- For startup founders and venture capitalists, the office party party is a December tradition.
- But poor financial forecasts for the new year lead VCs to tell founders to cut costs quickly.
- Many are cutting back on their parties, but some are finding creative ways to keep celebrating.
For many venture capitalists and the founders of the startups they invest in, December is synonymous with two things: year-end paperwork and office parties. Last-minute deals are usually balanced with a collegiate vibe at a rented event venue or restaurant with an open bar and lots of fairy lights.
But this year, the holiday season in startup country is a little different.
“Usually around this time my social media is exploding with images of the holiday season, but this year the radio is silent,” said Oriana Papin-Zoghbi, founder of the cancer research start-up of ovary AOA Dx, supported by Y Combinator.
After years of seemingly unstoppable growth, the “Patagonia Vest Recession” is upon us. From social media to e-commerce to enterprise software, once high-flying companies in the digital economy have been hit by a tidal wave of layoffs and forced to cut spending on well-known passion projects. loved.
Meanwhile, venture capitalists have warned of impending ‘death spirals’ and told their portfolio companies to cut spending where possible, which now includes the beloved party. Office. Today, with trading volume dwindling and many founders hesitant to raise new VC funds for fear of a dreaded “round the table,” holiday frugality may seem especially important.
Insider spoke with seven startup founders and investors to find out what techniques they’re using this holiday season to save as much capital as possible in an increasingly fragile market.
“We’re in a new world where you can’t burn like before,” said Brian Hirsch, founder and managing partner of Tribeca Venture Partners. He adds that reducing the “burn rate,” or the rate at which startups spend their cash reserves, which often fund year-end celebrations, has been the main topic of conversation at every board meeting in which he has attended in recent months. .
“Every investor, unless they live on another planet, advises their portfolio to cut spending,” Hirsch said.
Some startups opt for low or zero budget parties
Brooke Kiley, a partner at VMG, told Insider that questions about the holiday season often cropped up in her conversations with founders, and she advises startups to have fun even on a limited budget.
“My biggest piece of advice is that you can always do something special, meaningful and impactful at a reasonable cost,” she said, adding that teams should think about what’s most important to the their organization’s culture, whether it’s about building relationships or blowing off steam.
“Align those goals with your holiday party, and you can do something powerful and profitable,” she said.
For Nadya Okamoto, the 24-year-old co-founder of consumer menstrual products company August, renting a place was out of the question as a small early-stage startup. Still, she and her team were able to host a “zero-budget” holiday party in December at their New York office by partnering with another startup, Wander and Ivy, an organic wine producer, who served the drinks.
She and her colleagues set up and took down the decorations themselves, staying in the office until well after 10 a.m. the day before the party.
“We were sweeping the floors, turning on the lights with thumbtacks and ordering paper snowflakes,” she said. “Our whole community knows we’re scrappy, but it doesn’t seem scrappy – they know how much we care about the business and the community.”
Jessica Spivack Lowenstein, head of platform at K50 Ventures, said more intimate “micro-parties” have been a way for her fund to bring together founders and portfolio investors this year without breaking the bank.
“People are getting creative to find ways to bring people together in fun and less expensive ways,” she said. “If companies and companies are doing it, it’s smaller, so people are doing it for the team and not for the whole network – it’s easier to connect with people because it’s a small group.”
Spivack Lowenstein shared that K50 Ventures opted to hold smaller regional founder meetings in São Paulo and Bogota, where many of their portfolio companies are based, instead of a large office party near their headquarters. , since the company held a big event for New York Tech Week just a few months ago.
It’s the favorite party style of Artem Semjanow, the founder and CEO of healthtech-AI startup Neatsy.ai. He told Insider he opted to take a company-wide trip to a bathhouse over the holidays, a tradition the early-stage startup can afford to continue this year as it doesn’t. only employs 12 people.
“There’s a great place in the mountains where you, steaming from the bath, go down the slide straight into the icy mountain river,” he said. “After that, you sit wrapped in towels in a big tub with decoction and watch the stars. A lot of good ideas are born during that.”
Even virtual parties may not be enough to cut costs
Other founders, including AOA Dx’s Papin-Zoghbi, are bringing back pandemic-era “Zoom happy hours” to accommodate their remote teams and save on big year-end fees.
“In better times, we would have done our team retreat in person,” she said, but she still plans to make the party a fun break for her team by sending them a parcel of goodies beforehand. and games to play together on the phone to.
Erin Fabio, the founder of creative agency Grit Studio, took a similar approach and decided to host a virtual wine tasting with a sommelier on Zoom for her team, she told Insider.
Sean Harper, CEO of venture-backed insurance startup Kin, said he was looking to make cuts where he could as he was reluctant to raise more money in the current environment, where Investments often come with onerous terms and lower valuations.
“We have to be able to, you know, sustain our growth with our own resources,” Harper said, “because I don’t know if I’ll be able to go and raise more equity.”
But while the holiday festivities can be an easy place to cut spending, Harper said that might not be enough for businesses that are really struggling.
“Maybe you should cut some trips, maybe you don’t have a big holiday party, but that’s all a drop in the bucket compared to the number of people,” he said. “People are the most expensive.”