5 ms·

Startups Face a ‘Fundamental Reset,’ Says VC

33 points by otoburb 6y ago

nathanaldensr 6y ago
I wish I could read the article as the headline sounds interesting. Alas, paywall...
- deleted 6y ago
  [deleted]
Mizza 6y ago
Capital faces a 'fundamental reset', says torch-wielding mob.
- sremani 6y ago
  Meanwhile at the US Treasury Mnuchin shouted "Release the Kraken" and breaking all the red-tape.. the Iron Clad PRINTER, Kraken started printing Green.... BRRRRRRrrrrr…. There it was $5 Trillion .. ex nihilo!
  - jedberg 6y ago
    It's important to note that most of that $5T are loans that will have to be paid back to the Treasury by the businesses that get the money. Just like TARP, which ended up being profitable for the US Treasury. Also it should be noted it is the Fed that prints money and is independent from the Treasury.
code_biologist 6y ago
http://archive.is/zxK0b http://archive.is/zxK0b
alexbanks 6y ago
In the post-covid world, you have to actually make money and have ROI to be worth invested in.
- bob33212 6y ago
  Same thing happened after the 2002 tech crash. The IPO market dried up for unprofitable company.
hpoe 6y ago
I know everyone wants to talk about all these fancy economic theories about, market capture, VC funding, exponential growth etc around startups, especially SV and tech startups. I don't buy it, I see everything happening as the classic example of a bubble. Some people made a ton of money in tech through a combination of hard work, having a really great idea, and luck, Google, Facebook, Amazon, etc. Other people saw how much money they made and the market and other piled in to try and get rich, some of them had good ideas, some of them had ideas that sounded good. This was the rising of the bubble, VCs want to get in on this, dreams of exorbitant wealth played before their eyes, they started funding tech ideas even if they didn't think they were good or there was clearly no way for the idea to actually be that profitable. But it didn't matter, this is when we started spouting things like "don't invest in a product, invest in a star team", "pivoting" began to become big, questions about actual revenue were hand waved with words like "market capture" and "penetration". Then we hit the height of the bubble, the second stage hadn't actually really produced any wildly profitable companies but other big tech companies bought them, for their engineers or platform, or data or something, at obscene valuations and so the VCs and founders still made a killing. The dream for founders and engineers went from "have a good idea that you can build something on" to "how can I get myself bought by Google", VCs meanwhile went from "will my capital work out here" to "I need to get in fast on the first rounds and some other sucker will be willing to buy it for more on the next round of funding." This is when the idea no longer mattered, what you did, how you were going to do it, none of those things mattered anymore. Move as fast as you can the faster you move the more likely you were to hit the "next big thing", in reality you were just playing the lottery, but instead of VCs buying $5 lottery tickets they were buying $5 million dollars stake in companies. Engineers rather than paying with their hard earned cash for the scratch-n-win were suckered into paying with hours of their lives in hopes of scoring big on the "being bought out jackpot". Things seemed to peak with the WeWork fiasco, ideas that were stupidly blindingly obvious, and already being done were suddenly transformed into these hot new golden geese because they used tech jargon to cover up the fact the emperor was wearing no clothes. We are now in the bubble popping for tech, corona probably wasn't the way anyone saw the bubble popping but now the contraction in capital, and the easy money drying up will show which companies had a solid good business model, which ones were iffy, and which ones were completely ludicrous. This ended up being a lot longer than intended but really sometimes you don't need fancy explanations or complex financial analysis to figure out things, sometimes plain old common sense can help you better see the forest for the trees.
jedberg 6y ago
This is my third downturn. So far this one doesn't look much different than the others. A lot of businesses that could only survive on VC money have/will collapse, and the good businesses will stay good, albeit maybe with slower growth or smaller margins. The large companies will power through, and maybe even hire up some of the really great talent that was at now-defunct startups. Some new businesses will spring up to address our new realities. The lockdown will end one way or another. Maybe some things will be forever different, like after 9/11. Maybe we'll have to wear masks in public forever. Sounds like a great opportunity for a fashion brand. Maybe we'll have to take our temperature to enter a public place forever. Sounds like an opportunity to make rapid temperature scanners that work on crowds. In the grand scheme of things, this won't make a huge difference to the business cycle. Some companies will die, others will be born.
- whatok 6y ago
  You had asset prices and rates at much different levels during this downturn vs your three downturns. You haven't had asset prices correct to what economic reality is (not saying they should necessarily but that's what's needed for a healthy business cycle) and rates can't really go in either direction without things getting really bad. I agree with your general comments 100% but this can be a much different business cycle as far as length and phase.
- nostrademons 6y ago
  Also my third downturn. The thing is, during the second downturn, I thought "We'll probably make it through this one okay, but it'll fatally weaken the system such that the next one may be the final one." We're at the next one now. Most of the issues I identified in 2009-2011 haven't really been addressed, and if anything have gotten worse. My thesis was that by bailing out the financial system, the government couple trust in the government with trust in the banks. The banking system was saved, but the price of this was that a large section of America gave up trust in America. Nothing has been done to restore that. If anything, it's gotten worse, with the Snowden disclosures, increasing media polarization, the election of Donald Trump, the impeachment procedures, and handling of coronavirus. Then add rising income inequality, inflation in critical need-to-live goods (health care, housing, and food), political polarization and tribalism, increasing publicity around the misdeeds of certain sectors (tech) that were considered the few bright lights in the American economy, skyrocketing national debt (which will increasingly tempt the federal government to monetize it), and decreasing economic and physical mobility, and you have a powder keg. My sense is that this is the start of something bigger, and that we're going to get a series of cascading failures until eventually we get a collapse of critical monetary or government infrastructure.
yumraj 6y ago
Can we also have a 'fundamental reset' of the VC industry which is overcrowded by incompetent sheep VCs?

33 points by otoburb 6y ago

nathanaldensr 6y ago

I wish I could read the article as the headline sounds interesting. Alas, paywall...

deleted 6y ago
[deleted]

Mizza 6y ago

Capital faces a 'fundamental reset', says torch-wielding mob.

sremani 6y ago
Meanwhile at the US Treasury Mnuchin shouted "Release the Kraken" and breaking all the red-tape.. the Iron Clad PRINTER, Kraken started printing Green.... BRRRRRRrrrrr…. There it was $5 Trillion .. ex nihilo!
- jedberg 6y ago
  It's important to note that most of that $5T are loans that will have to be paid back to the Treasury by the businesses that get the money. Just like TARP, which ended up being profitable for the US Treasury. Also it should be noted it is the Fed that prints money and is independent from the Treasury.

code_biologist 6y ago

http://archive.is/zxK0b http://archive.is/zxK0b

alexbanks 6y ago

In the post-covid world, you have to actually make money and have ROI to be worth invested in.

bob33212 6y ago
Same thing happened after the 2002 tech crash. The IPO market dried up for unprofitable company.

hpoe 6y ago

I know everyone wants to talk about all these fancy economic theories about, market capture, VC funding, exponential growth etc around startups, especially SV and tech startups. I don't buy it, I see everything happening as the classic example of a bubble. Some people made a ton of money in tech through a combination of hard work, having a really great idea, and luck, Google, Facebook, Amazon, etc. Other people saw how much money they made and the market and other piled in to try and get rich, some of them had good ideas, some of them had ideas that sounded good. This was the rising of the bubble, VCs want to get in on this, dreams of exorbitant wealth played before their eyes, they started funding tech ideas even if they didn't think they were good or there was clearly no way for the idea to actually be that profitable. But it didn't matter, this is when we started spouting things like "don't invest in a product, invest in a star team", "pivoting" began to become big, questions about actual revenue were hand waved with words like "market capture" and "penetration". Then we hit the height of the bubble, the second stage hadn't actually really produced any wildly profitable companies but other big tech companies bought them, for their engineers or platform, or data or something, at obscene valuations and so the VCs and founders still made a killing. The dream for founders and engineers went from "have a good idea that you can build something on" to "how can I get myself bought by Google", VCs meanwhile went from "will my capital work out here" to "I need to get in fast on the first rounds and some other sucker will be willing to buy it for more on the next round of funding." This is when the idea no longer mattered, what you did, how you were going to do it, none of those things mattered anymore. Move as fast as you can the faster you move the more likely you were to hit the "next big thing", in reality you were just playing the lottery, but instead of VCs buying $5 lottery tickets they were buying $5 million dollars stake in companies. Engineers rather than paying with their hard earned cash for the scratch-n-win were suckered into paying with hours of their lives in hopes of scoring big on the "being bought out jackpot". Things seemed to peak with the WeWork fiasco, ideas that were stupidly blindingly obvious, and already being done were suddenly transformed into these hot new golden geese because they used tech jargon to cover up the fact the emperor was wearing no clothes. We are now in the bubble popping for tech, corona probably wasn't the way anyone saw the bubble popping but now the contraction in capital, and the easy money drying up will show which companies had a solid good business model, which ones were iffy, and which ones were completely ludicrous. This ended up being a lot longer than intended but really sometimes you don't need fancy explanations or complex financial analysis to figure out things, sometimes plain old common sense can help you better see the forest for the trees.

jedberg 6y ago

This is my third downturn. So far this one doesn't look much different than the others. A lot of businesses that could only survive on VC money have/will collapse, and the good businesses will stay good, albeit maybe with slower growth or smaller margins. The large companies will power through, and maybe even hire up some of the really great talent that was at now-defunct startups. Some new businesses will spring up to address our new realities. The lockdown will end one way or another. Maybe some things will be forever different, like after 9/11. Maybe we'll have to wear masks in public forever. Sounds like a great opportunity for a fashion brand. Maybe we'll have to take our temperature to enter a public place forever. Sounds like an opportunity to make rapid temperature scanners that work on crowds. In the grand scheme of things, this won't make a huge difference to the business cycle. Some companies will die, others will be born.

whatok 6y ago
You had asset prices and rates at much different levels during this downturn vs your three downturns. You haven't had asset prices correct to what economic reality is (not saying they should necessarily but that's what's needed for a healthy business cycle) and rates can't really go in either direction without things getting really bad. I agree with your general comments 100% but this can be a much different business cycle as far as length and phase.
nostrademons 6y ago
Also my third downturn. The thing is, during the second downturn, I thought "We'll probably make it through this one okay, but it'll fatally weaken the system such that the next one may be the final one." We're at the next one now. Most of the issues I identified in 2009-2011 haven't really been addressed, and if anything have gotten worse. My thesis was that by bailing out the financial system, the government couple trust in the government with trust in the banks. The banking system was saved, but the price of this was that a large section of America gave up trust in America. Nothing has been done to restore that. If anything, it's gotten worse, with the Snowden disclosures, increasing media polarization, the election of Donald Trump, the impeachment procedures, and handling of coronavirus. Then add rising income inequality, inflation in critical need-to-live goods (health care, housing, and food), political polarization and tribalism, increasing publicity around the misdeeds of certain sectors (tech) that were considered the few bright lights in the American economy, skyrocketing national debt (which will increasingly tempt the federal government to monetize it), and decreasing economic and physical mobility, and you have a powder keg. My sense is that this is the start of something bigger, and that we're going to get a series of cascading failures until eventually we get a collapse of critical monetary or government infrastructure.

yumraj 6y ago

Can we also have a 'fundamental reset' of the VC industry which is overcrowded by incompetent sheep VCs?