This is the best time to get funding as a startup

Editor’s note: Jim Lanzone is CEO of Yahoo Finance’s parent company, Yahoo.

Yahoo CEO Jim Lanzone has written many internet success stories in a career spanning nearly three decades. From piloting the ship at Ask.com to launching CBS Interactive, Lanzone has built its reputation on turnaround stories.

However, he credits his success to early failures with startup eTour, an Internet search and navigation company he co-founded in 1998 at the height of the dot-com boom.

“We’ve been up and down,” Lanzone said at Yahoo Finance’s All Markets Summit (video above), referring to eTour’s crash during the dot-com bust. “We had raised $50 million when that was big money and almost went public. When the market crashed, we crashed. It was heartbreaking.”

With fears of rate hikes and a slowing economy rocking the tech sector once again, Lanzone draws parallels to his experience to send a message to startups today: Reevaluate fast, get costs under control and raise capital fast.

“This is the best time to get funded as a company,” Lanzone said, echoing comments made by famed investor Bill Gurley, general partner at Benchmark. “If you look at each of these crash phases, some of the best companies have been born.”

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The volume of venture capital deals has dropped dramatically this year as startups face increased scrutiny of business fundamentals amid a global economic slowdown. The number of deals fell for the third straight quarter in the second quarter, down nearly 20% sequentially, with the number of deals falling to the lowest level since the fourth quarter of 2020, according to Pitchbook data.

But venture capitalists have also continued to raise money through funding rounds. In the US alone, VCs have amassed almost $300 billion in dry powder waiting to be used. While that doesn’t necessarily guarantee enough capital to weather a downturn, Lanzone points to startups that have emerged from economic recessions: Uber (UBER), Airbnb (ABNB), WhatsApp (META), and Pinterest (PINS) are among a handful of them companies formed at the height of the Great Recession.

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“If you’re an existing company, one that went through the boom and raised money during the boom at pretty rosy valuations and you went through hiring and perks for your business,” Lanzone said, “you really need to reevaluate quickly. Get those costs under control, reevaluate how you view your market and valuation.”

Lanzone, who joined Yahoo from Tinder just over a year ago, added, “I think the companies that are adapting fastest…are the ones that are going to make it.”

Lanzone experienced the ups and downs of the tech cycle early in his career. A few years after co-founding eTour, he saw the company’s valuation plummet during the technology crash, leading to its acquisition by then-search engine AskJeeves.com. There, Lanzone led the turnaround of a public company – rising from SVP of Product Management to CEO. He led the company’s rebranding to Ask.com. Lanzone followed this up by founding another company, Clicker. Two weeks after receiving the funding in 2009, he said the market collapsed again.

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As the current CEO of Yahoo, Lanzone is in the midst of yet another reversal, although he prefers not to define it that way. With around 900 million monthly users across all Yahoo assets and billions in revenue, Lanzone sees a real opportunity to strengthen individual Yahoo brands and ultimately spin them off separately.

And he says this time he has the added benefit of being able to reverse the trend without shareholder pressure.

“If you look at it objectively [all Yahoo] fortune, would you say this is an amazing investment opportunity,” Lanzone said. “Given that we’ve been spun off from Verizon, we’re private again. (Now owned by Apollo Global Management.) That allows you to do the things you need to do behind the scenes to improve it.”

Watch the full interview in the video above.

Akiko Fujita is a presenter and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita

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