Tom Loverro, a general partner at a Silicon Valley-based venture capital firm, saw his content go viral on Twitter when 2.5 million people viewed his prediction Tuesday that a mass extinction event is coming for early- and mid-stage companies.

“Late ’23 & ’24 will make the ’08 financial crisis look quaint for startups,” Loverro tweeted, and he went on to explain when, why and how he thinks “looming die-off” will start along with advice for founders on how to survive it.

PREDICTION: There's a mass extinction event coming for early & mid-stage companies. Late '23 & '24 will make the '08 financial crisis look quaint for startups. Below I explain when, why & how it will start & offer *detailed advice to founders* on surviving the looming die-off. /1

— Tom Loverro (@tomloverro) January 31, 2023

Loverro is a general partner at IVP, a venture capital firm with offices in Menlo Park and San Francisco that specializes in helping tech executives and management teams with capital and strategy.

“Seems like I said something out loud many were thinking but either hadn’t gotten around to articulating publicly or were afraid to say publicly,” Loverro tweeted when he saw how many people viewed his advice.

In the world of startup investment, the year 2021 was a record breaker, while 2022 marked a hard reset to more normal times. Heading into 2023, recession fears are top of mind, Crunchbase reported.

In 2022, global venture funding saw a historic 35 percent year-over-year decline, totaling $445 billion. That compares to the $681 billion raised by startups in 2021.

Here are some sobering statistics: Nine out of 10 startups fail, 7.5 out of 10 venture-backed startups fail and the success percentage for first-time founders is 18, according to data collected by Failory, a content site for startup founders.

If it’s any consolation, “great” startups will always get funded, Loverro said, “albeit not on 2021-style terms. Many ‘good’ startups will endure down or flat rounds. Many merely ‘ok’ and pre-product-market-fit startups will die – at a greater rate than anything we’ve seen since 2008.”

Many startups raised about two years of cash in 2021 and 2022. They “cut burn” in the second half of 2022 to extend the funds, “but no matter what, they’ll need to raise again” (or sell, or die) in late 2023 and 2024, Loverro said.

The burn rate is a term used by startups and investors to track the amount of monthly cash that a company spends before it starts generating its own income.

Four in five very early-stage companies have fewer than 12 months of runway, Loverro said, citing a 2022 survey of 450 founders January Ventures.

“All of this points to a FLOOD of startups coming to market to raise capital beginning in H2 2023 and continuing through 2024. More will seek capital than will get funded. What you hear now is the quiet before the storm.”

Loverro predicts that late 2023 into 2024 will be worse than the great financial crisis of 2008-2009 for venture-backed startups. The great financial crisis “was centered on Wall St. private startup valuations, round sizes & burn didn’t go bananas in the years leading up to the GFC,” he said.

“This time is different. 2021, for startups, was more toxic than the GFC. The hangover will start later this year and will be more severe than that from the GFC.”

He predicts there will be a flood of startups raising and gun-shy venture capitalists with “alligator arms will slow their pace, take less risk and fund the startups with the most concrete traction. Timid LPs will hide under desks.”

Loverro said he predicts layoffs, firesales and shutdowns will ensue.

As for all the talk of dry powder that will make valuations go back up?

“FALSE for the following reasons,” Loverro said. “A. Funds won’t deploy their capital in 1 yr (unlike 2021) but rather in 3+ yrs, dividing that powder by 3 or 4! Yikes! B. Many funds have already been partially or mostly invested; their next funds might be smaller and take 2x as long to raise, b/c of LP constraints. /12 C. 2001-2004, there was also ‘a lot of dry powder’, but valuations still plummeted and words like ‘structure’, ‘ratchet‘ and ‘pay-to-play’ were commonplace.”

Here is Loverro’s seven-step survival guide that he says early-stage founders should follow:

1. “Raise now or sooner than you expected, before the Great Flood of 2023. If you fail, you can always try again later. But if you wait, try later & fail, well…
2. You did a layoff & cut burn? Great. Now cut burn even more. Cut what’s “good to have” but continue to fund core R&D.
3. Focus on survival, not valuation. Don’t let your ego or anchoring bias kill you. Public company stock prices go up and down every microsecond. Your stock price fluctuating isn’t fatal. Running out of money is.
4. For mid and later stage startups, bring on seasoned operators in C-level roles and for some companies of scale, it might even mean bringing in professional CEOs. Done right, this allows founders to play to their strengths.
5. Trade better unit economics for growth. Growth rates are coming way down for everyone this year. It’s all relative when you’re raising money. If you can nail your unit economics, you can always ramp burn and growth later.
6. Play your cards right, survive & go on OFFENSE. The best time to build & take market share is when your competition is dead/in retreat. 2021 felt like the best year to build a startup but it also felt like the best year to buy high-growth stocks 😉 Now is the time!
7. Be decisive. Half-measures rarely succeed.”

Crunchbase reporter Joanna Glasner predicts that startup investors will be looking for novelty in the companies they back in 2023. “Out with the me-too business plans (the ‘Uber of X’ or the ‘Shopify of Y). In with those quirky or differentiated enough to stand on their own.”