5 ms·

Hot Tech Startups May Have Higher Funding Hurdles

37 points by code4tee 11y ago

curiousjorge 11y ago
dot com bubble part 2 - broke ass millionaires ask for leniency.
- dang 11y ago
  Please stop posting unsubstantive comments to Hacker News.
seiji 11y ago
Key quote: “Lots of founders today weren’t around in 1999 and they don’t know a thing about financial markets beyond what’s happened in the last 24 months,” Mr. Gurley said in an interview. “To them that’s how this game is played, money is cheap and everything goes up. That’s why we have cycles.” If it takes a dot-com 2.0 crash to weed out all the frothy optimistic-but-useless startups and drop housing prices back to normal instead of $4,500 per month in SF/NYC, it's probably worth the economic hit.
- pokstad 11y ago
  I don't think NYC or SF home prices will be changing much anytime soon. As far as the rest of the country is concerned, there are signs pointing to the US housing industry being more resilient: http://www.wsj.com/articles/housing-stocks-offer-a-ray-of-hope-1440370792 http://www.wsj.com/articles/housing-stocks-offer-a-ray-of-ho...
code4tee 11y ago
There's a lot of high valued piles of crap in the tech space at the moment. Flushing the toilet a few times to rid the system of such junk is ultimately a needed cleansing. Tech startups that can show viable business models with actual profits will weather the storm. However for those that are living on 'user growth' and hype, well it's going to be a bumpy ride.
- rhizome 11y ago
  Problem is, it makes things tough for everybody, not just crap hucksters. If the bad companies were financially banished that would be one thing, but after a crash everybody will be tarred with a "startup" brush.
  - code4tee 11y ago
    Agreed. In the short term it's rough for everyone, but ultimately for those that are the real deal it's good to wash out the fluff... and there's a lot of fluff at the moment.
  - birken 11y ago
    Well if you are a startup that makes profit or has a long runway that is well managed, it doesn't matter what anybody else thinks about you. In boom times it can be a challenge to control burn for even well-run companies because the markets for things like employees or office space become distorted due to high demand. In bust times these expenses naturally go down, which helps well-run companies.
    - lbotos 11y ago
      What is a "long runway" for a startup? We are super transparent at my current startup and have what I'd say is "solid" runway but I'd love some perspective.
      - potatolicious 11y ago
        That's relative, but in the context of this conversation it probably means "runway longer than the miserable fundraising market is expected to last". So, longer than 1-2 years, which seems disturbingly typical for a lot of startups I've talked to. In contrast I once interviewed at a startup that had a net burn rate low enough to keep running for 7-8 years without needing additional funding, even assuming no revenue growth. Presumably they'd be in a better position to weather a tech downturn (though one has to be careful about what a downturn would also do to said revenue - companies building products and services for other tech companies are especially susceptible).
sudo_bang_bang 11y ago
If this proves to be a correction that eliminates some startups that don't have a business model then so be it. Startups shouldn't be owned as some sort of novelty items by investors or acquirers, they should be revenue producing. VC money won't go away for good businesses, and you shouldn't be scared if you are producing value for the economy. And you know what, in the end, it might even stabilize the Bay Area real estate market, which isn't all that bad in my opinion.

37 points by code4tee 11y ago

curiousjorge 11y ago

dot com bubble part 2 - broke ass millionaires ask for leniency.

dang 11y ago
Please stop posting unsubstantive comments to Hacker News.

seiji 11y ago

Key quote: “Lots of founders today weren’t around in 1999 and they don’t know a thing about financial markets beyond what’s happened in the last 24 months,” Mr. Gurley said in an interview. “To them that’s how this game is played, money is cheap and everything goes up. That’s why we have cycles.” If it takes a dot-com 2.0 crash to weed out all the frothy optimistic-but-useless startups and drop housing prices back to normal instead of $4,500 per month in SF/NYC, it's probably worth the economic hit.

pokstad 11y ago
I don't think NYC or SF home prices will be changing much anytime soon. As far as the rest of the country is concerned, there are signs pointing to the US housing industry being more resilient: http://www.wsj.com/articles/housing-stocks-offer-a-ray-of-hope-1440370792 http://www.wsj.com/articles/housing-stocks-offer-a-ray-of-ho...

code4tee 11y ago

There's a lot of high valued piles of crap in the tech space at the moment. Flushing the toilet a few times to rid the system of such junk is ultimately a needed cleansing. Tech startups that can show viable business models with actual profits will weather the storm. However for those that are living on 'user growth' and hype, well it's going to be a bumpy ride.

rhizome 11y ago
Problem is, it makes things tough for everybody, not just crap hucksters. If the bad companies were financially banished that would be one thing, but after a crash everybody will be tarred with a "startup" brush.
- code4tee 11y ago
  Agreed. In the short term it's rough for everyone, but ultimately for those that are the real deal it's good to wash out the fluff... and there's a lot of fluff at the moment.
- birken 11y ago
  Well if you are a startup that makes profit or has a long runway that is well managed, it doesn't matter what anybody else thinks about you. In boom times it can be a challenge to control burn for even well-run companies because the markets for things like employees or office space become distorted due to high demand. In bust times these expenses naturally go down, which helps well-run companies.
  - lbotos 11y ago
    What is a "long runway" for a startup? We are super transparent at my current startup and have what I'd say is "solid" runway but I'd love some perspective.
    - potatolicious 11y ago
      That's relative, but in the context of this conversation it probably means "runway longer than the miserable fundraising market is expected to last". So, longer than 1-2 years, which seems disturbingly typical for a lot of startups I've talked to. In contrast I once interviewed at a startup that had a net burn rate low enough to keep running for 7-8 years without needing additional funding, even assuming no revenue growth. Presumably they'd be in a better position to weather a tech downturn (though one has to be careful about what a downturn would also do to said revenue - companies building products and services for other tech companies are especially susceptible).

sudo_bang_bang 11y ago

If this proves to be a correction that eliminates some startups that don't have a business model then so be it. Startups shouldn't be owned as some sort of novelty items by investors or acquirers, they should be revenue producing. VC money won't go away for good businesses, and you shouldn't be scared if you are producing value for the economy. And you know what, in the end, it might even stabilize the Bay Area real estate market, which isn't all that bad in my opinion.