco while attending TechCrunch Disrupt.

By Rene Musech and Monique Pelletier

TechCrunch Disrupt took place this year with more attendees than the event has previously experienced and against the backdrop of the first tech IPOs we’ve seen in many months. While downtown San Francisco certainly doesn’t feel like it did pre-pandemic, there was noticeable tech market excitement in the SF mid-market air.

Here are 5 takeaways from our various Disrupt sessions and VC and startup founder conversations throughout the week:

1. The IPO Renaissance: A Win for Startups and VCs

Much has been written about Instacart’s debut on the public markets at a valuation significantly down from its last private valuation and some leveling off in Instacart and Klaviyo’s stock price after their initial debut day bumps. However, the general mood among startups and VCs seems to be that this opening of the IPO markets is a win for both late-stage startups, many of whom are working hard to generate revenue that can defend their 2021-era valuations, and early-stage startups looking to entice VCs to start increasing their spending again. VCs are now also seeing a path forward their current investments, many of which in the last 18 months have been caught in no mans’ land.

2. Accepting the inevitability of down rounds

In a significant shift of mindset, there is a growing acceptance within the tech community, with venture capitalists leading the charge, that down rounds will become standard practice for those raising money in the coming months. Startups are recognizing the need to take their time and grow their revenue with their previous valuations, but this can only happen if their cash runways from their last rounds are extended, or down rounds are raised.

3. AI: Exciting, but Not a Magic Bullet for Funding

While AI continues to be an exciting frontier for VCs, it’s not magic bullet for securing funding. Investors are placing a renewed emphasis on solid business fundamentals and so startups need to demonstrate not only technical prowess but have strong unit economics, margins and efficiency metrics on go to market. This post-COVID high shift underscores the importance of building sustainable, revenue-generating businesses, rather than banking solely on cutting-edge technology.

4. The OpenAI Effect: Strategic Investors Seek Innovation

The partnership between Microsoft and OpenAI has sent ripples through the startup landscape and strategic investors are on the hunt for opportunities to replicate what Microsoft achieved with OpenAI. This trend signals a broader shift towards strategic investments that foster symbiotic relationships between established tech giants and innovative startups.

5. Lessons from Crypto: Customer-Centric Innovation

The rise of crypto has imparted a valuable lesson to founders across the tech landscape. While groundbreaking technology is crucial, it should never overshadow the fundamental principle of delivering what customers truly want. The success of any startup hinges on its ability to address genuine pain points and provide meaningful solutions. This customer-centric approach not only fosters loyalty but also drives sustained growth and success and it’s an approach VCs are now more consistently screening for when evaluating new investments.

In conclusion, TechCrunch Disrupt served as a window into a tech and investor landscape that has experienced accelerated change over the last month. The five key takeaways – from the reinvigorated IPO markets to the acceptance of down rounds, the recalibration of AI funding, the pursuit of strategic partnerships, and the emphasis on customer-centricity – will undoubtedly shape the strategies and priorities of startups and venture capitalists in the months to come and are trends we will be watching closely at Brands2Life.