Just over a year ago, I published a story about how the good times in Silicon Valley were screeching to a halt.
A founder told me that their investor at Tiger Global was starting to ask more questions. Sequoia Capital published a new slide deck cautioning their portfolio companies of a “crucible moment” in the private markets. Instacart cut its valuation. Y Combinator said in a letter: “Prepare for the worst.”
But the private markets operate at a lag, and—just as it can take a decade to learn whether someone is a good investor or not, it also takes a long time for the ripple effects of deflated macroeconomic conditions to run their course.
It’s only now that we’re seeing venture capital megafirms slice the size of their next funds. And it’s only been the last six months or so that the funding pullback has really started showing up in the numbers in any kind of meaningful way. Corporations are ditching companies they once paid a pretty penny for. Startups are filing for bankruptcy. Late payments are amassing.
But what does all of this actually mean for a founder who has a great idea and still wants to build something? I spent six months shadowing a pre-seed peer-to-peer marketplace called Yoodlize, whose team works out of a double-decker bright blue school bus, to find out. The married cofounders started fundraising in mid-September, and I followed along during their six-month fundraising process and launch in Hawaii. Yoodlize may just be one company, but the team’s difficulty in getting a check offers insight into the broader market, where capital is suddenly hard to come by, where investors are getting more defensive on term sheets, and where venture capitalists are reverting to the founders and markets they already know best.
“In this climate, we made sacrifices,” Yoodlize cofounder and CEO Jason Fairbourne told me during one of our conversations. While Fairbourne has built other companies in the past and fundraised before, he said he’s never had so much trouble just getting a meeting.
When Fairbourne was in San Francisco for tech week in early November, several investors told Jason they weren’t taking meetings with founders that weren’t already in their pipeline, he says. Some agreed to get coffee, but were upfront: We’re not accepting formal pitches. Fairbourne had planned a subsequent trip to Los Angeles, where some of the successful consumer-focused startups and marketplaces have congregated, but Fairbourne couldn’t get enough face-to-face meetings to make the trip worthwhile, so he canceled it. “We did a few emails and chats with people from L.A. but nothing went anywhere,” Fairbourne says, noting that investors he reached out to were “more or less, just not responding.”
I detail the fundraising process, how investors are expecting more give on the term sheet, and where Yoodlize ended up. You can read the full story here.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.
