Yahoo CEO: Why this is the best time for startups to get funding – Yahoo Finance

Editor's note: Jim Lanzone is the CEO of Yahoo Finance's parent company, Yahoo.

Yahoo CEO Jim Lanzone has overseen his share of internet success stories in his nearly three-decade career. From steering the ship at Ask.com, to the launch of CBS Interactive, Lanzone has built his reputation around turnaround stories.

Yet, he credits his success to early failures with startup eTour, an internet search and navigation company he co-founded in 1998 at the height of the dotcom boom.

We went up way up and way down, Lanzone said at Yahoo Finances All Markets Summit (video above), referring to eTour's crash during the dotcom bust. We had raised $50 million when that was a lot of money and almost went public. When the market crashed, we crashed. It was heartbreaking.

With fears of interest rate hikes and a slowing economy rattling the tech sector yet again, Lanzone is drawing parallels from his experience to send a message to startups today: Re-evaluate swiftly, get costs under control, and raise capital, quickly.

This is the best time to get funded as a company, Lanzone said, echoing comments made by famed investor Bill Gurley, a general partner at Benchmark. If you look at every one of these crash periods, those are when some of the best companies have been born.

The scale of venture capital deals have fallen dramatically this year, as startups face increased scrutiny on business fundamentals in the face of a global economic slowdown. The number of deals fell for a third consecutive quarter in Q2, down nearly 20% from the previous quarter, with the deal count falling to its lowest level since the fourth quarter of 2020, according to Pitchbook data.

But venture capitalists have also continued to raise money through funding rounds. In the U.S. alone, VCs have amassed nearly $300 billion in dry powder, which is waiting to be deployed. While that doesnt necessarily guarantee enough capital to outlast any downturn, Lanzone points to startups that have emerged from economic recessions: Uber (UBER), Airbnb (ABNB), WhatsApp (META), and Pinterest (PINS) are among a handful of companies that were founded at the height of the Great Recession.

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If you're an existing company, one that has been through the boom and raised money during the boom at valuations that were pretty rosy and you went through hiring and perks for your company," said Lanzone, "you have to really re-evaluate quickly. Get those costs under control, re-evaluate you know, how you view your market and your valuation.

Added Lanzone, who joined Yahoo from Tinder just over a year ago: I think the companies that adapt the most quickly...are the ones that are going to make it through.

Lanzone experienced both the highs and lows of the tech cycle early on in his career. A few years after he co-founded eTour, he saw the companys valuation plummet during the tech crash, leading to an acquisition by what was then AskJeeves.com, a search engine. There, Lanzone oversaw the turnaround of a publicly traded companyand moved up from SVP of Product Management to CEO. He led the firms rebranding to Ask.com. Lanzone followed that by founding another company, Clicker. Two weeks after he received funding in 2009, he said the market crashed yet again.

As the current CEO of Yahoo, Lanzone is in the midst of another turnaround story, though he prefers not to define it that way. With roughly 900 million monthly users across all Yahoo assets, and billions of dollars in revenue, Lanzone sees a real opportunity to strengthen individual Yahoo brands and ultimately to spin them off separately.

And he says, this time, he has the added benefit of engineering a turnaround without the pressure of shareholders.

If you were to take an objective look at [all Yahoo] assets, you would say that's an amazing investment opportunity, Lanzone said. Given the fact that we have been spun out of Verizon, we're private again. (Now owned by Apollo Global Management.) That allows you to do the things that you need to do, behind the scenes, to improve it.

Check out the full interview in the video above.

Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita

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Yahoo CEO: Why this is the best time for startups to get funding - Yahoo Finance