VIDEO: Why too much cash can lead to startup failure

How has the pandemic affected the startup ecosystem and changed the industrial landscape of venture capital?

For one, according to Anu Hariharan, partner at YC Continuity, there are a lot more funds investing in startups – however, there is also “way more supply of capital than there are companies to be funded.”

Secondly, Hariharan says – speaking at last month’s Phocuswright Conference in a virtual fireside chat with Altimeter Capital founder and CEO Brad Gerstner – “liquidity has been amazing the past two years,” noting the blockbuster IPOs of companies including DoorDash and Airbnb in 2020.

“[In those cases] you’re also seeing returns, because people have realized tech companies are no longer purely software-based; it’s pervasive across industries and has the opportunity to have monopolistic share.”

In turn, more funds are interested in investing in tech, and more hedge funds are interested in investing in startups, Hariharan continues.

However, at YC, the incubator advises its batch companies to be thoughtful about how and when they raise money.

“If you have too much cash, you don’t really end up narrowing the focus and you don’t have that same grit or perseverance across the team to really narrow the focus and execute to the level that you need as you scale.”

In a broad-ranging interview, Hariharan also discusses why “unicorn” startups no longer have the cachet they used to, as well as the future of hybrid work and what the metaverse means for travel.

Watch the full interview below.