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Illustration: Aïda Amer/Axios

New startup formation has slowed significantly, with fading hopes for a late 2020 rebound.

Driving the news: Carta, a startup that manages employee equity for other startups (including Axios), last week laid off 161 employees, or around 16% of its staff. The basic takeaway was tempered expectations for the number of potential new customers to sign and service.

Carta arguably is an index for startups, which makes these layoffs a major indicator.

  • Yes, many of today’s most iconic tech companies were born from the ashes of past economic crises, but this one might be different.
  • No more serendipitous meetings at parties, no more sitting down with a friend to change the world on the back of a napkin.
  • Even if you and a possible co-founder are tight, and you can get past the daunting idea of all-remote hiring, you’re in unchartered waters when it comes to customer demand and supply chain stability.
  • Even if you want to build, can you?

To its credit, Carta is treating laid-off employees about as well as a company can. They all get three months of severance and COBRA coverage through year-end. Carta also removed the one-year vesting cliff for those hired within the past 12 months, and already had a generous post-termination exercise period.

But there were still a lot of ex-employee grumbles, based on a subsequent Bloomberg report that the company was "seeking to raise" $200 million in new funding at a $3 billion valuation. Plus, it's likely that many former Carta employees were aware that this money would be on top of the $200 million that sources say Carta already had in the bank.

  • The new funding is real, per multiple sources. In fact, it's basically done, co-led by existing investors Lightspeed Venture Partners. The negotiations began prior to the coronavirus outbreak, but terms never changed. The closing was delayed a bit by complications related to some overseas investors.
  • The company hasn’t yet announced the deal, although Tribe Capital did explain its thinking in a lengthy memo sent to LPs over the weekend (which it just posted here).

The bottom line: Carta is building for the future in which it hopes to thrive, while acknowledging lowered expectations for the present. Just like startup-land at large.

Go deeper

Biden unveils "wartime" COVID strategy

Biden signs executive orders on Jan. 21. Photo: Mandel Ngan/AFP via Getty Images

President Biden on Thursday signed a slew of executive orders to address the coronavirus pandemic, including an interstate face mask mandate and an order to renew supplies of PPE, testing materials and vaccines through the Defense Production Act.

Why it matters: The stakes are highest for Biden’s vaccination effort. Several states cannot keep up with demand.

3 hours ago - Politics & Policy

Stalemate over filibuster freezes Congress

Illustration: Sarah Grillo/Axios

Senate Majority Leader Chuck Schumer and Mitch McConnell's inability to quickly strike a deal on a power-sharing agreement in the new 50-50 Congress is slowing down everything from the confirmation of President Biden's nominees to Donald Trump's impeachment trial.

Why it matters: Whatever final stance Schumer takes on the stalemate, which largely comes down to Democrats wanting to use the legislative filibuster as leverage over Republicans, will be a signal of the level of hardball we should expect Democrats to play with Republicans in the new Senate.

Dave Lawler, author of World
3 hours ago - World

Biden opts for five-year extension of New START nuclear treaty with Russia

Putin at a military parade. Photo: Valya Egorshin/NurPhoto via Getty

President Biden will seek a five-year extension of the New START nuclear arms control pact with Russia before it expires on Feb. 5, senior officials told the Washington Post.

Why it matters: The 2010 treaty is the last remaining constraint on the arsenals of the world's two nuclear superpowers, limiting the number of deployed nuclear warheads and the bombers, missiles and submarines which can deliver them.