5 ms·

As the Startup Boom Deflates, Tech Is Humbled

88 points by jpm_sd 7y ago

jatsign 7y ago
So, is this rationality prevailing (play stupid games, win stupid prizes), or a canary in the coal mine for the US/world economy as a whole?
- jpm_sd 7y ago
  Probably both.
- nnq 7y ago
  Bet on the first. The US economy is probably getting healthier, dropping/burning the dead wood. Now, US politics... that circus looks weird from the outside, but whatever works for them ¯\_(ツ)_/¯
  - metabagel 7y ago
    It looks weird from the inside too.
  - frockington1 7y ago
    The next presidential election, despite being an absolute circus, should keep things split no matter who wins. This makes political stagnation a reliable bet for the next 2.5 years, possibly even longer. Normally a good sign for markets as little new regulations/change will be occurring.
- itronitron 7y ago
  Since this bubble is largely being driven by private investors it seems like the broader economy won't suffer but will instead benefit from investors losing their interest in stupid games.
nnq 7y ago
So some of the fake-innovators are finally failing (long overdue). Startups are no longer a "fashion", so hopefully there will be less posers and less people who brand as startups businesses that are more fit for slow organic growth. Like really, WTF did Uber or Airbnb really innovate or invent?! Grateful to them that they finally raised the bar in areas of the service industry where everything sucked for the consumers... but there should be other stuff to focus on if you want 100x ROI. What they did was pretty much mundane and incredibly boring, they succeeded by incredibly-smart-business-sense and uberhuman bubble-surfing-skills! Finally more breathing room. And hopefully less competition for capital, so that the people actually really innovating and inventing new stuff have more chances of getting it. Overall there's only reason for optimism!
- lambdasquirrel 7y ago
  Not sure how to respond to this, because they really did innovate in the beginning, in a way that’s not obvious to the “makers:” they created whole new business models. Or at least AirBnB did. It’s still unclear whether the Uber model is actually (financially) sustainable. With that said they didn’t innovate in any other way, and haven’t shown that they’re able to continue innovating on business models. The world takes for granted their original business-model innovation, now that it’s so commonplace, so all the same, it’s easily understandable to be hearing this.
  - growlist 7y ago
    People have been renting out rooms, houses etc. for a very long time. When I was a kid you could call up the tourist board or various organisations for a list of people renting out rooms in their house. Other than a new delivery medium, exactly what has AirBnB added? The only thing I can think of is the feedback features.
    - Jommi 7y ago
      Wow, you are really trying to reduce Airbnb's business arent you? How do you not see a global house/room rental platform not being a complete game changer on how people travel?
sorenn111 7y ago
Doesn't this seem similar to other downturns the tech industry has seen? I think it is quite likely that in the next 5 years there's a good chance of a recession and that tech and startups will feel it as they have in other downturns (this may be a cycle of that). Why would it be incorrect to assume that startups will roar back as they did post dotcom bubble and post great recession?
- roseway4 7y ago
  We’ll likely see many more tech-enabled consumer (and some B2B) startups fail. Meanwhile, B2B tech companies with good unit economics will continue to grow, hire, raise more capital and IPO/exit. They may not be as sexy as the PR-laden BS that we’ve seen in the last few years, but there are many more solid companies with real businesses than there are Caspers, WeWorks, scooter companies etc
readhn 7y ago
IMO We reached a peak of start up enthusiasm: so many entrepreneur wannabes around. The reality is that Mr Market is going to make lots of egos very humble very soon.
rossdavidh 7y ago
I have the feeling that, unlike in 2001 and 2008, we haven't had a recession in a while so there wasn't a filtering process for unprofitable startups. Due to the quantity of $$ looking for an investment target, the unprofitable ideas kept getting investment $$ far longer than would normally be the case. But, eventually, it becomes apparent that some of these ideas aren't going to ever be profitable, because not every problem is solved by growth. So, really, it's just as well to have a shakeout of unprofitable ideas now, rather than accumulate ever-more bogus ideas sucking up resources. The only unusual thing is that it's been so long since the last recession that this shakeout is happening without one. Of course, we could have one soon, but I've been thinking that for a while now, so who knows.
- Fordec 7y ago
  I foresee a post-crash wave. Yes there will be a shakeout of unprofitable ideas. But "VC unprofitable" is not directly comparable to real world unprofitable. Growth at all costs mantras take down good ideas with 8-9 figure market caps too. If you don't take investment (maybe through debt + bootstrapping) and can deal with the slower growth rate $50M "lifestyle" businesses with full founder ownership isn't something to sneeze at.
  - rossdavidh 7y ago
    There are definitely cases of a potentially profitable X-size startup being killed by taking 100*X in VC money, and then trying to find some way of justifying that pricetag.
tjchear 7y ago
My suspicion is with the low hanging fruits gone, investors will soon turn their eyes away from growth-at-all-cost unicorn potentials to profitable companies that target tiny specific niches.
- blaser-waffle 7y ago
  > to profitable companies that target tiny specific niches I agree with this, and will take it a step further: it'll mostly be B2B and niche business and service applications.
laughingbovine 7y ago
Our entire sector is overvalued. This could just be the beginning of investors realizing their investment isn't really worth what they paid. If there is a reckoning on the big companies, that could lead to a recession.
iamcasen 7y ago
I welcome the reckoning honestly, I think there was a whole decade or more of this myth that tech startups just print money and that young, hip, techie folks were at the forefront of innovation. The reality was just that many, many idiots were flush with VC money, and that there was very little intelligent business going on. Most startups I worked at seemed to care more about their slick office space and their culture than the bottom line, equating a successful round of funding with actual business success. That being said, I won't deny that the well known tech companies did change culture dramatically (Netflix, Google, Amazon, AirBnb, Uber, Facebook, etc). These days I really prefer the "bootstrapped" business scene. Companies that start small, and are forced to make revenues early on to stay afloat. Why the need to build 100 billion dollar businesses? What's wrong with 50 million dollar businesses? Rather than starting with some grand vision, why not start with the basics: I can create value in x way, and meet the needs of y market. From there it's all just managing finances, spending time wisely, and making tough trade-offs, the hallmarks of any business.

88 points by jpm_sd 7y ago

So, is this rationality prevailing (play stupid games, win stupid prizes), or a canary in the coal mine for the US/world economy as a whole?

jpm_sd 7y ago
Probably both.
nnq 7y ago
Bet on the first. The US economy is probably getting healthier, dropping/burning the dead wood. Now, US politics... that circus looks weird from the outside, but whatever works for them ¯\_(ツ)_/¯
- metabagel 7y ago
  It looks weird from the inside too.
- frockington1 7y ago
  The next presidential election, despite being an absolute circus, should keep things split no matter who wins. This makes political stagnation a reliable bet for the next 2.5 years, possibly even longer. Normally a good sign for markets as little new regulations/change will be occurring.
itronitron 7y ago
Since this bubble is largely being driven by private investors it seems like the broader economy won't suffer but will instead benefit from investors losing their interest in stupid games.

nnq 7y ago

So some of the fake-innovators are finally failing (long overdue). Startups are no longer a "fashion", so hopefully there will be less posers and less people who brand as startups businesses that are more fit for slow organic growth. Like really, WTF did Uber or Airbnb really innovate or invent?! Grateful to them that they finally raised the bar in areas of the service industry where everything sucked for the consumers... but there should be other stuff to focus on if you want 100x ROI. What they did was pretty much mundane and incredibly boring, they succeeded by incredibly-smart-business-sense and uberhuman bubble-surfing-skills! Finally more breathing room. And hopefully less competition for capital, so that the people actually really innovating and inventing new stuff have more chances of getting it. Overall there's only reason for optimism!

lambdasquirrel 7y ago
Not sure how to respond to this, because they really did innovate in the beginning, in a way that’s not obvious to the “makers:” they created whole new business models. Or at least AirBnB did. It’s still unclear whether the Uber model is actually (financially) sustainable. With that said they didn’t innovate in any other way, and haven’t shown that they’re able to continue innovating on business models. The world takes for granted their original business-model innovation, now that it’s so commonplace, so all the same, it’s easily understandable to be hearing this.
- growlist 7y ago
  People have been renting out rooms, houses etc. for a very long time. When I was a kid you could call up the tourist board or various organisations for a list of people renting out rooms in their house. Other than a new delivery medium, exactly what has AirBnB added? The only thing I can think of is the feedback features.
  - Jommi 7y ago
    Wow, you are really trying to reduce Airbnb's business arent you? How do you not see a global house/room rental platform not being a complete game changer on how people travel?

sorenn111 7y ago

Doesn't this seem similar to other downturns the tech industry has seen? I think it is quite likely that in the next 5 years there's a good chance of a recession and that tech and startups will feel it as they have in other downturns (this may be a cycle of that). Why would it be incorrect to assume that startups will roar back as they did post dotcom bubble and post great recession?

roseway4 7y ago
We’ll likely see many more tech-enabled consumer (and some B2B) startups fail. Meanwhile, B2B tech companies with good unit economics will continue to grow, hire, raise more capital and IPO/exit. They may not be as sexy as the PR-laden BS that we’ve seen in the last few years, but there are many more solid companies with real businesses than there are Caspers, WeWorks, scooter companies etc

readhn 7y ago

IMO We reached a peak of start up enthusiasm: so many entrepreneur wannabes around. The reality is that Mr Market is going to make lots of egos very humble very soon.

rossdavidh 7y ago

I have the feeling that, unlike in 2001 and 2008, we haven't had a recession in a while so there wasn't a filtering process for unprofitable startups. Due to the quantity of $$ looking for an investment target, the unprofitable ideas kept getting investment $$ far longer than would normally be the case. But, eventually, it becomes apparent that some of these ideas aren't going to ever be profitable, because not every problem is solved by growth. So, really, it's just as well to have a shakeout of unprofitable ideas now, rather than accumulate ever-more bogus ideas sucking up resources. The only unusual thing is that it's been so long since the last recession that this shakeout is happening without one. Of course, we could have one soon, but I've been thinking that for a while now, so who knows.

Fordec 7y ago
I foresee a post-crash wave. Yes there will be a shakeout of unprofitable ideas. But "VC unprofitable" is not directly comparable to real world unprofitable. Growth at all costs mantras take down good ideas with 8-9 figure market caps too. If you don't take investment (maybe through debt + bootstrapping) and can deal with the slower growth rate $50M "lifestyle" businesses with full founder ownership isn't something to sneeze at.
- rossdavidh 7y ago
  There are definitely cases of a potentially profitable X-size startup being killed by taking 100*X in VC money, and then trying to find some way of justifying that pricetag.

tjchear 7y ago

My suspicion is with the low hanging fruits gone, investors will soon turn their eyes away from growth-at-all-cost unicorn potentials to profitable companies that target tiny specific niches.

blaser-waffle 7y ago
> to profitable companies that target tiny specific niches I agree with this, and will take it a step further: it'll mostly be B2B and niche business and service applications.

laughingbovine 7y ago

Our entire sector is overvalued. This could just be the beginning of investors realizing their investment isn't really worth what they paid. If there is a reckoning on the big companies, that could lead to a recession.

iamcasen 7y ago

I welcome the reckoning honestly, I think there was a whole decade or more of this myth that tech startups just print money and that young, hip, techie folks were at the forefront of innovation. The reality was just that many, many idiots were flush with VC money, and that there was very little intelligent business going on. Most startups I worked at seemed to care more about their slick office space and their culture than the bottom line, equating a successful round of funding with actual business success. That being said, I won't deny that the well known tech companies did change culture dramatically (Netflix, Google, Amazon, AirBnb, Uber, Facebook, etc). These days I really prefer the "bootstrapped" business scene. Companies that start small, and are forced to make revenues early on to stay afloat. Why the need to build 100 billion dollar businesses? What's wrong with 50 million dollar businesses? Rather than starting with some grand vision, why not start with the basics: I can create value in x way, and meet the needs of y market. From there it's all just managing finances, spending time wisely, and making tough trade-offs, the hallmarks of any business.