How VCs and Startups Are Cutting Back on Holiday Parties to Save Cash

  • For startup founders and venture capitalists, the office holiday party is a December tradition.
  • But poor financial forecasts for the new year are leading VCs to tell founders to quickly cut costs.
  • Many avoided their parties, but some found creative ways to celebrate anyway.

For many venture capitalists and the startup founders they invest in, December is synonymous with two things: end-of-year paperwork and office holiday parties. Last-minute business is usually balanced with collegial cheer at a rented event venue or a restaurant that features an open bar and lots of tinsel.

But this year, holiday parties are looking a little different in startup-land.

“Usually around this time, my social media is exploding with photos from holiday parties, but this year it’s been radio silent,” said Oriana Papin-Zoghbi, the founder of the Y Combinator-backed ovarian-cancer -research startup AOA Dx.

After years of seemingly unstoppable growth, the “Patagonia vest recession” is in us. From social media to e-commerce to enterprise software, once high-flying companies across the digital economy have been hit by a tidal wave of layoffs and forced to cut spending on cherished passion projects.

Meanwhile, venture capitalists are warning of impending “death spirals” and ordering their portfolio companies to cut spending as much as possible, which now includes the beloved office holiday party. Now, with deal volume slowing and many founders hesitant to raise new venture funding for fear of a dreaded “down round,” holiday frugality can be felt.

Insider spoke with seven startup founders and investors to learn which strategies they’re using this holiday season to save as much capital as possible in an increasingly shaky market.

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“We’re in a new world where you can’t burn like you used to,” said Brian Hirsch, the founder and managing partner of Tribeca Venture Partners. He added that reducing the “burn rate,” or the rate at which startups spend their cash reserves, which often fund year-end celebrations, has been a key topic of conversation at every board meeting. which he attended for the past few months. .

“Every investor, unless they live on another planet, advises their portfolio to reduce spending,” Hirsch said.

Some startups opt for low or no budget parties

Brooke Kiley, a partner at VMG, told Insider that questions about holiday parties come up often in her conversations with founders, and she advises startups to have fun even on a 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 should think about what’s most important for their organization’s culture, whether it’s relationship building or letting off steam.

“Align those goals with your holiday party, and you can do something powerful and economical,” she says.

For Nadya Okamoto, the 24-year-old cofounder of consumer menstrual-products company August, renting a venue as a small seed-stage startup was out of the question. However, he and his team were able to host a “zero-budget” holiday party this December at their New York office by partnering with another startup, Wander and Ivy, an organic-wine producer, which served with drinks.

He and his coworkers set up and took down the decorations themselves, staying in the office until past 10 the night before the party.

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“We sweep the floor, put up lights with thumbtacks, and we order paper snowflakes,” he said. “Our whole community knows we’re no-nonsense, but it doesn’t feel silly — they know how much we care about the company and the community.”

Jessica Spivack Lowenstein, head of K50 Ventures’ platform, said the more intimate “micro parties” have been a way for her fund to still bring its portfolio founders and investors together this year without breaking the bank. bank.

“People are getting creative to find ways to bring people together in fun ways that are cheaper,” he said. “If companies and companies do it, it’s smaller, so people do it for the team and not the whole network – it’s easier to connect with people because it’s a small group.”

Spivack Lowenstein shared that K50 Ventures chose to hold smaller, regional founder meetups in São Paulo and Bogota, where many of their portfolio companies are based, instead of a big office party near their headquarters, since the company held a big event for New York Tech Week just a few months ago.

It’s become the preferred party style for Artem Semjanow, the founder and CEO of healthtech-AI startup Neatsy.ai. He told Insider he chose to host a company-wide trip to a bathhouse around the holidays, a tradition the seed-stage startup can continue this year because it only employs 12 people.

“There is a beautiful place in the mountains where you, steamed from the bath, go down the water slide right into the frozen mountain river,” he said. “After this, sit wrapped in towels in a large vat with the decoction and look at the stars. Many great ideas were born during this time.”

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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 on big year-end expenses.

“In better market times, we would have done our team retreat in person,” he said, but he still plans to make the party fun for his team by sending them a care package ahead of time. treats 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, the CEO of venture-backed insurance startup Kin, said he is looking to make cuts wherever he can, because he is reluctant to raise more money in the current environment, where the Investments often come with onerous terms and lower amounts.

“We have to be able to, you know, sustain our growth with our own resources,” Harper said, “because I don’t know if I can raise more equity.”

But while holiday festivities can be an easy place to cut costs, Harper says it may not be enough for companies that are truly struggling.

“You should maybe cut some travel, maybe you don’t have a big holiday party, but that’s all a drop in the bucket compared to head count,” he said. “People are the most expensive.”



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