At the Silicon Slopes Summit this weekend, I had the chance to speak onstage with Vanta CEO Christina Cacioppo.
- The California-based company creates tools to automate security and privacy compliance for other startups.
State of play: We talked about how this year’s sluggish tech funding could affect the culture of the tech industry.
- This got me wondering if Utah’s tech sector might change as well.
What is happening: It’s been very difficult for tech startups to secure funding in 2022 — a downturn that experts say could last for quite some time.
- With fewer investors pouring in less money, those who do are demanding more proof that their money won’t be wasted.
Why is this important: That’s a big change from just a year ago — and from industry norms over the past two decades, when tech investors were more focused on the promise of future revenue growth. .
- This contributed to the tech industry’s reputation for extravagance; if a startup was spending beyond its means early on, it was a sign of confidence, while a careful counting of the beans might even seem pessimistic.
- It also helped create a flashy perks race to recruit and retain employees; Cacioppo recalled a private chef serving him three meals a day in a previous job.
The last: Tech investors are now asking for startups’ “burn rates,” meaning how much money they need to spend per dollar of revenue, Cacioppo said.
- The new pressure to control costs could be painful for many startups.
- But it could also make the industry easier to prove value and less susceptible to empty show.
Between the lines: The shift to working from home has already significantly reduced office expenses, but investors are now expecting even more efficiency.
- Startups may also need to reconsider lavish retirements and hearty freebies.
- Recruitment can focus more on direct compensation and whether an employee likes the product and the job itself, rather than luxury perks.
Enlarge: Utah is a little different from California, and companies might not face such an acute change in the investment climate, said Clint Betts, CEO of Silicon Slopes.
- Early-stage Utah startups attract venture capitalists who don’t expect the investments to pay off for another decade anyway.
What they say : “Based on the types of tech companies being built here, Utah may be a bit more insulated from the current funding environment,” Betts told Axios.
And after: Utah startups still need to prepare for a downturn, which Betts says means developing “a laser focus on productivity, revenue, and talent management.”
