As the downturn hits crypto, a key investment source for startups could slow down – Marketingwithanoy

The party is over!

While the 2021 venture cycle was still booming, every startup sector was feeling warm. Every geography set records. Founders ruled, venture capitalists lined up to pay high prices for startup stocks, and new business models flourished.

Now, in mid-2022, we have seen an invigorating return to the mean. Most startup sectors seem busier dealing with last year’s excesses than attacking the future, while trends in geographic startup investment have reversed. In fact, the pendulum of relative power has swung back to venture capitalists away from founders, startup prices are falling, and some ideas that prevailed in 2021 are in disarray.

It’s worth noting that none of this should come as a surprise; the economy is always turning.

But it didn’t turn around overnight. Looking back, it seems that the feedback loop between falling public market prices and reduced startup activity first joined the software market. The shelling of SaaS companies in the public markets led to a pullback in the investment rate and price of software startups, something that is still consumed today among tech startups of all ages.

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Crypto held on to his period of cheer for longer. Sure, Coinbase stock had seen some of the sky come out of its value in the first quarter, but at the end of March, the US crypto exchange was still worth more than $40 billion. Coinbase continued to lose ground as April saw stocks begin their current decline, but in May this column wrote that “no one told the crypto world that mega-deals for startups aren’t so numerous anymore.”

The pain of the current downturn started more slowly in the crypto market, perhaps because the blockchain domain is a kind of parallel economy to the one we interact with every day. Of course they are directly linked, but perhaps not as closely as, say, traditional startups and the Nasdaq.

Anyway, the era when crypto companies seemed to be able to avoid the downturn simply by working on their own vision for the future is over.

Growth, layoffs, mergers and acquisitions

A few weeks ago, Coinbase announced that it was halting hiring to reconsider its priorities. That alone came as a shock, as the company was still ramping up its technology investments in the first quarter of the year. As the company said in its Q1 earnings report regarding its cost structure:

Technology and development expenses were $571 million, up 24% from the fourth quarter, and were driven by technical recruiting related to our continued investments in product innovation and platform infrastructure.

In fact, the company set a firm tone, saying it intends to stay within reasonable limits:

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