Paypal and Affirm co-founder Max Levchin said Thursday that the stage a start-up is in is a major factor in whether the company will survive the economic downturn.
“It’s really stratified. I think this is the very best time to be either a late-stage, well-funded start-up, because the competition is thinner … [or] even better perhaps, this is the time to hunker down, go 10,000 feet below ground and build something truly amazing,” Levchin said on “Closing Bell.”
For companies in the middle part of the growth cycle, the situation is tougher, Levchin said. A wave of layoffs has already hit the tech world, with start-ups cutting nearly 4,000 jobs in March.
“It’s the mid-markets, or the series B unprofitable start-ups, where every investor has to make a decision — ‘Do I keep throwing good money after bad or do I back out?’ — so I think that’s where the situation is the toughest,” Levchin said.
The entrepreneur said the economic slowdown has created a big opportunity for people with great ideas.
“You can be sure that not that many people are dreaming huge because so many are just trying to survive. And so if you can get yourself in front of a great idea and inspired and hopefully venture funded … this is the greatest time to start a company,” he said.
Levchin did say that Affirm, his current company, which helps consumers finance large purchases, was seeing that midmarket e-commerce start-ups were experiencing a lot of demand during the crisis but smaller companies were struggling.
Affirm announced a series F round last year that raised $300 million. That brought the total equity raised by the company to more than $800 million.