8 ms·

I'm sorry for some of my schadenfreude here, but really, so many of these startups are overfunded with way too many employees to begin with. They've often paid

I'm sorry for some of my schadenfreude here, but really, so many of these startups are overfunded with way too many employees to begin with. They've often paid top dollar for expensive technical talent in locations with very high cost of living. I can't wait to see a pull back to solid fundamentals. I don't see why a daily vacation rental company honestly needs 240 highly paid employees. One company cited in the article (WanderJaunt) laid off 56 out of its 240 total employees, but honestly I bet they could do just well with 20 total employees. Let's put the Lean back in Lean Startup and provide real value instead of playing the magical, mysterious game of VC musical chairs.

anthony_r 7y ago
See also the "Austrian business cycle theory". But the bust, while clearing the economy of a lot of mal-investment, goes on for quite a painful while before the previous level of output/employment/prosperity is matched. https://en.wikipedia.org/wiki/Austrian_business_cycle_theory https://en.wikipedia.org/wiki/Austrian_business_cycle_theory
- rexreed 7y ago
  Are you implying that venture funding at previous levels is a function of low interest rates (that's the theory in ABCT linked above). I don't think that specifically applies here. While it's possible venture funding is accelerated by low rates, this was not the case in the late 1990s prior to the 2000s dot-com crash. Rather we're seeing a Black Swan event causing macroeconomic pull back, and it's pulling back the covers on companies that really had no fundamental underlying value or support. The only real exit for these companies was acquisition or public markets. But with both exits now drying up, there's nothing but overvalued, overfunded companies with revenue streams (if they have any) drying up faster than the glaciers are melting. The fundamentals were never there, and it was only the fat-times of VC investment keeping them afloat. There might be a role to play with ABCT with regards to VC investment as a whole, but this downturn is more than just a normal business cycle.
- Marazan 7y ago
  Ah yes, ABCT. First, assume the market is made up of rational actors. Second, assume that sustained irrational investment choices have been made by the rational actors.
  - runeks 7y ago
    A rational person can make mistakes.
  - anthony_r 7y ago
    What is "rational". I don't think that this theory assumes anything about "rationality". It's many of the other economic theories that are built on the pinnacle of "rationality".
    - Marazan 7y ago
      I mean, the fact that ABCT is not backed up historical events either is a bit of a blow to its credibility.
      - anthony_r 7y ago
        Have you ever seen the chart of fed funds rate with shaded recessions? https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS
closeparen 7y ago
Why is it so offensive to people in this industry that our skills are valued? Sometimes it seems a little crazy to me too, but I'm not, like, excited to need to live with 5 roommates 90 minutes away from work again like you seem to be.
- marcosdumay 7y ago
  The GP is not complaining that our skills are valued, it's complaining that those companies have an awful low productivity. You know, people filling low productivity jobs means that our skills aren't valued enough.
  - deleted 7y ago
    [deleted]
  - sumedh 7y ago
    > it's complaining that those companies have an awful low productivity. That is just human nature, once the company starts going big and has the funds, the managers start empire building.
    - deleted 7y ago
      [deleted]
- rexreed 7y ago
  You answered your own question. It's not that people don't think you're valued, it's that the value you are getting commensurate with pay levels is unsustainable in the region. When the tide goes down, the first boats to flounder are the ones on high ground. I hope we can also see an unwinding of the ridiculous cost of living that is part of the rationale behind unsustainable wage growth. These things go hand in hand.
  - dhruvkar 7y ago
    >> I hope we can also see an unwinding of the ridiculous cost of living that is part of the rationale behind unsustainable wage growth. From your mouth to god's ear. The ridiculous cost of living is what made me reconsider the Bay Area (South Bay) after 5 years there. My wife and I are very financially conservative. We pay cash to own assets - car, house etc. That just wasn't possible out there. And I couldn't imagine shelling out >$1M (not that I have it) in cash to own a mediocre house that would be worth 5 times less almost anywhere else.
tjr225 7y ago
Schadenfreude is an absolute awful response to this. A lot of us are just trying to put food on the table and pay off student loans.
- rexreed 7y ago
  You know the numbers. 90%+ of startups fail. In an economic downturn, it's more like 99%+. If you're trying to put food on your table, startups are probably the wrong place to turn.
  - tjr225 7y ago
    Maybe I don't know the numbers. Maybe I only work for a startup because it allowed me some flexibility I wouldn't have had otherwise. Maybe I didn't know that a global pandemic was going to shut down the economy. Maybe I'm fresh out of college and don't know better. Maybe I lost my last job and had to take this job because the other option was to go bankrupt. Who knows? My point is the same as it was in my gp; your attitude is grim and you're misplacing your negativity onto real people. This is the wrong time to do that. In this situation, there is only one explanation for schadenfreude and that explanation is that the person feeling it is an asshole. I'm glad I've only head the pleasure of speaking to you on the internet.
    - bsder 7y ago
      > Maybe I didn't know that a global pandemic was going to shut down the economy. Then you are a fool. The tech economy crashes on 5-7 year cycles. See: Dot bomb. 2008 Financial Crash. Covid-19 in 2020. I can go backwards in time, too. 3D graphics card startup crash. Microprocessor startup crash. AI winter. etc. Too much money flows into the sector and then eventually the VC funds want it back. Roughly on 5-7 year timescales. Funny how that aligns with crashes, no? This time VC's changed tack--they won't put money into anything which produces a product so they can simply keep the shell game going. Presumably that's why this crash is a little late. If you aren't ready for this kind of cycling, you shouldn't be in a startup.
nakedshorts 7y ago
I agree. At the end of the day, the startup ecosystem is much healthier when the market is sane. On the one end you have newbie angel investors and VCs throwing money at pre-revenue startups that will go nowhere. On the other end of the spectrum you have Softbank pumping in billions and ruining what could've been great businesses. Honestly, WeWork had (and still has) such a great value proposition. It could've been a very stably profitable company with a valuation in the hundreds of millions, but here we are.

anthony_r 7y ago

See also the "Austrian business cycle theory". But the bust, while clearing the economy of a lot of mal-investment, goes on for quite a painful while before the previous level of output/employment/prosperity is matched. https://en.wikipedia.org/wiki/Austrian_business_cycle_theory https://en.wikipedia.org/wiki/Austrian_business_cycle_theory

rexreed 7y ago
Are you implying that venture funding at previous levels is a function of low interest rates (that's the theory in ABCT linked above). I don't think that specifically applies here. While it's possible venture funding is accelerated by low rates, this was not the case in the late 1990s prior to the 2000s dot-com crash. Rather we're seeing a Black Swan event causing macroeconomic pull back, and it's pulling back the covers on companies that really had no fundamental underlying value or support. The only real exit for these companies was acquisition or public markets. But with both exits now drying up, there's nothing but overvalued, overfunded companies with revenue streams (if they have any) drying up faster than the glaciers are melting. The fundamentals were never there, and it was only the fat-times of VC investment keeping them afloat. There might be a role to play with ABCT with regards to VC investment as a whole, but this downturn is more than just a normal business cycle.
Marazan 7y ago
Ah yes, ABCT. First, assume the market is made up of rational actors. Second, assume that sustained irrational investment choices have been made by the rational actors.
- runeks 7y ago
  A rational person can make mistakes.
- anthony_r 7y ago
  What is "rational". I don't think that this theory assumes anything about "rationality". It's many of the other economic theories that are built on the pinnacle of "rationality".
  - Marazan 7y ago
    I mean, the fact that ABCT is not backed up historical events either is a bit of a blow to its credibility.
    - anthony_r 7y ago
      Have you ever seen the chart of fed funds rate with shaded recessions? https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS

closeparen 7y ago

Why is it so offensive to people in this industry that our skills are valued? Sometimes it seems a little crazy to me too, but I'm not, like, excited to need to live with 5 roommates 90 minutes away from work again like you seem to be.

marcosdumay 7y ago
The GP is not complaining that our skills are valued, it's complaining that those companies have an awful low productivity. You know, people filling low productivity jobs means that our skills aren't valued enough.
- deleted 7y ago
  [deleted]
- sumedh 7y ago
  > it's complaining that those companies have an awful low productivity. That is just human nature, once the company starts going big and has the funds, the managers start empire building.
  - deleted 7y ago
    [deleted]
rexreed 7y ago
You answered your own question. It's not that people don't think you're valued, it's that the value you are getting commensurate with pay levels is unsustainable in the region. When the tide goes down, the first boats to flounder are the ones on high ground. I hope we can also see an unwinding of the ridiculous cost of living that is part of the rationale behind unsustainable wage growth. These things go hand in hand.
- dhruvkar 7y ago
  >> I hope we can also see an unwinding of the ridiculous cost of living that is part of the rationale behind unsustainable wage growth. From your mouth to god's ear. The ridiculous cost of living is what made me reconsider the Bay Area (South Bay) after 5 years there. My wife and I are very financially conservative. We pay cash to own assets - car, house etc. That just wasn't possible out there. And I couldn't imagine shelling out >$1M (not that I have it) in cash to own a mediocre house that would be worth 5 times less almost anywhere else.

tjr225 7y ago

Schadenfreude is an absolute awful response to this. A lot of us are just trying to put food on the table and pay off student loans.

rexreed 7y ago
You know the numbers. 90%+ of startups fail. In an economic downturn, it's more like 99%+. If you're trying to put food on your table, startups are probably the wrong place to turn.
- tjr225 7y ago
  Maybe I don't know the numbers. Maybe I only work for a startup because it allowed me some flexibility I wouldn't have had otherwise. Maybe I didn't know that a global pandemic was going to shut down the economy. Maybe I'm fresh out of college and don't know better. Maybe I lost my last job and had to take this job because the other option was to go bankrupt. Who knows? My point is the same as it was in my gp; your attitude is grim and you're misplacing your negativity onto real people. This is the wrong time to do that. In this situation, there is only one explanation for schadenfreude and that explanation is that the person feeling it is an asshole. I'm glad I've only head the pleasure of speaking to you on the internet.
  - bsder 7y ago
    > Maybe I didn't know that a global pandemic was going to shut down the economy. Then you are a fool. The tech economy crashes on 5-7 year cycles. See: Dot bomb. 2008 Financial Crash. Covid-19 in 2020. I can go backwards in time, too. 3D graphics card startup crash. Microprocessor startup crash. AI winter. etc. Too much money flows into the sector and then eventually the VC funds want it back. Roughly on 5-7 year timescales. Funny how that aligns with crashes, no? This time VC's changed tack--they won't put money into anything which produces a product so they can simply keep the shell game going. Presumably that's why this crash is a little late. If you aren't ready for this kind of cycling, you shouldn't be in a startup.

nakedshorts 7y ago

I agree. At the end of the day, the startup ecosystem is much healthier when the market is sane. On the one end you have newbie angel investors and VCs throwing money at pre-revenue startups that will go nowhere. On the other end of the spectrum you have Softbank pumping in billions and ruining what could've been great businesses. Honestly, WeWork had (and still has) such a great value proposition. It could've been a very stably profitable company with a valuation in the hundreds of millions, but here we are.