Editor’s note: Sabya Das is a Partner at Moneta Ventures, a Sacramento-based venture capital firm that invests in early stage technology companies. He’s a graduate of the University of California, Berkeley, where he majored in cognitive science and computational modeling.

What’s your role at Moneta?

I joined Moneta in 2014 as an Analyst and Member of the founding team. We started raising our first fund with the core idea that we could build the VC firm that the Moneta team members would have wanted to partner with themselves as founders and entrepreneurs in their previous ventures. Our firm has since scaled to 10 investment team members with over $250 million in committed capital. Today, I’m the partner overseeing Moneta’s investments on the West Coast and internationally, focusing on companies across verticals, but with a concentration in MediaTech, MarTech, and FinTech. I also serve on the board of directors at several Moneta portfolio companies and am very operationally involved across go-to-market strategy, product development, and corporate development.

How would you describe Moneta’s investment thesis and what differentiates you from other VCs?

Moneta is an early stage venture capital firm investing in enterprise technology businesses across the West Coast and Texas. Moneta was founded by entrepreneurs to be outstanding long-term partners to entrepreneurs. The entire partnership knows what it’s like to start and scale a business, and the core ethos of the firm is to have a relentless focus on being a strategic and operational value-add for the companies that we invest in. We are high conviction investors and have the ability to be the first institutional check into a company and to continue to support it through Series B.

From an operational standpoint, our team leverages its collective expertise to provide hands-on support across sales, marketing, capital raising, corporate development, and operations to drive significant value beyond capital investment. Our team aims to be the first call that portfolio company founders make when faced with tough decisions and adversity.

Beyond the operational value-add that the Moneta team provides directly, we have a highly active, diverse, and engaged limited partner base that supports our portfolio companies with vertical-specific domain expertise and customer introductions. In addition to Moneta’s entrepreneurial DNA, from a geographic standpoint, we focus on making investments in underserved markets outside of the valley. This focus drives deal flow from top-tier, oftentimes overlooked businesses.

In all, these factors make Moneta Ventures a highly differentiated alternative for top-tier founders.

Given everything that’s happened so far this year from a macroeconomic perspective, how do you see the VC landscape evolving over the next 12-24 months?

Everyone knows about the valuation crunch that’s happening across Series A+ companies. What we’re seeing and expect to continue seeing is that while there will be some delta in valuations for median pre-seed and seed deals, later-stage deals will experience the most volatility. We have seen some revenue multiple contraction across our early stage deal flow, but given the record dry powder sitting on the sidelines, we believe demand will remain strong for top-performing early stage companies in spite of the macro uncertainty.

I also think that given the broader volatility, investors will be much more focused on capital efficiency and core unit economics going forward, even for early stage businesses. This means that companies will have to have compelling fundamentals across customer acquisition costs, customer retention, scalability, and capital efficiency, not just top-line revenue growth. Plus, we feel that companies that can demonstrate the ability to achieve profitable or nearly profitable operations early in their lifecycle (without sacrificing growth) will be highly sought after and will command significant valuation premiums relative to more capital-intensive businesses.

In our view, this is a healthy correction in the market and a clear sign that the pendulum is swinging back as late-stage investors have a renewed focus on sustainable company fundamentals.

In our view, this is a healthy correction in the market and a clear sign that the pendulum is swinging back as late-stage investors have a renewed focus on sustainable company fundamentals.

What advice are you giving your portfolio companies to survive and thrive over what may be a tumultuous year ahead?

Given our operational experience, a lot of our advice is tactical in terms of how they can best deploy their sales and marketing dollars, particularly when they have a fleshed-out product, but haven’t demonstrated scalable product market fit. We’re reminding our companies not to completely pull back on their digital advertising and marketing spend — even in challenging times — but rather to experiment and figure out which channels and strategies are most effective as early on as possible. That way it’s easier to get to the metrics that later-stage investors will care about when the company next goes to raise capital, such as what their customer acquisition costs are on a fully loaded basis or how to improve their contribution margin to be in the top 10 percent of SaaS companies.

Generally speaking, we are advising our portfolio companies to use this time period as an opportunity to stay aggressive while remaining disciplined on capital allocation and ensuring that the company has strong cash reserves. We think the best companies will emerge even stronger out of these volatile market conditions. They will be able to continue growing, taking market share from competitors that hesitate and take their foot off of the gas pedal.

How do you frame your conversations with founders around layoffs and OpEx reductions if they’ve never experienced a recession before?

I typically think that layoffs should be a measure of last resort for our portfolio companies. We have always cautioned them to remain disciplined on hiring across cycles to avoid getting out over their skis on costs. If a company’s cost base and OpEx do become problematic, we advise founders to remain pragmatic and assess the root causes of their current position before trying to restructure the problem away. This approach often treats the symptoms of a business’s cash constraints or burn rate, and not the underlying causes. One option is to optimize sales and marketing spend as I mentioned before. Another is to raise bridge financing at less favorable terms/valuations.

Ultimately, it is a founder’s job to act as a fiduciary to shareholders and layoffs are sometimes inevitable during recessionary periods to contain costs and extend runway. When layoffs are unavoidable, it’s important to try to help your employees find a new company, to offer the best package that you can, and to make whatever concessions are possible around things like vesting. We also always caution founders not to hire and fire too quickly. Although they may think doing so will be perceived as a sign of strength, it’s often just a disruptive, costly, and time-consuming move that can affect their company’s long-term growth trajectory.

Tactically speaking, after layoffs, it’s essential to double down on stock-based incentives for key team members to ensure that they are aligned with the business for the long run.

Are you seeing many down rounds?

No, we have not seen many down rounds within our portfolio or with early stage companies that we are evaluating. We’re more likely to see multiple reductions on a go-forward basis. We see companies that are raising their Series B but that might have raised at too high of a valuation before. Fortunately, they’re generally well capitalized and can afford to wait rather than raise a down round. In general, we are seeing down rounds happening more frequently at the growth stage and haven’t really seen them trickle down to early stage financings yet. Although we are not seeing down rounds, early stage valuations have reverted back to the mean and there is a lot more discipline around entry multiple and fundamentals.

What tech trends are you most excited about and where do you see the biggest opportunities for value creation over the next few years?

There’s an unprecedented level of innovation happening within the US and across the globe. We are very bullish on the next decade of growth as technology scales across every major industry.

Technological advances are also creating new segments of the market such as AI/deep learning, precision medicine and new therapeutics/drugs, digital health and new modalities of care, and enterprise automation.

One of the most exciting trends that I am seeing is the maturation of artificial intelligence and machine learning companies. AI and ML technology is finally leaving the lab and academia and beginning to proliferate all aspects of enterprise software. In our view, this AI/ML will underpin all major enterprise software platforms and touch every aspect of the enterprise within the decade. The technology and tools that enable this transformation will be big winners. One specific vertical of focus for us has been in the conversational AI space. We think that there’s a lot of runway for improvement and new use cases for conversational AI, and that it will drive massive changes across healthcare, sales and marketing, and customer support/success.

Within digital health, for example, we’ve seen several emerging companies that are building technology to transform behavioral health. Natural language models allow new technologies that monitor patient visits and leverage keywords, sentiment analysis, and tone/clinical markers to provide decision support to a patient’s care team. This is lowering the cost of care, improving patient outcomes, and has the potential to drive massive efficiencies as it is adopted.

I’d also add that in this market we see a lot of people building companies that take tried-and-true technologies and processes to industries that are a little behind the times, such as bringing SaaS analytics platforms to the agricultural industry. We get just as excited about these businesses.

Can you tell us about some of your recent investments?

Absolutely. One is called VideoVerse, a video technology platform that uses AI to automatically take short live video streams of TV, like a soccer match, identify what’s happening in the clip, and then instantly share it on social channels. We’re excited about this technology because it has the potential to fundamentally change how people engage with content.

Another interesting company is TruckBook, which helps truck owner-operators find and source loads, which can otherwise be very difficult and time-intensive if they don’t have a team to help. TruckBook’s solution intelligently and automatically gets access to dedicated loads and real-time load boards that then creates routes to maximize truck owner-operators’ earning potential. That way they don’t have to find and manage loads or worry about backhauling (i.e., driving back empty) which is inefficient for them and a massive and unnecessary source of emissions.

Finally, I’d mention Surf, a Toronto-based company that’s developed a free browser extension that gives users the ability to control and monetize their data. It’s fully transparent about its data collection and compensates users for whatever data they share, allowing them to earn points that can be redeemed for gift cards and other prizes in exchange for whatever fully anonymized they feel comfortable sharing.

Thanks for sharing your insights, Sabya. We appreciate it!