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74% of Startups Have Trimmed Staff, 65% Have Less Than 6 Months of Cash
- greatgib 7y agoWrong link, the correct one is: https://www.forbes.com/sites/johnkoetsier/2020/04/30/74-of-startups-have-trimmed-staff-65-have-less-than-6-months-of-cash https://www.forbes.com/sites/johnkoetsier/2020/04/30/74-of-s...
- exceptione 7y ago"Will a society that has grown accustomed to hearing about startups employees’ big salaries and cushy perks — dog-walking services while working, anyone? — and that are mainly based in the big coastal cities, be willing to bail out what many might see as privileged and coddled millennials?" Curious what people think about this question.
- javajosh 7y agoIt's a troll, not a question. Are people really reading it at face value, or do they subscribe to the popular view that most content is generated to serve the sick desperation of an aging and fading publishing industry desperate for attention and clicks? (see what I did there?)
- Ididntdothis 7y agoI really hope they won’t get bailed out. I think it would be healthier for tech if there was less investor money floating around so people can focus in tech and not on hyper growth. Maybe there will be a trend towards more bootstrapped companies that run real businesses as in making profits.
- amw-zero 7y agoI wish I could upvote this 10 times. The Silicon Valley meme of some companies is too real. I only work for companies with a practical business model that I think has an actual chance of making money. It seems strange to have to stress that.
- drusepth 7y agoI really hope so too. I've been running a decently-profitable bootstrapped company for a few years now and it's been weird having potential investors/acquirers looking more at things like activity/growth metrics than dollar amounts and profitability. (Obviously, both are very important and I understand why an investor would look at what a cash infusion could do; but I generally lean toward dollar amounts, runway, margins, and traction being more important when valuing a company than how quickly I could theoretically scale up and pivot/expand into new markets). I think there's a big disconnect in the world of "startups" (hyper growth) and "small businesses" (profitability and scaling), and bridging the gap between the two might have a net-positive impact on the market at large.
- hef19898 7y agoThat makes two. German start-ups managed to convince the government to set-up a 2 Bn € fund to bail out start-ups (that are defined how again?). The reasoning is that these companies are not eligible for other programs by virtue of not being financially stable enough to get bank loans. It's basically a VC / investor bail out. It would be rediculous if it wasn't so sad.
- joejerryronnie 7y agoMeanwhile, in the real world of VC’s, they’re still looking for the “Uber of x” to pull in a 100x return before they can offload the smoking carcass to the public markets.
- renewiltord 7y agoThey already are. We applied for and got PPP.
- jbay808 7y agoI wonder why "millennials" is relevant to the question being asked.
- bdcravens 7y agoIt doesn't even make sense. Plenty of GenXers working in startup land.
- fred_is_fred 7y agoWhile I also agree this is true there are weekly threads there that imply people over 35 (or 40) cannot get a job in software. All Gen-Xers are over 35, so only one or the other reflects reality.
- oliverz 7y agoGenX is 40+ now
- pmiller2 7y ago40 is over 35.
- bdcravens 7y agoI don't think this is true. In my experience, those who are seem to have a constraint they don't mention, like knowing an older language that isn't in vogue (I spent a lot of time in the ColdFusion ecosystem, and there were many who really didn't know another language), and who haven't expanded their skillset as the industry has changed (front-end frameworks, Docker, cloud, git workflows, etc) (I'm not on the market now, but I'm 43, my coworker is 41 or 42 I think, and virtually every programmer friend/cohort I know of that's 40+ is still gainfully employed)
- fred_is_fred 7y agoI agree with your impression as well and am also over 40. This site I think generally does not seem to agree with this sentiment.
- majormajor 7y agoWait I thought startup employees were awkward young males living in small rooms in shared homes or dorm-like buildings, kinda just scraping by hoping their product catches on, and working 24/7?
- sarora27 7y agoyou're confusing employees with founders :P
- propogandist 7y agoHigh risk,high reward
- mrits 7y agoI'm not that young
- emodendroket 7y agoDepends how politically connected they are.
- gen220 7y agoOur company is in a counter cyclical industry, one of the ones referenced in the article. We were looking to raise money this quarter, regardless of this pandemic, because we had maybe a year and a half of safe runway left. The interesting thing is that this downturn has simultaneously raised our revenue (since we’re counter cyclical), but dramatically decreased the likelihood of us getting another round with reasonable terms this quarter/year, because cash is no longer cheap for our would-be investors. As such, even though our quarterly financials are going to be abnormally high, they decided to cut some perks and let go of 5% of employees (among other things) to reduce our burn rate. It’s an interesting outcome: it doesn’t matter how counter cyclical your business is, if you have a runway and it’s less than two years, you’re impacted. In the aftermath of all this, I wonder if more entrepreneurs of wannabe hyper growth companies will seek out positive cash flow more sincerely than they do today, after going through this trauma.
- hartator 7y ago> It’s an interesting outcome: it doesn’t matter how counter cyclical your business is, if you have a runway and it’s less than two years, you’re impacted. Not if you're profitable.
- fennecfoxen 7y agoBeing profitable rather implies more than two years' runway.
- deleted 7y ago[deleted]
- lmeyerov 7y agoYou're profitable until you're not. B2b world took a breath and continued in many places, but if the bottom keeps falling out, very unclear what next quarter looks like, and the quarter after. If the other end of the b2b is a b2c and the b2c goes away, so does the b2b. We're seeing new (small) purchases continue at big enterprises, and 2020 budgets were already ok'd in dec/jan/feb. We also help gov teams, and even slower response there (and I feel for the employees there where remote work is even less of a thing, esp. in national defense). Institutional momentum & insulation means a very delayed response. No clue when it'll be and what it'll be. Hence, even if you're doing fine, but don't have runway for > 1yr, who knows. Run-rate is very different from a cash reserve when the rug gets pulled out under you for whatever reason.
- deleted 7y ago[deleted]
- notyourday 7y agoThe really funny part to me is that the same startups that laid people off are posting in "Who is hiring". I mean, come on!
- Zhenya 7y agoCut the fat and hire good engineers looking for work. :Shrug:
- wolco 7y agoCare to name names?
- frandroid 7y agoIf developers are difficult to hire in a regular market, you can use this opportunity to hire them now while you trim your marketing team, which is trying to sell to a market which has hit the pause button anyway...
- notyourday 7y agoExcept that layoffs.fyi which publishes lists of people being laid off together with their titles and linkedin/email addresses lists software engineers in the same companies that post a week later posted in "Who is hiring" looking for software engineers.
- itake 7y agoI think a lot of companies used covid as an excuse for cutting under-performers without needing to go through the complicated PIP process.
- dehrmann 7y agoEspecially when they know they can replace them with a lot of talent suddenly on the market.
- ImaCake 7y agoThis kind of practice is illegal in most developed countries. Hiring for the same position after giving someone a redundancy is considered intent for unreasonable dismissal. Does the USA not have these kind of protections?
- rdlecler1 7y agoWe invest in foodtech and agtech startups. Most of them have seen spikes in demand, but operationally there are challenges and almost everyone has slowed their burn and cut staff because no matter how fantastic their numbers are they can’t rely on venture capital being there on the other side. Companies that were looking at a a $10-$12m Series A are now dialing back to $2-3M seed II rounds with insiders. Companies that were looking at large $40m-$60m funding rounds, within 8 months of their last round have mostly stopped fundraising altogether. Still it seems like the big firms are willing to do some seed deals to stay active without blowing out their fund. Tough times.
- caseysoftware 7y ago"Startups are laying people off!" Examples: Publicly traded companies Uber and Lyft. Sorry, they're not startups. And yes, most will have less than 6 months in the bank. Most rounds of funding are planned to last 18-24 months. If they raised at the tail end of 2019, they're already 4+ months into that. More likely, the bulk of the 65% are companies who raised late 2018 through mid 2019. They're in the middle of figuring out their new round and who will/won't be involved. The good news is that the VC funds have to put their money somewhere so investment can't stop. LPs don't invest for good luck. The bad news is that VCs are likely going to slow down for a quarter or two and valuations will grow more slowly than before. Companies that have good metrics may be in good shape as VCs become more available and their pipeline dries up. Companies with mediocre to bad metrics may be gone by the end of the year.
- Justsignedup 7y agoIrony, strong companies I been part of have ~2 years of banked cash. Even non-profits. These hyper-growth companies are showing their weakness. They only work during hyper economic growth. The fact that Uber and Lyft don't have like 2 years of runway in the bank is a strong indication of exactly how much these companies are gambling like drunken sailors. This is exactly why we must bail out the people and let the companies that did not heed the warnings die out. Ideally with the owners losing all those mega billions they managed to grab.
- Apocryphon 7y agoNot just the companies themselves, but the VCs that feed into their behavior. Will VC firms ever feel the repercussions for fueling this tech boom's irrational exuberance?
- rvz 7y agoAnd what happens when you chase hyper-growth over profitability when either the markets crash or a global catastrophe happens or perhaps more accurately both events happening? [0] This plea for halp is left as an exercise to the reader. [0] https://techcrunch.com/2020/04/08/deliveroo-graphcore-and-other-big-uk-startups-say-theyre-being-cut-out-of-covid-19-lending-relief/ https://techcrunch.com/2020/04/08/deliveroo-graphcore-and-ot...
- notimetorelax 7y agoThe original link gives 400 for me. This one seems to work: https://www.forbes.com/sites/johnkoetsier/2020/04/30/74-of-startups-have-trimmed-staff-65-have-less-than-6-months-of-cash/ https://www.forbes.com/sites/johnkoetsier/2020/04/30/74-of-s...
- turowicz 7y agoBusiness as usual then
- fab1an 7y agoI'd guess that most startups have less than 6 months of cash regardless of a pandemic happening or not. Of course, blaming the pandemic for layoffs is an opportune thing to do. For most (actual) startups (Lyft is not a startup) this should be an excellent time to execute or to pivot, but most certainly to thrive.
- brenden2 7y agoI think there's a big reckoning coming. Big companies will do fine, in fact they'll probably just get bigger and richer. Anyone who's already poor, close to broke, or otherwise in a bad position is going to get hit hard by this. I know it's a really unpopular opinion right now, but I do think the worst damage from the virus is the economic impact which is going to set millions (maybe even billions) of people back another 10-20 years. Simultaneously, rich people will just build an even bigger moat between themselves and the poor. I think the biggest risk to rich people (and they know this) at the moment is that poor people finally decide to fight back against feudalism and we go through a new cycle of political upheaval ("new world order" type thing[0]). This is something Ray Dalio talks about a lot if you follow his writings/talks. [0]: https://en.wikipedia.org/wiki/New_world_order_(politics) https://en.wikipedia.org/wiki/New_world_order_(politics)
- scarface74 7y agoI’ve never wanted to work for $BigTech. But the market and salary for senior software engineers collapsed locally and I don’t see it coming back. I still have a job. But, we did have an across the board pay cut. I have an interview this week with one of the major tech companies. It’s not a software engineering position. But it is tech adjacent. They are the only companies that have the cash to afford to pay the wages I want.