4 ms·

Crash is going to happen. Most of these startups are not run by people with business sense who know how to make a company profitable. They are raised by people

Crash is going to happen. Most of these startups are not run by people with business sense who know how to make a company profitable. They are raised by people who know how to tell stories to raise easy money. The money is not there anymore, soon enough they'll run out and won't get a lifeline.

throwaway2016a 10y ago
The good ones know how to tell a story... a lot of them can't even do that. They just have wealthy friends/family or made some money from another deal where they got lucky and think they can do a startup. I work at a consulting company and it's amazing. Some of the customers come in and have five employees, no product, no story, but a rich dad. I have literally seen a millionaire dad sit across their kid in a meeting trying to explain what minimum viable product is and ended up giving in and paying to have their over-blown product made anyway. It's worth noting that we also explain and strongly encourage the client to stick to MVP, we never recommend overly broad feature sets. Not saying those are common but they do exist.
- duaneb 10y ago
  It's so odd. Most of the attraction I see in starting a business is the problem of bootstrapping it—there are many business ideas that are attractive, and the game is in separating the viable ones from the busts. I'm not sure why you would start one if you really just want to be a PM and not think about the cash flow.
swalsh 10y ago
I thought that too, but that last YC batch was filled with some solid (read boring) start-ups. They all had potential... not sure they all had the potential to be billion-dollar companies, but I doubt YC is going to lose any money on that batch. It was a lot more down to earth than the typical silicon valley type nonsense I've personally become used to.
- freyr 10y ago
  That's great to hear, but a crash would be due to typical Silicon Valkey, and the latest HN batch can't prevent it.
  - ianai 10y ago
    I don't think you can say it'd be due to Silicon Valley when there are so many global factors at play/to blame.
    - jwdunne 10y ago
      There are actually many things in the world to be worried about when it comes to the economy. A few badly run companies won't help with that but ultimately won't be the cause. Brexit may or may not have an effect. What is most likely is that other EU countries see the same movement towards exit based on the influence of far right parties. If the US elects a president that openly calls for that, like a certain party candidate did for Brexit, we can be certain about the uncertainty. That's just inside my sphere of concern. There are many other things going on in the world that could lead to a shock in the economy.
    - freyr 10y ago
      My point was that a crash would be a big enough event that the latest batch of YC startups wouldn't stop it, and one data point doesn't invalidate the broader criticism of SV over the last five years or so. Of course, there may be global factors that could impact a crash in SV. But if the SV tech economy crashes (which is what we're talking about here), I think most blame will fall on local rather than global factors.
jomamaxx 10y ago
The 'crash' won't be so much a function of how well earl stage companies are doing. It's a function of the IPO markets and overall investor confidence. If there are a few big IPOs, it will create excitement and money will keep coming. "The money is not there anymore" - it definitely is. Even without some IPOs to keep the animal spirits going - the big difference between this and the last few VC 'corrections' is that now we are in a permanent era of low interest rates - and - money from around the world is finding it's way into the Valley creating a surplus of cash. This is a secular change, and it's the 'new normal' at least for now. As long as there are pitches, there will be money. I suggest a correction is coming of some kind, but it won't be a huge drawback, like the kinds we've seen before.
rco8786 10y ago
> The money is not there anymore According to the article, "investors are shoveling money into venture capital funds, which raised so much cash in the first half of this year that it rivaled the amount raised in all of 2015."
- cylinder 10y ago
  How about that number excluding Uber and Airbnb? Anyhow I am talking more about the smaller lower profile startups, not the unicorn media darlings that can always find dumb money somewhere.
shostack 10y ago
You seem to be implying that a "crash," which I'm taking to be defined as something that drops the stock market and overall economy, is caused by these startups. The widespread Mainstreet investors are not invested in startups like they were in the IPO-fueled dot-com bubble. It is largely accredited LPs going through VCs privately. Yes, there may be other economic factors that could cause a crash, but at this point, I think we would need to see an unprecedented black swan event to royally shake investor confidence. The election outcome could be an interesting one as markets tend to go a little crazy during election years. Plus, I'm curious how many people VC-funded pre-revenue startups in the Bay employ. If they were to all crater overnight, what impact would that have on the housing market given the other massive tech companies with strong revenue models and billions in the bank to weather anything? My assumption is they hire and locally employ orders of magnitude more people.

throwaway2016a 10y ago

The good ones know how to tell a story... a lot of them can't even do that. They just have wealthy friends/family or made some money from another deal where they got lucky and think they can do a startup. I work at a consulting company and it's amazing. Some of the customers come in and have five employees, no product, no story, but a rich dad. I have literally seen a millionaire dad sit across their kid in a meeting trying to explain what minimum viable product is and ended up giving in and paying to have their over-blown product made anyway. It's worth noting that we also explain and strongly encourage the client to stick to MVP, we never recommend overly broad feature sets. Not saying those are common but they do exist.

duaneb 10y ago
It's so odd. Most of the attraction I see in starting a business is the problem of bootstrapping it—there are many business ideas that are attractive, and the game is in separating the viable ones from the busts. I'm not sure why you would start one if you really just want to be a PM and not think about the cash flow.

swalsh 10y ago

I thought that too, but that last YC batch was filled with some solid (read boring) start-ups. They all had potential... not sure they all had the potential to be billion-dollar companies, but I doubt YC is going to lose any money on that batch. It was a lot more down to earth than the typical silicon valley type nonsense I've personally become used to.

freyr 10y ago
That's great to hear, but a crash would be due to typical Silicon Valkey, and the latest HN batch can't prevent it.
- ianai 10y ago
  I don't think you can say it'd be due to Silicon Valley when there are so many global factors at play/to blame.
  - jwdunne 10y ago
    There are actually many things in the world to be worried about when it comes to the economy. A few badly run companies won't help with that but ultimately won't be the cause. Brexit may or may not have an effect. What is most likely is that other EU countries see the same movement towards exit based on the influence of far right parties. If the US elects a president that openly calls for that, like a certain party candidate did for Brexit, we can be certain about the uncertainty. That's just inside my sphere of concern. There are many other things going on in the world that could lead to a shock in the economy.
  - freyr 10y ago
    My point was that a crash would be a big enough event that the latest batch of YC startups wouldn't stop it, and one data point doesn't invalidate the broader criticism of SV over the last five years or so. Of course, there may be global factors that could impact a crash in SV. But if the SV tech economy crashes (which is what we're talking about here), I think most blame will fall on local rather than global factors.

jomamaxx 10y ago

The 'crash' won't be so much a function of how well earl stage companies are doing. It's a function of the IPO markets and overall investor confidence. If there are a few big IPOs, it will create excitement and money will keep coming. "The money is not there anymore" - it definitely is. Even without some IPOs to keep the animal spirits going - the big difference between this and the last few VC 'corrections' is that now we are in a permanent era of low interest rates - and - money from around the world is finding it's way into the Valley creating a surplus of cash. This is a secular change, and it's the 'new normal' at least for now. As long as there are pitches, there will be money. I suggest a correction is coming of some kind, but it won't be a huge drawback, like the kinds we've seen before.

rco8786 10y ago

> The money is not there anymore According to the article, "investors are shoveling money into venture capital funds, which raised so much cash in the first half of this year that it rivaled the amount raised in all of 2015."

cylinder 10y ago
How about that number excluding Uber and Airbnb? Anyhow I am talking more about the smaller lower profile startups, not the unicorn media darlings that can always find dumb money somewhere.

shostack 10y ago

You seem to be implying that a "crash," which I'm taking to be defined as something that drops the stock market and overall economy, is caused by these startups. The widespread Mainstreet investors are not invested in startups like they were in the IPO-fueled dot-com bubble. It is largely accredited LPs going through VCs privately. Yes, there may be other economic factors that could cause a crash, but at this point, I think we would need to see an unprecedented black swan event to royally shake investor confidence. The election outcome could be an interesting one as markets tend to go a little crazy during election years. Plus, I'm curious how many people VC-funded pre-revenue startups in the Bay employ. If they were to all crater overnight, what impact would that have on the housing market given the other massive tech companies with strong revenue models and billions in the bank to weather anything? My assumption is they hire and locally employ orders of magnitude more people.