YC Warning Another Signal to Focus on Ecosystem?

Incubator and investment fund Y Combinator just sent a message to their founders and portfolio companies recommending they prepare for the worst.

The message focused primarily on the need to get scrappy and lean due to contractions in the funding market. It explained the incentives facing investors that will likely drive fewer deals at lower valuations - especially to new companies - even if not fewer meetings.

There was advice about controlling costs, trying to get into the black, and planning for 24 months without outside capital.

But there was also a reminder that downturns mean big upside for those who navigate them well:

Remember that many of your competitors will not plan well, maintain high burn, and only figure out they are screwed when they try to raise their next round.  You can often pick up significant market share in an economic downturn by just staying alive.

YC's warning, paired with a strong endorsement of an ecosystem-first approach from BVP and A16Z, means the partnership approach is more needed than ever.

The most cost-effective way to grow is with partners. When direct sales and marketing budgets are squeezed and high CAC experiments nixed, companies need to double-down on co-innovation, co-marketing, and co-selling.

Those with the best partner ecosystem are best positioned to weather the storm.

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