What founders can escape venture's no-man's land?

Valuations

Current market valuations present a complex landscape for founders, with distinct strategies required for different sectors. Anu Hariharan emphasizes that Internet businesses like DoorDash and Airbnb can achieve 20 to 25 times EBITDA, reflecting their cash flow efficiency 1. However, software companies often rely on revenue multiples due to their lack of profitability. She advises founders to consider repricing strategies, as demonstrated by Monza during the pandemic, which ultimately led to significant growth and cash flow positivity 2.

Internet businesses have always traded on EBITDA multiples. And that's the beauty of consumer Internet businesses, because they can show earnings and they show profitability.

--- Anu Hariharan

Repricing can provide a new baseline for growth, allowing companies to invest in operations rather than marketing.

   

Venture Capital

The future of venture capital is marked by increased competition and the need for differentiation. Anu Hariharan predicts that only a small set of funds focused on fundamentals will achieve top returns over the next decade 3. She notes the oversupply of venture funds chasing a limited number of companies, particularly in the AI sector, where valuations have skyrocketed to 2021 levels 4.

The winners are going to be people who really have a product and a differentiation for funders and therefore are able to attract them at a reasonable price.

--- Anu Hariharan

Founders are advised to build relationships with investors early and operate efficiently, as raising capital may become increasingly challenging.