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3 Reasons Early Stage Founders Should Ignore The Doom Mongers

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It seems there is a competition playing out online to hand out the most pessimistic advice possible to founders. A quick scroll on LinkedIn or Twitter would have even the most optimistic CEO shutting down their company and running for the hills. Such blatant doom-mongering might be good for views and likes, but it is nonsense.

For a start, the venture capital market cannot be treated as one homogenous mass. Advice given to founders raising a Series C round should be entirely different from founders raising a seed or Series A round. Yet the commentary online rarely makes that critical distinction, falling back on overly negative, unhelpful generalizations.

It is also not the first time we are facing a recession. Many founders and investors will not have lived through the dot-com bubble or the Global Financial Crisis. For those that have, the current circumstances feel familiar and are not unprecedented. Like all gloomy economic times, there are challenges and risks, as well as opportunities.

For founders at the early stage of building a venture-backed startup – that is, before and including raising Series A – there are reasons to be cautiously optimistic.

Seed rounds are happening

Most commentary around the overall health of the venture capital funding market looks at a short time frame. Headlines announce that venture capital funding is down in 2022 versus 2021. Digging deeper there are good reasons not to be overly alarmed.

First, early-stage funding is the least impacted and still amounted to $34 billion globally in the third quarter of 2022. The decline versus 2021 of 25% quarter on quarter and 39% year on year is a somewhat meaningless comparison. Venture funding could not continue growing exponentially and this correction was a matter of time. Moreover, and to make an obvious point, billions of dollars are still going to early-stage companies around the world – capital supply will naturally ebb and flow.

Second, looking at UK venture capital funding since 2013, the long-term trend has been upward, with 2021 an anomaly. Comparing 2022 to all of the years before 2021, funding numbers are still relatively healthy. And this makes sense. As a (pre-)seed stage investor, exits are so many years away that the prevailing macroeconomic conditions have relatively little impact on decision-making.

The danger for founders is setting expectations believing that 2021 was a normal year and that what was required to raise then is the same now. It has become harder to raise as a result of reduced capital (versus 2021) and re-calibrated risk appetites, but founders are still closing seed rounds. The market has changed but remains open.

Series A funds are active

For Series A funds, 2021 was a challenging time. Valuations were sky-high and fundraising processes moved with incredible speed, making due diligence and robust decision-making challenging, For many funds without a premium brand, it was a struggle to get access to the best companies. In 2022, things have returned to normal.

Looking again at the comparison with 2021, Series A funding in 2022 is the least impacted – down just 23% year on year. This reflects the fact that many strong companies were raising and continued appetite for funds to invest in them.

The re-calibration at Series A impacts founders in a few ways.

Most notably, valuations have come off their 2021 highs. Huge rounds at high valuations lionized in 2021 now look over exuberant at best or rash at worst. They are also creating headaches for founders who are struggling to grow into them and raise their next round on palatable terms. Today, giving away more of your company for less money compared to last year can feel like a negative thing, but, within reason, raising the right amount of money you need for a sensible dilution worked before the boom and will continue to work in the future.

The type of funds in the Series A market also continues to evolve. Multi-stage funds are cautious, busy looking after their later-stage portfolio companies, with some dipping their toes into the water with seed cheques to stay active and relevant (and justify their management fees to LPs). Stage specialists are enjoying their moment in the sun – able to win opportunities that may have eluded them in 2021. Processes have elongated and take up more founder time than before as funds dig deep into every opportunity, keen to avoid any sub-optimal decision-making. It is painstaking for founders but results in more durable early relationships with investors.

Expectations at Series A have also been re-set to pre-2021 levels. The days of pre-emptive rounds when companies only have a few hundred thousand dollars of revenue are over. Metrics that founders need to achieve to have a realistic chance of securing a Series A funding round are fluid, but the now well-known SaaS Funding Napkin is a helpful guide.

Lower valuations, longer processes, and more rigor around required metrics do not appear like great news for founders, but they represent an overdue return to reality. They also do not mean that the market is closed. As with seed (and pre-seed), funding levels at Series A remain robust against historic norms and many founders are continuing to close rounds.

Time is on your side

Early-stage founders today will be looking for growth funding – Series B onwards – several years from now. Growth rounds are hard today and nobody knows when the current cycle will turn. However, in two or three years we will likely be back on the upswing, with capital and risk appetite returning as the public markets thaw. Nothing is guaranteed, but founders starting or early on their journey now are much better positioned than those who, unfortunately, got caught in the eye of the storm.

Founders reading advice to slash their headcount, dramatically cut marketing budgets, aim for ‘default alive’ or shut down their company, should think carefully about whether that advice is relevant and proportional. In these challenging times, many commentators are taking worst-case scenarios to generate clicks, or extrapolating their individual experiences to make assumptions about the entire venture capital market.

Being the founder of an early-stage company has always been hard. It is harder in 2022 than in 2021, but not materially harder than it has been over the past few decades. The right approach is cautious optimism, shutting out the noise, taking advice from a small number of people you trust, and not letting fear dictate your actions.

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Amazon may lay off 20,000 employees, including managers: Report

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Amazonmay lay off about 20,000 employees across divisions as the company reevaluates its pandemic-induced hiring spree, according to a media report.

A Computerworld report stated that the tech giant could lay off employees across the company, including distribution centre workers, technology staff, and corporate executives. Staff at all levels will likely be affected, it found.

Last month, the New York Times reported that Amazon plans to lay off approximately 10,000 people, and “the cuts will focus on Amazon’s devices organisation, including the voice-assistant Alexa, as well as at its retail division and in human resources”.

However, according to Computerworld, the layoffs could impact nearly double the number of employees– roughly 6% of the company’s corporate employees and about 1.3% of its global workforce of more than 1.5 million composed primarily of hourly workers.

YourStory could not independently verify the report.

Corporate staff have been told that employees will receive a 24-hour notice and severance pay, in accordance with their company contracts, the Computerworld report noted. “There is a sense of fear among employees in the company as the news has come out,” the report added, quoting a source who was informed directly about the layoff effort.

The layoffs would be the largest staff reduction in Amazon’s history.

“There is no specific department or location mentioned for the cuts; it is across the business. We were told this is as a result of over-hiring during the pandemic and the need for cost-cutting as the company’s financials have been on a declining trend,” the source told Computerworld.

After the New York Times report, Amazon Chief Executive Officer Andy Jassy shared some information about role eliminations in a note. Jassy confirmed that layoffs were occurring, though he did not specify the planned number of employees to be laid off.

“Our annual planning process extends into the new year, which means there will be more role reductions as leaders continue to make adjustments. Those decisions will be shared with impacted employees and organisations early in 2023,” Jassy wrote in the message, noting that Amazon had already communicated that layoffs would occur in the Devices and Books businesses, and would be extending a voluntary reduction offer for some employees in the People, Experience, and Technology (PXT) organisation. 

“We haven’t concluded yet exactly how many other roles will be impacted (we know that there will be reductions in our Stores and PXT organisations), but each leader will communicate to their respective teams when we have the details nailed down,” Jassy noted.

Meanwhile, the Computerworld report noted that employees on Amazon’s robotics team have been laid off.

Amazon’s muted third-quarter earnings as well as disappointing fourth-quarter projections led the company’s stock to plummet. Its third-quarter earnings were severely impacted by unpredictable consumer shopping habits and inflation. 

Amazon is likely to lay off several employees in India across divisions, according to media reports. Last month, Amazon confirmed that it will shut down its wholesale unit Amazon Distribution. This is the third business unit to be closed after the e-commerce giant announced the wrapping up of Amazon Academy and the food delivery business in India.

Globally, tech companies have announced layoffs as part of their cost-cutting efforts. In November, Meta CEO Mark Zuckerberg announced that the company had decided to reduce the size of its team by about 13%, cutting over 11,000 jobs. In the same month, Elon Musk reduced half of Twitter’s workforce or about 3,700 jobs at the social media firm.

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Unlock The Entrepreneurial Potential Of Your Team With Employee-Ownership

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A strong team of many outperforms even the most hardworking of entrepreneurs on their own. But when hiring employees, freelancers and contractors, how do you ensure they have the same entrepreneurial skills and drive that you do as your company’s owner? Is it unrealistic to expect employees to be motivated and committed to an organisation they didn’t found?

Nicki Sprinz thinks she has cracked the code of unlocking the entrepreneurial potential of your team, and the answer lies in employee ownership. Sprinz is managing director of B-Corp certified ustwo London, a company of over 200 employees, and cofounder of Ada’s List, an 8000-strong community designed to support women working in the tech industry. ustwo has recently become employee-owned and has already seen the benefits of breaking down the distinction between owners and employees.

According to the Employee Ownership Association, this way of working can improve productivity, support more resilient regional economies and empower team members, resulting in them being far more engaged. Sprinz explained the main benefit for entrepreneurs of this model along with practical tips for managing directors and company founders to make the transition to becoming employee-owned.

Employee ownership protects the company

“Being employee-owned means existing team members, who are now partners, feel empowered as owners,” said Sprinz. She believes that this encourages everyone to put in the work to uphold a strong company culture and course-correct if they see anything awry.

Whilst this might not happen automatically, a founder can make it more likely that their team upholds the vision. Sprinz has put frameworks in place to ensure everyone has a voice. “We hold open firesides, have elected partner representatives on the board, and ensure there are regular channels of communication for all team members to be part of growing the culture and living the values,” she said.

Keeping the team on board means protecting the company. “There are no surprises about the direction we are taking with the business,” explained Sprinz. “We involve everyone in the decisions we make on our projects and ensure we are accountable, both commercially and ethically.”

Attract and retain top talent

In a competitive market, how does your company attract and retain the best talent in the world for the benefit of your clients? Employee-ownership could be the solution. Not only does it make job listings stand out, but it attracts individuals who are like-minded and think long term. They are committed to a future with whichever company they choose to join and are prepared to push themselves to make it happen.

“High quality potential recruits and employees are interested in values and purpose,” said Sprinz. “Being able to talk about employee ownership helps you stand out in a tough hiring market. We have several interview stages so a candidate can get to know us as well as we’d like to know them.”

Sprinz’ interview stages aim to weed out “cultural and value mismatches that ultimately lead to an unfulfilled team.” They ask candidates multiple questions about their values and examples of them in practice, and they encourage candidates to probe with questions about ustwo. They also “publicise the salary for all open roles and candidates have the opportunity to meet other members of the team,” she added.

Control quality

When scaling a business, ambitious entrepreneurs cannot afford to let quality slip. Growth at all costs is a false economy that ends with the business back at square one and having to work harder to undo reputational damage. “A more entrepreneurial team ensures quality stays high,” explained Sprinz. Not only do your team members care deeply about the work they do, they also know they benefit from company growth, so they are incentivised to keep raising the bar.

“If your team is invested in the long term financial success of the company, they also feel pride that their work contributes to overall success,” said Sprinz. “They respond by raising the bar on their work.” Sprinz also believes that, “Regular transparent sharing of financial results and metrics maintains dialogue on personal and company impact.”

Direct the future

An employee-owned company has options for the future. The owner might one day want to step aside or sell, and the company’s succession plan will already be in place. In the meantime, the company has hit new heights and progressed with new ideas because its foundations are solid.

Like Maslow’s Hierarchy of Needs, you cannot reach self-actualisation without warmth and shelter, and a company cannot break through ceilings with constant recruitment issues. When team members are bought into the company, they are bought into its future too, making more certain outcomes for everyone involved.

“The partner representatives on the board surface the priorities of the rest of the team and ensure the conversations of the board are directed accordingly,” explained Sprinz. “The representatives are actively part of the bigger picture and playing a huge part in shaping the company’s future.”

Unlock the entrepreneurial potential of your team by exploring employee ownership, advised Sprinz. The best people will be proud to tell their friends that they are part-owners of the place they work. They will feel valued and listened to and respond with their effort and devotion. Could employee ownership be the right step forward for you?

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With $3M new funding, Egyptian startup OneOrder sets out on growth drive • TechCrunch

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OneOrder, Egypt’s supply chain solutions provider for restaurants, has raised $3 million seed funding led by Nclude with participation from A15, and Delivery Hero Ventures. The latest funding brings the total funding raised by the startup to $10.5
million, including $6.5 million working capital financing from financial institutions.

Launched in March this year, OneOrder makes it possible for restaurants to order food supplies through its online platform, solving the fragmented supply chain challenges that lead to erratic prices, waste, quality issues, and storage cost.

By using its platform, restaurants no longer have to deal with tens of suppliers, and can order only what they need, for next day delivery, stemming wastage and doing away with the need for warehouses. The platform also ensures operational efficiency and helps restaurants save money by leveraging OneOrder’s economies of scale.

The startup plans to use the funding to scale its operations in Egypt including increasing its warehouse footprint, and to explore growth opportunities within the Gulf Cooperation Council (GCC) region, and Africa.

“We are exploring Saudi Arabia and expanding south into our continent. I think Africa has a lot of markets that feel the same pain points that Egypt does,” said OneOrder co-founder and CEO, Tamer Amer, who co-founded OneOrder with Karim Maurice (CTO), also founder Cube, an online restaurant-reservation service.

“The solution that we’re providing has shown that this industry is ready for tech solutions…[and] we are working on a more substantial operating system for the restaurants not just the supply chain and inventory management system, rather the full cycle that would turn their operations automatic by using AI and machine learning capabilities to drive the supply chain,” said Amer, a restaurateur for over two decades, initially in the U.S before settling in Egypt from 2008.

Amer, told TechCrunch that the sourcing challenges he experienced operating two restaurants in Egypt — Fuego, a sushi bar, and Longhord Texas Barbeque — inspired the launch of OneOrder, to serve the country’s total addressable market of 400,000 restaurants.

“I had always taken the supply chain in the U.S for-granted; we would order and get the supplies all the time. We didn’t have to worry about shortages or price changes. I realized that Egypt is so underserved and the industry is really doing a lot of things that we shouldn’t be doing,” he said.

“… restaurants should not have a full-time job monitoring the supply chain and procuring products because it takes away focus on the core business, which is serving customers. So that’s where the idea really started,” he said.

OneOrder plans to, through its partners and backed by its extensive data, begin extending working capital financing options to restaurants as a way of helping them scale their operations.

Basil Moftah, the managing partner at Nclude, said: “The product-market fit of the OneOrder solution is very impressive, along with the positive impact it is delivering to all stakeholders in the value chain. Through the use of technology and alternative data, OneOrder’s embedded financing will help underserved clients who are unable to secure traditional financing. This aligns perfectly with our investing philosophy and we are glad to be embarking on this journey with the team.”

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