“Companies don’t lay off their best employees first. These people will find it hardest to regain employment because they will be “on the market” the longest until things return to growth,” said Avi Eyal , founder and managing partner of Entrée Capital. “The culture of working from home is changing back to being in the office a lot more and fantastic benefits are being withdrawn. Productivity per employee is likely to return to more normal levels.
These were some of the predictions he shared with CTech when asked how the layoffs seen in the sector recently will affect the market. Entrée Capital provides venture capital for seed to Series B companies around the world and has $1 billion under management.
Name of Fund/Funds: Entry Capital
Total amount of the fund: $1B under management
Partners: Avi Eyal, Ran Achituv, Eran Bielski, Adi Gozes
Notable / select portfolio companies: monday.com, Riskified, Breezometer, Open Web, Fundbox, Rapyd, HiBob, Snapchat, Glovo, Coupang, PillPack, SeatGeek, Stash, Gusto.
Eyal joined CTech for its “2022 VC Survey” to share some of his insights and recommendations for companies as they approach 2023.
If 2020 was the year of the pandemic, and 2021 was the year of records, how would you define 2022 in the VC sector?
2022 is the year when reality finally sets in. We are in a recession and it is not mild. Things will get worse, not better. The war in Ukraine, inflation and government changes in China, the USA, the EU, and the UK will have long-term and far-reaching effects on everyone. Tech is not an island, it is part of every business and will win and lose as the rest of the business will.
Who are the big winners of 2022 and why?
Companies with a positive free cash flow.
Who are the big losers of 2022 and why?
Tech companies from seed to late stage that have raised funds at a high valuation, that have an expense base and that will not survive 2023.
What do you expect in the VC sector in 2023?
There is much less dry powder than most people think. Most of the dry powder is actually management fees and reserves, and funds will find that unless they are in the top 10 dollars to put into this asset class.
What global processes affect (positively and negatively) the Israeli market?
All global processes affect Israeli tech – quite simply, Israeli tech depends entirely on foreign sales. If foreign buyers stop making decisions, cut expenses and let go of staff, it will affect Israeli tech directly and in the most important way: revenue and cash flow.
How should different companies prepare for the coming year?
It is probably too late to prepare. If you haven’t made the hard choice now, you’re probably on a bad track.
What sectors in high-tech should we look at in the coming year – and why?
Everyone will suffer a loss. HR tech and cyber especially so.
HR: Do the layoffs that have already happened and those to come help in any way to fix the plight of the companies in the last 2-3 years?
Companies don’t fire their best employees first. These people will find it hardest to regain employment because they will be “on the market” the longest until things return to growth. The culture of working from home is changing back to being in the office much more and fantastic benefits are being withdrawn. Productivity per employee will likely return to more normal levels.