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65% of entrepreneurs believe that fundraising in 2016 will be more difficult than in 2015, according to First Round’s survey. The volatility in the stock market, the steady erosion of public multiples, and the broad decline of seed, venture and growth investment in Q4 2015 seem to portend a repricing of the startup market. In light of those changing circumstances, entrepreneurs should prepare a few different analyses for 2016.

Suppose you’ve been selected to participate in a game show. The game show host asks you to pick one of three doors. Behind one, the grand prize awaits. Behind the other two are goats. You choose Door 1. Then the hosts opens Door 3, revealing a goat. The host prompts you again, “Would you like to select Door 2?” Should you choose it?

This statistics question rose to fame in 1990 when Marilyn Vos Savant asked it in Parade Magazine. In the weeks that followed, Vos Savant received more than 10,000 letters pronouncing her wrong. One thousand of these letters had been penned by PhDs, and many bore the insignia of prestigious universities.

2015 is the end of an era, the era of startup growth at any cost. In 2016, the question that will immediately follow, “What is your annual growth rate?” will be “What are your unit economics?” This change in investor mentality is catalyzed by the increasing cost of startup capital.

Starting in 2014, and perhaps even a bit before, startups have been able to raise capital at better terms than at any time since 2000. More money raised for less dilution. The greater competition among investors increases valuations relative to revenue pricing valuations further into the future.

How have public SaaS companies fared in the public markets over the past few years? It’s been mixed. Over this three year period, 32 of 50 companies are worth more today than they were either at IPO or at their trading price three years ago. Of the remaining 18, 7 of those companies went public in 2015. It was a tough year for SaaS companies to go public.

For all the talk about late stage rounds, megarounds and unicorns, early stage startups are benefitting disproportionately from near-record years of venture capital investment. Of the $42B invested in startups in 2015, 34% or about $14B was raised in series A and seed rounds. That figure is up from 18% in 2005. The 35% attained in 2013 share for early investment ties the 1996 record.

image credit: Manu Cornet

In 1967, Harvard Business Review rejected a paper submitted by Mel Conway. A year later, Conway’s thesis would be dubbed Conway’s Law. Conway graduated from Caltech with a Masters in physics and from Case Western Reserve with PhD in math. He worked on the Pascal compiler among other notable software projects. Over the course of his career, Conway observed a phenomenon. The products software teams created reflected their organizational structure.

At its essence, a product is a combination of different funnels bringing the user from one state to another. How many funnels does your startup’s product have? How many are you measuring? How many are you optimizing?

Uber’s consumer experience has two funnels. The first is user on boarding: registering a user and collecting their payment information. The second is booking transportation from opening the application to rating a driver’s performance.

In his book describing Google’s People Operations called Work Rules!, Laszlo Bock presents this chart to describe the difference between the way many companies think about talent today, as a normal or Gaussian distribution, and how Google thinks about it, as a power law. It’s the most provocative idea about employee compensation I’ve found.

As Daniel Kahneman showed in Thinking Fast and Slow, humans think in normal distributions. Most people will near the mean and a few outliers exist at the best and worst end of the spectrum. But, that’s not the case at work. Quoting Bock:

Which of the 16 major start of categories in information technology will reap disproportionate share of investment dollars in 2016? And which sectors are closely guarded secrets shielded by seed investors, that may have their breakout year this year?

Using Crunchbase data, I analyzed share of dollars commanded by each of these 16 categories over the last five years to understand the trends in both the seed and series A fundraising markets. The chart above contrasts the pace of investment across the two markets by sector measured by % of total dollars invested anually. Seed investment is marked blue, and series A investment is marked red.

When I was at Google, we worked with a user experience team frequently to help us design changes to the AdWords front end. After having reviewed our designs within our product team for weeks, we often thought the design was complete and foolproof. But we were consistently proven wrong by the UX team whose work surfaced face-slapping oversights.