Trimming The Hedges, Planning For A Rainy Day

At the end of 2016, folks in the startup tech ecosystem looked toward 2017’s impending “uncertainty.” Then at the end of 2017, the same worry about 2018; rinse and repeat last year, looking toward 2019. Yet, looking back, not much changed — there’s more money than every in the early-stage ecosystem, bigger financing rounds, large private pre-IPO growth rounds, and much more.

So, will the end of this year be any different, as we look to 2020? Pundits and Twitterati will likely cite the same issues that we faced entering into 2017, 2018, and 2019 — political uncertainty, trade uncertainty, and so forth. However, I have picked up on some disparate signals over the past week which lead me to believe, while we live in a perpetual loop uncertainty, there are some self-imposed changes coming across the startup tech ecosystem in the Bay Area. I call this “trimming hedges” and “planning for a rainy day” mentality. The yard looks fine, but folks are trimming the hedges to make sure they’re neater and tidier, and they’re planning for inclement weather to appear at some point.

There are many little signals to stitch together. Heads of recruiting at talent firms and at large pre-IPO companies have hinted their 2020 hiring plans may freeze or be cut back; leaders at institutional VC funds are waiting for 2019’s IPO class (which has been great) to end lock-up periods and are planning to amp up portfolio activity for the next year, which means investment pace may slow a bit (a good thing); and

One could argue there are 101 reasons for all of this sentiment, and they’d be right. But I’ll just focus on what I believe is the trigger: Chatter about The Vision Fund (TFV). Whether it will be successful or not, the gossip and chatter generated by TVF has had a long-term and out-sized effect on the startup/tech ecosystem — scaling startups took on hundreds of millions (and even billions) in private investment and other VC funds began scaling in response (partly defensively to protect their winners).

While recent events in a few portfolio companies are still anecdotal, the difference this time is the attention given to these events and the size of the positions. Just like optimism can compound on itself, so too can hesitation and a bent toward slightly more conservative cash and planning management. I’m not saying that next year will actually be different — I have no idea. But, what I am saying is, the leaders of recruiting firms, VC firms, and pre-IPO companies are grabbing their clippers to tidy up the yard and most certainly planning for that rainy day.