- For startup founders and venture capitalists, the office party is a December tradition.
- But poor financial forecasts for the new year are prompting venture capitalists to tell founders to cut costs fast.
- 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 means two things: end-of-year paperwork and end-of-year office parties. Last-minute business is usually balanced by collegiate cheer at a rented event venue or restaurant that offers open bars and lots of tinsel.
But this year, the Christmas holidays in startup land look a little different.
“Usually around this time, my social media is blown up with pictures of Christmas parties, but this year it’s been radio silent,” said Oriana Papin-Zoghbi, founder of AOA Dx, an ovarian cancer research start-up backed by by Y Combinator.
After years of seemingly unstoppable growth, the “Recession of vests in Patagonia” it’s on us Since social media a electronic commerce a business softwareonce high-flying companies in the digital economy have been hit by a wave of layoffs and forced to Cut spending on beloved passion projects.
Meanwhile, venture capitalists have been warning of imminent “death spirals” and instruct their portfolio companies to cut spending whenever possible which now includes the beloved office Christmas party. Today with decrease in turnover and many founders are hesitant to raise new venture funds for fear of a dreaded ‘down“Holiday frugality can feel especially important.
Insider spoke to seven startup founders and investors to learn what techniques they’re using this holiday season to save as much capital as possible in an increasingly volatile market.
“We’re in a new world where you can’t burn the same stuff as before,” said Brian Hirsch, founder and managing partner of Tribeca Venture Partners. He adds that lowering the “consumption 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 to date. who attended in recent months. .
“Every investor, unless they live on another planet, is advising their portfolio to cut spending,” Hirsch said.
Some startups are opting for low- or no-budget parties
Brooke Kiley, a partner at VMG, told Insider that questions about the holiday season have come up often in her conversations with founders, and she’s advising startups to have fun even when they’re on a tight budget.
“My biggest piece of advice is that you can still do something special, meaningful and impactful at a reasonable cost,” he said, adding that teams need to think about what’s most important to their organization’s culture, whether it’s building relationships or venting.
“Align those goals with your holiday party, and you can do something powerful and profitable,” he said.
For Nadya Okamoto, the 24-year-old co-founder of August, the consumer menstrual products company, renting a place as a small startup was out of the question. Still, she and her team were able to throw a “zero budget” Christmas party this December at her New York office by partnering with another start-up, Wander and Ivy, an organic winemaker, who supplied the drinks. .
She and her coworkers set up and took down the decorations and stayed in the office until well after 10 p.m. before the party.
“We were sweeping floors, tacking lights on and ordering paper snowflakes,” he said. “Our entire community knows we’re rudimentary, but it doesn’t feel rudimentary – they know how much we care about the company and the community.”
Jessica Spivack Lowenstein, head of platform at K50 Ventures, said the more intimate “microparties” have been a way for her fund to still 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,” he said. “If companies and firms 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 founders meetups in São Paulo and Bogotá, where many of its portfolio companies are located, rather than a large office party near its headquarters, as the company had organized a big event for New York Tech Week just a couple of months ago.
This has been the party style of choice for Artem Semjanow, founder and CEO of AI and healthcare tech startup Neatsy.ai. He told Insider that he opts to host a company-wide trip to a bathhouse over the holidays, a tradition the early-stage startup can afford to continue this year because it only employs 12 people.
“There’s a great place in the mountains where you, steamed from the bath, slide down the water slide right into the icy mountain river,” he said. “After that, you sit wrapped in towels in a large tub with decoction and look at the stars. Many good ideas were born during this.”
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 big on year-end costs.
“In better market times, we would have done our team retreat in person,” he said, but he still plans to make the party a fun break for his team by sending them a care package beforehand with goodies and games to play together on the call. .
Erin Fabio, 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, chief executive of Kin, a venture capital-backed insurance start-up, said he has been looking to cut back whenever he can because he is reluctant to raise more money in today’s environment, where investments often come fraught with onerous terms and lower ratings.
“We need 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 raise more capital.”
But while the holiday season can be an easy place to cut expenses, Harper said it may not be enough for companies that are really struggling.
“Maybe you should cut back on some travel, maybe you don’t have a big holiday party, but all of that is a drop in the bucket compared to the people count,” he said. “People are the most expensive.”