The Hunter, or the Hunted...

Last year, Oregon State and Washington State were left at the college football altar. USC and UCLA quickly bailed to the Big Ten, followed by Oregon and Washington. Arizona, Arizona State, Utah and Colorado bailed to the Big 12. And, Stanford and Cal improbably joined the Atlantic Coast Conference. Twelve schools quickly become two, with the Cougars and Beavers scrambling for a more permanent home. Corvallis and Pullman are not exactly big media markets though - and both schools were left with no major dance partners. 

While OSU and WSU were left at the altar, they did get to keep the wedding presents (roughly $250m combined) and their conference name. However, neither school is Notre Dame - and effectively had to buy their football games from the Mountain West Conference (to the tune of $23m combined over 2 years). The WCC was far kinder - only charging the schools $1.16m combined to host basically every other sport, including basketball for 2 years. The MWC's money grab won them the short-term, and gives them their own war chest. However, their greed could also spell their quick downfall. 

Losing Boise State, San Diego State, Fresno State, and Colorado State really hurts from a competitive lens. However, from the media rights lens, it could mark the beginning of the end. MWC teams are receiving $4m a year under their current media rights agreement with CBS and Fox (expiring after the 2025-2026 season). The new Pac12 could easily get $10m+ per team (ESPN) for media rights...and become the preeminent west coast conference. The severely injured MWC is left with far weaker schools, an expiring media rights situation, and a shortage of replacements (there are only 134 FBS schools). Additionally, other conferences will likely pick over the scraps, and grab the few remaining properties of value - namely Air Force and UNLV. By 2025-2026, the MWC could be filled with outcasts from other conferences, and former FCS schools (and a weak media rights agreement). 

In many ways, the MWC went from the hunter, to the hunted. By losing their top 4 programs (and likely losing 1 or 2 remaining valuable properties), the MWC is left reeling, and with a big long-term media rights problem. The Pac12 can now poach at will - and only needs 2 more teams to form a regional conference. Given the shifting winds of the conference landscape, it's only a matter of time before existing MWC schools start looking around the dance floor for a new partner. 

So, what does this have to do with venture capital, or startups? 

The top 10-20% of startups are still naming their own price, and causing mini feeding frenzies. Money is being thrown at any pure AI companies. The largest funds continue to rake in huge commitments for new funds. And, the stock market is still hovering near record highs. However, if you glance past the headlines, a huge part of the startup world is treading water, or reeling. Most of these companies are struggling to even approach venture scale growth, are rushing to breakeven, and running out of options. Existing investors are fatigued, distracted, and disincentivized to keep supporting these legacy companies. In many cases, runway and options are in short supply. 

As a founder, your startup is your baby. The late nights, sleepless nights, early mornings, and constant hustling is a huge sacrifice for an equally huge personal outcome. Walking away with nothing but battle scars and less hair is a tough pill to swallow. Naturally, founders are extremely sensitive to bad outcomes, and will usually use every remaining ounce of energy and persistence to find a better landing. 

As a founder, you're also closer to the business than anyone else. You understand the day to day rhythm, the players, and the competition. However, there is usually a glaring blind spot - knowing where you stand within the startup market, where you stand with investors (new and existing), and how your business looks to acquirers. Good VCs will readily tell their portfolio company founders where they stand, and help them find the best possible paths to acceptable, or good outcomes. The founders still need to have the will to fight, and be willing to hear tough feedback too. 

Knowing the funding/exit landscape, and your own place within your industry is critical to optimizing an outcome. Not everyone is Texas or USC - someone has to be the middle tier team, or bottom tier team within their own markets. While your standing can, and does change - one other key trend holds in every market environment (but especially in turbulent ones):

You always want to be the hunter, or worst case, an opportunistic hunter. The Big Ten and SEC were/are hunters. WSU and OSU were opportunistic hunters. And, the MWC is now the hunted. I'd love to see my old school, UVa go on the offensive, and try to find enough votes to dissolve the ACC. Unfortunately, they'll probably sit on their hands, and let others make the decisions for them. While Uva and UNC probably do have some options by standing still, it's usually better to make your own move, and remove any unnecessary risks. 

If you're burning money, running out of runway - and can't easily raise more money (more than a lifeline size bridge), you're in the danger zone. If your investors are running out of patience, and new investors are not waiting in the wings, you're at risk. If you're in the M&A process, but do not have significant runway (well past the possible acquisition), you might have a big problem. And, if you're sub-scale (less than $3m or $4m ARR), without real EBITDA or growth, you're skating on thinning ice. 

While you want to do everything possible to avoid being hunted, strong companies also now have an incredibly appetizing hunting ground. There is a massive glut of sub $5m ARR companies with boards/investors that want off the ride - at almost any number. Founders have parachuted out of some companies, and replacement CEOs often have little interest in fighting a drawn out trench war type of fight. Several former venture all-stars are out of runway, and options. Companies with cash, an ability to close deals quickly, and a strong product backbone are in a uniquely privileged position. They can execute the same playbook repeatedly - buy stressed and distressed assets for a fraction of their true worth, and then raise huge rounds of their own (with the integrated ARR). 

The Big Ten and SEC effectively stole 4 of the most valuable properties - when they grabbed Texas, Oklahoma, USC, and UCLA. And, they did it for the same effective cost as their weakest members. The Big Ten surgically stole the marquee Pac 12 teams, as the conference struggled with their own new media rights deal. The SEC raided the weaker Big 12. And, the Big 12 then smartly raided the Pac12. You may not be the Big Ten or SEC of your industry, but you might be the Big 12 or Pac 2. You also might be the MWC or the AAC. Wherever you stand, you want to strengthen your own position - not only for optimality around funding/exits, but for your own survival. Once/if you're being hunted, things can get messy, quickly.