More or less. Tom Loverro is calling the bottom, give or take half a year. 

“I don’t need to call the exact bottom, because startups need to anticipate,” says Loverro, a general partner at VC firm IVP. Whether the bottom is actually six months from now or tomorrow doesn’t matter, he says. The point is things aren’t going to get much worse. For founders, that means it’s time to “go out there, land grab, and beat your competition.”

Loverro, whose investments include Coinbase, Datadog, and HashiCorp, has a penchant for predictions. In January 2023, he declared that a “mass extinction event” was coming for startups. Data suggests he was onto something: In 2023 alone, about 3,000 startups shuttered globally, according to PitchBook estimates. Carta data (often cited, though an imperfect one-to-one) places the number of shuttered startups at 467 for all of 2022. 

If the phrase “mass extinction” evokes dinosaurs and asteroids, we’re now in the moment where the worst of the damage has been done—and survivors are poking their heads out of the rubble to scan the landscape. In Loverro-terms, we’re entering a “Great Reawakening” for startups, and founders have to shift out of defensive mode and start getting “reasonably aggressive” to take advantage of a new environment. 

“We’re in this time that’s kind of not a boom and not a bust,” said Loverro, who published his Great Reawakening thesis on social media last week. “We have to get out of our Stockholm Syndrome, and get back to thinking: ‘Hey, maybe it’s okay if my startup burns a little more money.’ On average, now I have to convince other directors: ‘You know what? Let’s be a little aggressive again.’ There’s still some fear around the table.”

Loverro’s advice for startup CEOs: Set up performance-based budgets; work on your next AI-fueled act; quickly increase investment in what’s working and scrap what’s not working with similar speed. 

I’ve been wondering why I find Loverro’s perspective so compelling, and I think it comes down to this: He’s essentially talking about human nature. You put your hand on the stove, you get burned, you think twice about what you do next. 

The trick with building startups, of course, is that it’s inherently a painful endeavor—so it sometimes requires consciously going against the natural instinct to avoid pain. Loverro cites small business-focused software company Podium as an example of one startup that had to make tough changes, like slashing operating expenses and reducing the size of its sales team. But now, Podium’s back in growth mode.  

I got in touch with Podium CEO Eric Rea and ran my human nature-stove thesis by him.  

“I totally agree, I think everybody’s once bitten, twice shy,” said Rea. “So, it feels weird to go back and say: ‘Hey, we’re going to take a big risk, and we’re going to invest in this thing that’s new.’ That didn’t pan out for a lot of companies in 2021, and I say that as someone who’s done it, who’s touched the stove.”

The current AI frenzy is the latest test of this fundamental tension for startups, pitting the natural human instinct to avoid pain with the need to adapt and capitalize on market conditions.

To some, the booming investments in AI startups are an example of the industry obstinately refusing to learn lessons; setting itself up for another big burn. But to Loverro, that’s not a bug of the venture industry—it’s a time-honored feature.

“The venture narrative is the boom and the bustling—the dotcom era to the dotbomb era, great crashes, extinction events,” said Loverro. 

“Somebody will say: ‘But AI is crazy expensive, you VCs still don’t have a clue. Did you learn any lessons?’ And I’ll say: ‘Name a year where there wasn’t some obsession.’ That’s part of the cycle, where we have something we’re obsessed with. That’s actually normal for venture capital.”

If Loverro is right and the season for startups is changing, it’s time to reach for the stove again—and, if you’re lucky, maybe you’ve even got some oven mitts. 

Scoop… A key xAI employee has left the Elon Musk-led company and rejoined OpenAI, my colleague Jessica Mathews reported. Read the whole story here. 

ICYMI… Kleiner Perkins has raised north of $2 billion across two new funds.

See you tomorrow,

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

- Rohlik Group, a Prague, Czech Republic-based grocery delivery company, raised $170 million in funding. The European Bank for Reconstruction and Development led the round and was joined by existing investors Sofina, Index Ventures, Quadrille, TCF Capital, and others.

- N-Power Medicine, a Redwood City, Calif.-based clinical research and drug development platform, raised $72 million in Series B funding. ​​Merck Global Health Innovation Fund led the round and was joined by others.

- ZeroEyes, a Philadelphia, Pa.-based developer of AI gun detection software for security cameras, raised $53 million in Series B funding. Sorenson Capital led the round and was joined by Intel Capital, BroadLight Capital, and existing investors. 

- illumex, a Tel Aviv, Israel-based enterprise data platform, raised $13 million in seed funding. Cardumen Capital, Amdocs Ventures, and Samsung Ventures led the round and were joined by ICI Fund, Jibe Ventures, Iron Nation Fund, and others.

- Feather, a Berlin, Germany-based insurance startup designed for European expats, raised €6 million ($6.4 million) in funding. Keen Venture Partners led the round and was joined by Plural and others. 

EXITS

- Cinven acquired a stake in idealista, a Madrid, Spain-based online real estate classifieds platform, from Oakley Capital for €2.9 billion ($3.1 billion).

- iA Financial Group acquired Vericity, a Chicago, Ill.-based life insurance provider, from J.C. Flowers & Co. for approximately $170 million. 

FUNDS + FUNDS OF FUNDS

- Freeflow Ventures, a Pasadena, Calif.-based venture capital firm, raised $50 million across two funds focused on companies developing science-based solutions to challenges in human and planetary health.

PEOPLE

- 10D, a Tel Aviv, Israel-based venture capital firm, hired Alon Kantor as partner. Formerly, he was with Check Point.