Zume Pizza is a cautionary tale, albeit a day late and a dollar short.

Because what they are calling a “Startup Mass Extinction Event” is already happening.  

They were going to make pizza with robots in moving trucks. Who needs to spin dough in the air anyway? 

It was the brainchild of Alex Garden, and Softbank’s Masayoshi Son (the man who gave $3 billion in venture capital to Adam Neumann at WeWork) was hooked. Zume raised $445M from Softbank and other investors, including Yahoo’s Jerry Tang and Kleiner Perkins’ John Doerr, personally. 

By 2019 it was valued at, wait for it… $2.25B! For real. 

Well, the rest of the story seems, in hindsight, predictable. Using robots to make pizzas in trucks while driving around is a dubious ambition, and it proved fatal. An incongruous pivot to producing sustainable packaging is equally hard to grasp

The point here is that what the startup environment is experiencing is like the effects of climate change – dry, unforgiving, and starting to burn. 

Capital is tight, interest rates are high, and the tolerance for lack of cash flow and profitability has evaporated.

It’s been called the potentially worse collapse of the startup space since 2008, and it’s already here. According to research by January Ventures, 81% of early-stage startups stated they only have less than 12 months of runway left. Leading venture capital players are predicting a “mass extinction event” for early- and mid-stage startups that will make the global financial collapse in 2008 “look quaint” by comparison.

The gloomy prediction for the state of the startup sector aligns with a massive drop in global venture financing throughout 2022. According to GlobalData, the value of global VC dropped by 36% in 2022. In 2021, the value of global VC deals was $512.7B compared with $293.8B in 2020.

Analyzing M&A and VC Activity in Q4 2022, GlobalData revealed that VC activity had dropped for a fourth straight quarter in the final quarter of 2022. Global economic slowdown, the ongoing Russian invasion of Ukraine, high inflation rates, rapidly rising interest rates, soaring energy prices, the looming threat of a global recession, and supply chain disruption are cited as reasons behind negative investor sentiment.

"The Mass Extinction Event for startups is underway," said Tom Loverro, general partner at IVP.

Buckle up.