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Silicon Valley startups rein in spending and prepare for layoffs
- jasonjei 11y agoIt's been a rough year already for SV software companies. Tableau, the poster child for big data, had their market cap drop almost by half this week.
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- techsupporter 11y agoIsn't Tableau based in Seattle, not Silicon Valley?
- jasonjei 11y agoGeographically, that may be the case. But because it's lumped in with a clique of SV startups, I don't think being in Seattle detracts from what's going on in SV is also affecting software companies in the rest of America. (To be clear, I think "SV" implies the style of software companies found in SV that may be found elsewhere in America.)
- econner 11y agoI just like the last point: "There's still going to be major entrepreneurship going. Google itself was counter to the trend of the original dotcom bust."
- frik 11y agoI want to read more news about startups, venture capital, Silicon Valley/SF on HN - 29 news on HN frontpage are about other topics (interesting for sure, but the balance is off).
- KirinDave 11y agoStartups aren't news. What they do and how they do it is news.
- dang 11y agoCan you give some examples of stories that you feel should be discussed on HN, but weren't? I see a lot of startup stories here. I fear that part of the problem is that stories get posted, have good discussions, and fall off the front page before many readers see them.
- frik 11y ago> I fear that part of the problem is that stories get posted, have good discussions, and fall off the front page before many readers see them. That's it, and I share your fear. I don't know how to solve it. Maybe it's what the majority wants on the top, maybe it's what a vocal minority with high karma points doesn't want (flagging/whatever negative news). I just see the end result. I would just like to get the big picture on the frontpage and not have to rely on algolia search for that. One thing I realized is that HN front page has very different topics depending on which time I check HN. It shifts its focus depending when people tend to visit HN from east cost, west cost, europe, asia. A useful function would be to check out the HN frontpage how it looked at a specific time. Let's say I would like to see HN as it looked like 8am Pacific timezone yesterday. I know about https://news.ycombinator.com/lists https://news.ycombinator.com/lists , maybe add another filter to that list.
- beachstartup 11y ago> A useful function would be to check out the HN frontpage how it looked at a specific time. Let's say I would like to see HN as it looked like 8am Pacific timezone yesterday. sigh, kids these days. first of all, i'm sure this exists somewhere on the internet. start with archive.org and go from there. if not, witness: 0 * * * * curl https://news.ycombinator.com https://news.ycombinator.com -o /tmp/hn-`date "+\%Y-\%m-\%d-\%H:\%M:\%S"` for bonus points, version control it with github so everyone can see it. even better, send it into elasticsearch. hint: curl -X -F -H you could implement a website that does this in literally an hour with today's tools. hell, you could even run it through some basic tools like python NLTK and matplotlib and twilio to text message you a fucking color-coded n-gram frequency pie chart every time it runs. you don't need ruby on rails, rabbitmq, redis, and a huge sql schema to do this, just a few lines of bash and python. this would be more useful than 85.1% of startups operating today, which is probably part of the problem. feel free to steal it.
- dawhizkid 11y agoIt's the crappy startups that will go away. That's a good thing for everyone, honestly.
- united893 11y agoIt's not that clear cut, it can be random due to timing for startups that just raised. Name me some crappy startups you think will fail, I'll name you lots more that make a great product, but couldn't stay solvent either.
- camillomiller 11y agoAt which point making a great product has become enough? Making great things and having great ideas in business does not entitle you to survival. Investors are particularly twitchy right now, there might be some casualty among the just, but believe me, time is due for wiping the drawing board and deflate the huge egos of productless founders who just hide behind startup jargon and easily raised money.
- Gibbon1 11y agoYeah I was going to say good decisions aren't made when investors start to panic. Or consider GM maker of fine crappy cars. They went bust in 2009. Companies are often long expenses and short profits. Meaning they commit to certain level of expenses capital or otherwise, yet their profits depend on near term sales. Business dries up, balance sheet goes red and if they can't borrow money, they go belly up. Rock solid business, gone.
- LoSboccacc 11y agoIn general, yes, it is gonna cut a lot of the fat. But in the transition period it will make VC/angels more risk averse making money harder to find for good startups as well.
- morgante 11y agoNot for talent. I might not want to work at the crappy startups, but their additional engineering demand drives up salaries overall.
- snockerton 11y agoGeneral macroeconomic scare mongering has an upside in that perhaps some fat will be trimmed. Those with a product or service with real value should remain standing.
- abalashov 11y agoIt's an age old-question but I still don't have a good sense of the answer: When leaner economic times come around and tech companies downsize their work forces, they speak about culling "nonessential" employees and "growing smarter". How do they deal with the political problems of admitting to having hired a sizable number of "nonessential" employees to begin with, and, moreover, the obvious implication that their previous growth strategy was indeed "stupid"?
- venomsnake 11y agoAn employee is more than just cash - you may onboard employees anticipating future growth or projects. You may have hired them and just kept them for future reasons. You may even keep them on the payroll to just keep everyone's morale high.
- united893 11y agoYou customize your workforce to meet the current market demands. When the price of oil is high, you hire a lot of people to work the wells. When the price of oil tanks, but the price of coal rises, you downsize on oil production and ramp up coal mining.
- ethbro 11y ago> you hire a lot of people to work the wells I think it's a valid question whether that's still a valid approach in a modern, high-value knowledge economy (and yes, I'm including oil well operators in there). Honestly interested from companies that have been through grow-shrink-grow. Is it as clear as that, re: being able to find new people when the time is righr? Or is there enough of a ramp-up time for new employees that the equation is more complex?
- Eridrus 11y agoThe usual estimate of ramp-up time for employees at a startup is considered to be a month or two, but the business cycle is measured in years, so if you expect a secular downturn, firing people makes sense. I think oil is actually complicated and rare enough that it might actually be an example where you don't want to lay them off, since finding replacements may be quite hard if you lay off those positions for a few years, so you may want to try and weather the storm while the Saudis flood the market with oil. Having said that, companies make bad decisions all the time since making good decisions is a lot harder than everyone seems to think.
- jmspring 11y ago-- "Uncertainty in the tech industry is really pushing people back towards more certainty — working at a mutual fund, a bank, a hedge fund," Really? I left out the commentor name because of how stupid the comment is and how well banks and the like are doing. Re: startups, a bit of culling isn't a bad thing, painful yes, but not every idea is pursuing above all else.
- angersock 11y agoThe interesting thing, to me, isn't so much what'll happen to the employees--it's what's going to happen to all the SaaS and PaaS folks the remaining startups depend on. When everyone and their buddy is signing up to spew cash into the coffers of services like Amazon, Heroku, and other hosted solutions (instead of doing it themselves), those services can spread and grow. What happens, though, when that easy cash is no longer available? What happens when, for example, paying a lot for Docker or NPM no longer makes sense? The outflux of customers has the--in some sense--real possibility of killing those businesses for the remaining users. Look at Github, for example, as a company trying to run ahead of the curve--it can happen. I'm more concerned with what happens to ecosystems, like Node, that have VC-fueled companies as critical components. I'd love to hear other opinions on this point of view.
- skewart 11y agoThat's a very good question. My guess is that we might see an implosion or two, but I highly doubt we'll ever see a struggling b2b SaaS company cause serious problems for its former users when it goes out of business. If a company could inflict so much damage in the broader ecosystem by when it goes out of then it can charge high prices for what it offers. As a general rule if you're providing something people sttruggle to function without. then you can always stay in business if you want. Of course, there are edge cases involving mismanagement, but I suspect they're extremely rare. Perhaps what might be more likely would be acquisitions where the acquiring company kills the service for some reason - like what happened with Parse.
- obulpathi 11y agoA very interesting point! Cloud services cost tons of money. For companies running on AWS, a better alternative might be to migrate to Google Cloud or alter cheaper alternatives. Google Cloud lacks some bells and whistles at this point but it shaves off 50% of your AWS bill.
- itsmeduncan 11y agoDo you work for GCE? You've made this exact same comment twice on the same link. Do you have any examples or links that back up the 50% cheaper point? As well as the trade-offs for switching to GCE? We run on GCE, Heroku, and AWS.
- VeilEm 11y agoAny kind of JavaScript, iOS or Android engineer getting laid of will get a job within a month if they want. Competent backend developers, devops, ML engineers also will have no problems finding a job. I recently went through a job search in the bay area and only applied at places I wanted to work and got a job at the first place I applied with phone interviews and in person interviews scheduled at other places. The job market is really great right now. If you're getting laid off, now is a good time.
- meddlepal 11y agoA sudden flood of engineering talent on the market has other problems. Salaries could go down and given how expensive The Bay Area is then that could be problematic.
- VeilEm 11y agoGiven how hard hiring has been, I doubt it. The current talent shortage could absorb a huge number of engineers. A lot of startups are well funded for many years anyway. People are predicting doom and gloom but I really don't see it. Home prices falling is also probably not a terrible thing, even on an engineer's salary homes are hard to come by, and rents are extreme. A small correction is probably a good thing. I bought my house at the bottom of the housing market in 2011 and its value has nearly doubled since then which is ridiculous to me. I also have enough savings to last me years. Lots of companies are also doing just fine. This really isn't the earth shattering dot com bust some of you want it to be.
- meddlepal 11y agoWhy do you think home prices will fall? There is plenty of foreign investment money out there to shove into the real estate market. We have this problem in Boston right now. We're building and it's doing nothing to the rents because it's being snapped up by foreigners.
- nostrademons 11y ago
- gonyea 11y agoSo, "Startup" to them = private, bloated company? I'm guessing they're talking about the "startups" who hemorrhage money on a trendy office location and uncomfortable chairs. It'd be cool if we had a different name for being several rounds deep, private, and profitless.
- philippnagel 11y agoMaybe, Unicorn?
- VeilEm 11y agoI like "black swan"
- cmurf 11y agoBlack swans are very particular and mate for life. I think another metaphor is needed here.
- mc32 11y agoIcaruses? High flying, great pedigree, abundant hubris till they go over the edge unprepared.
- LoSboccacc 11y agoIcarhorses
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- dclowd9901 11y agoDoesn't exactly roll off the tongue. My vote is for "wisps". So fragile, the slightest disturbance in its reality distortion field and it ceases to exist.
- cenal 11y agoI wonder why http://MatterMark.com http://MatterMark.com isn't covering more about this. I'd be interested in seeing what they have to say since their entire business is monitoring these trends.
- askafriend 11y agoThey laid off a bunch of people and went through a massive restructuring themselves. I'm sure they don't want to talk about it and draw attention to that.
- w1ntermute 11y agoMattermark sounds exactly like the kind of startup-serving-startups that will be the first to disappear when the boom turns to bust.
- nickfrost 11y ago@w1ntermute We are not the kind of company that will 'disappear when the boom turns to bust'. Despite what you and others may think, we do not just serve startups or various types of investors. We have many enterprise level B2B customers. Our business is NOT built on the backs of small, early stage startups, which we likely won't even sell our product to. Also, if there is a but, it'll be us reporting the trends on it.
- nickfrost 11y ago@askafriend I work at Mattermark and we have not gone through a 'massive restructuring'. As with any growing startup, some people don't work out, traditionally more sales people vs. other types of employees. We are on a steady hiring trajectory and we have no problem with being transparent as a company. Where did you here we went through a 'massive restructuring"?
- mc32 11y agoOh noes, they'll have to think about office space in Fremont or Milpitas... the horror and, and the workers will have to contemplate moving and paying a low 2,000 for a 1BR in the lower East Bay, the cost savings horror... But seriously, some trepidation like this in the market is probably good for stabilizing some of the office space and housing prices [employers being more fiscally responsible when leasing and employees renting more affordable places in the suburbs anticipating instability and reining in extravagant housing spending --I wanna be able to walk from my flat to the baa that charges me 16 per drink]
- free2rhyme214 11y agoThe trepidation in the market is certainly good for getting things back to reality.
- danans 11y ago>employers being more fiscally responsible when leasing and employees renting more affordable places in the suburbs anticipating instability and reining in extravagant housing spending --I wanna be able to walk from my flat to the baa that charges me 16 per drink This statement seems excessively judgemental. What exactly is wrong with someone wanting to walk from their flat to a bar to pay X for a drink, and pay what housing cost they are OK with for that privilege? And what's wrong with companies paying to be in the same environment? EDIT: rewording
- mc32 11y agoWrong? Nothing. Sustainable? Except for Hollywood; not very; something's got to give. It's not as if most are getting paid millions per movie and could afford a year or two without a job [or hit for an actor] The point is, it's a bit short-sighted. If the rents were a slight premium, sure, ok. But when they are exorbitant as they are it makes little fiscal sense [except for those who hit paydirt] but those likely bought houses and aren't renting. In other words, save your money, maybe you'll have to commute and maybe the bar won't be as close or have all the cool people, but it's worth having money for when there is a collapse.
- drawkbox 11y agoStartups that are born in or survive a downturn, they are more tight with better survivalism. When things get better they still have an advantage over other startups. Things go from tight to alright, alright and it doesn't affect them. Tightly run ships, like smart remote companies without as much office space (lower salaries outside SV) or many employees or even generating revenue run will probably not even feel a blip in most cases. It is the ones that are a while from a product and paying the higher tag for office space, salaries and more for the chance to get funding in SV. If that funding isn't there for a while it could be problematic and is the risk with boom/bust cycles.
- draw_down 11y agoSuch as?
- drawkbox 11y agoEarly 37 Signals (Basecamp now)[1] and github[2] are two examples that started out this way and the former continues this way today. StackOverflow is another[3]. [1] https://37signals.com/remote https://37signals.com/remote [2] http://techcrunch.com/2015/11/14/at-github-you-dont-need-no-stinkin-office-but-there-is-a-nice-one-if-you-do/ http://techcrunch.com/2015/11/14/at-github-you-dont-need-no-... [3] https://blog.stackoverflow.com/2013/02/why-we-still-believe-in-working-remotely/ https://blog.stackoverflow.com/2013/02/why-we-still-believe-...
- draw_down 11y agoI meant the part about starting during or surviving a downturn. It sounds nice, I just wonder if it's true.
- drawkbox 11y agoMicrosoft is a big one but here's some more (Adobe, ARM, HP): http://www.businessinsider.com/great-tech-companies-that-started-in-terrible-economic-times-2011-8?op=1 http://www.businessinsider.com/great-tech-companies-that-sta... Salesforce, Google, Akamai also survived the dotcom bust and also killed when the market came back. The conditions that create a company under tighter bands will always have a better indicator of limits than companies that don't. They understand the cutthroat nature of the market. Apple could be considered another initially and on their second rebirth since their second rise was after the crash. They were hustling during that on R&D and exploded out the gate when the market came back, part of the reason they hoard cash and control their ecosystem so much, when they opened it up in the late 80s/90s it nearly killed them.
- beatpanda 11y agoG O O D.
- shostack 11y agoJust goes to show that sound financials in a startup without lots of outside investment expecting outsized returns are often smarter choices. What sucks is that many companies that are healthy and not facing layoffs are going to use all this doom and gloom news (that really seems to be trying to feed off itself and spark a downturn that is smaller than they want it to seem) to ride their employees harder, depress salaries, etc. I strongly advise anyone with any power over salaries and such to consider strongly that if your business is healthy, continue paying a fair market wage. The job market is still strong, and your employees loyalty will disappear overnight the moment you start trying to knock down their pay if you are clearly not in the same boat as over-funded/valued startups and just trying to take advantage of the situation.
- gizi 11y ago70% of what they are funding in SV is absolutely nonsensical, while 70% of what makes sense is not even located in SV. This percentage is bound to keep going up. SV will not remain the center of the technology startup world for much longer.
- dimgl 11y agoI found this particular quote from the article interesting. > Margaret Quigley, 27, a techie with some coding experience, is on the hunt for a job in San Francisco. > Quigley, who previously worked at a popular consumer start-up, has been job hunting for five months. She recently rejected one start-up's offer, a one- to two-month tryout — without pay. Quigley said she has also rejected multiple sales job offers and an offer that was in the right field but came in too low. I'm sorry but... what? Not everyone can do software development. This bit makes it seem like any person who is considered a techie can now land a cushy job. If you don't know what you're doing, expect really bad offers. Maybe take an internship and make a name for yourself. I had to work basically minimum wage for about six months at my first startup gig and that propelled me to what I'm doing today. Not sure what that bit was about. > It's a tough time to be job hunting in Silicon Valley, and things are about to get a lot harder for individuals with certain skills. I just got a job in the Bay Area so again, I don't think these are valid points in this article.
- dopamean 11y agoI did think it was a little odd that her programming skills would be described as "some coding experience." That certainly doesn't make her sound like a developer and if that's the role she's looking for then the results are unsurprising.
- jzawodn 11y agoI know her and don't believe she's after a role as a developer. But there are a lot of roles where those skills can come in quite handy even if that's not the primary job.
- joeriel 11y agoWhat do they even mean by "techie" then? I'm assuming she's not on the hardware side. "Techie" is such a vague term.
- Disruptive_Dave 11y ago
- MrQuincle 11y agoInteresting viewpoint from Bischke: "startups doing something genuinely different just because there is no one paying them just to be another Uber for teddy bears". This betrays a lack of trust that VCs are able to judge the value of a company. That they really only invest in companies because others invest in them. Or that they invest in something they are very familiar with and are unable to recognize technological disruption. I've a startup so I've never been on the other side of the table, but I can't imagine that there is not also a survival of the fittest on the VC side. Perhaps being very early in a company doesn't pay off in an extraordinary fashion? How would the system not be autocorrecting for VC failure?
- cel1ne 11y ago"That they really only invest in companies because others invest in them." IMHO that's the business world in a nutshell. Being scared of innovation and changing the status quo.
- quattrofan 11y agoThe Pop that has been too long coming...
- jmnicolas 11y agoBut but what about all the articles 3 months ago that were saying we're definitively not in a tech bubble ?! It reminds me of 1999 or 2000 were I saw at my local book shop a book titled something like "are you ready for the next 20 years of uninterrupted economic growth ?" written by 2 Nobel price winners, no less ... Then there was the (should I say first ?) tech bubble pop one or two years later ...
- icebraining 11y agoWhich articles? All the ones I remember regarding whether there was a bubble ranged from "maybe" to "definitively", and a search seems to confirm that generally: https://hn.algolia.com/?query=bubble&sort=byPopularity&prefix&page=0&dateRange=pastYear&type=story https://hn.algolia.com/?query=bubble&sort=byPopularity&prefi...
- pj_mukh 11y agoHah! Every article I read for the last two years has been gleefully predicting this for a year now. Most SV companies (including some of the much maligned "unicorns"), I know started buckling up and becoming profitable far before this. Some frivolity will end no doubt, but the gleeful anticipation with which some people have been awaiting a bubble pop might be disappointed. This still just looks like a correction compared to what happened last time.
- npalli 11y agoThe NASDAQ plunged from over 5000 in March 2000 to about 1100 in two years. That was a bubble. People getting laid off is not a bubble, if so, then we will keep having these 'bubbles' every year making the whole term meaningless. The very fact that 20 people jump in and warn us at the slightest hint (like this) that this is a bubble tells me that we are not in a bubble. Even if people get laid off they will find work else where. Funny thing is that this article talks about laid off tech workers finding work in Finance, which as we speak is getting decimated.
- rhino369 11y agoHow do you know if this isn't March 2000 all over again. A tech bubble would look different than in 2000 because companies didn't go public the same numbers as last time. That blunts the impact a bit. But it also hides the impact. If VCs go into panic mode you won't know about it until start ups start failing in high numbers from running out of runway.
- obulpathi 11y agoFor startups planning to host their infrastructure on AWS, a better alternative might be to go with Google Cloud or other cheaper alternatives. This can significantly increase the startups runway, by lowering the operational costs. Google Cloud lacks some bells and whistles at this point but it shaves off 50% of your AWS bill. Edit: Here is why Google Cloud can save 50% of your aws bill "1X" is AWS Compute: VMs Price: 30% less + Per minute billing Boot time: ¼ X Network between VMs: Same region: 4X Across regions: 10X BigQuery vs Redshift : ½ -20X Big Data (Hadoop and Spark): 3X Disks: Read throughput: 1X Write throughput: 4X (Ephemeral); 2X (Persistent) Local SSDs: Read throughput: 8X Writes throughput: 4X Storage (S3): Throughput: 2X Latency: 3X (initial); ½ X (for subsequent reads)
- patio11 11y agoThis can significantly increase the startups runway, by lowering the operational costs. There is an old saying in business: "overhead walks on two legs." People are expensive; everything else is cheap in comparison. This is particularly true for most software companies, where payroll (and other expenses directly sensitive to number of employees) typically dominates every other expense. There are software companies which do $100 million a year in revenue on $50k a year in infrastructure costs. Bloat that crazily for a B2C startup making, let's say, generous time-to-market and inhouse-expertise-required tradeoffs. Even if you're spending $50k a month on Amazon, shaving off half of that buys you 1~2 extra FTEs.
- obulpathi 11y agoLet's look at Google vs AWS from people's time: * Ease of use: Google Wins(Cloud Shell, SSH into instance from browser). Its far easier to spin up an instance and manage it on Google Cloud than AWS with VPC mess. * Platform Cohesivity: Google Wins (See the comparisio below) * AWS has 2 storage solutions with different APIS: S3 and Glacier; Compare that to Google. Just one storage solution to serve all needs. You get a backed in CDN for free! * AWS has two queuing systems (SQS and Kinesis) and still require the developer / admin to adjust the scaling of infrastructure. Google has just one Pub/Sub. You get push notifications on top. No need to tune knobs to get extra scale. It just works. * AWS load balancers and persistent disks need warming up before high usage. If you are running a website on global scale, you need to use DNS geo load balancing on top. Google load balancers are global (as opposed AWS regional load balancers), no need of DNS tricks. No need of prewarming. Google persistent disks need no prewarming. You can mount a single persistent disk on multiple instance and share data easily. * Security: Google encrypts data at rest and at wire by default. Try doing that on AWS. Google takes care of SSH key provisioning and management. AWS: You have to do it by yourself. * AWS NATs and micro instance are known to be unreliable. Google has live migration. If something goes wrong with instance they work their magic behind the scenes so that you don't have to worry about migrating the instance to another physical host. * Automation: Instance id are not global on AWS. Have fun creating maps and stuff inside CloudFormation templates. Google Cloud resources are global. All resources (images ids) have a global identifier. No more messing with zonal vs regional vs global resources. Google Cloud can save money by saving your time too!
- tmaly 11y agothis is no different then what happened in 2000/2001 companies with high fixed costs and little or no revenue went belly up
- deleted 11y ago[deleted]
- kordless 11y ago> the best startups, like Google, come out of a period like this Google isn't a startup. In fact, a company ceases being a "startup" once it finds a business model with which it can sustain itself. If a company can layoff a percentage of it's employees, slow growth, and still make money, they aren't a startup. We really should stop putting ourselves in double binds with stupid statements like this and reject them when we hear others parroting them.
- adventured 11y agoThey're not saying that Google is still a startup. They're saying that when Google was still a start-up / very young company, it thrived in the post dotcom bust after 2000.
- kordless 11y agoI'm well aware of Google's history and the dotcom bubble that occurred from 1999-2003. I'm also aware that Google made $19M in revenue on a loss of $14 million in 2000 and I'm saying the company Google was at that time can't be considered a "startup". It's a contentious point, clearly.
- cdransf 11y agoWhy would you accept an offer from a company if you can't see how they are or will make money and, by extension, continue paying your salary?
- xacaxulu 11y agoI wonder if this will temper the growth of so many 'hacker dojos' or 'code schools' churning out entry-level developers/designers with promises of near 6-figure salaries.
- sjg007 11y agoHonestly just stop reading the news. They just make sensationalist headlines as click bait.