8 ms·

I really struggle to believe all this thing. We have some inflation because of covid stimulus and Ukraine war, sure. So the fed is going to increase the rate, s

by polote 4y ago

I really struggle to believe all this thing. We have some inflation because of covid stimulus and Ukraine war, sure. So the fed is going to increase the rate, sure. And everyone is panicking at the same time so markets are falling. Poor people have less money because they need to pay for more expensive food but all the others still have money to invest, so I don't understand what it changes for vc ( except for the money they lost investing in crypto)

JCM9 4y ago
The market has cycles where is goes from loving startups that burn cash with the aim of “growing big” and then figuring out the business to absolutely despising these models and flushing them out of the system. We’re at that pivot point now in the cycle. Startups with cash on hand and generating cash from operations will have some bumps in the road and probably take a big hit to their valuation, but with make it through. Startups still trying to figure out how they’re going to “make money” and without a ton of cash on hand to give them a long runway likely won’t make it through the next 18 months.
baybal2 4y ago
twayt 4y ago
On the outside, VC should theoretically be about value investing in the best startups that have sound fundamentals and can grow. Practically, when the market is optimistic and everyone wants to invest in high growth startups, the game can become about "passing the bag". Invest in a company at a low valuation in their seed or series A and wait for a later stage investor to come in and be the one left holding the bag. Ideally, the startup generates enough hype to IPO and then all the investors have a successful exit. You can see this trajectory with startups like WeWork. When the market is not that optimistic anymore and people are in conservation mode, there's no one to pass the bag to anymore so VCs have to appropriately adjust which businesses they are going to invest in and the valuation. This is why hype, signaling and FOMO plays such an important role in fundraising. It is about whether the startup can generate enough promise to convince others that they're a high growth investment vehicle and not as much about whether they are profitable in the short term.
throwawaylinux 4y ago
Is there significant inflation due to the Ukraine war? Inflation started to take off about April last year, and was 7.9% at the end of February this year when Russia invaded Ukraine. Since then it rose about a half percent and then started to drop, as sanctions have been implemented.
- FormFollowsFunc 4y ago
  Inflation in America has more to do with the COVID lock downs in China. Ukraine is having more of an effect on Europe which is highly dependent on gas from Russia.
  - throwawaylinux 4y ago
    What's the data or reasoning behind your claim? Inflation in Europe also started an upward trajectory early last year and became unusually high well before the war in Ukraine. There were also very few COVID lockdowns in China in 2021, most were in early 2020 and then some major ones occurred in 2022 but those, like Ukraine, were well after inflation started to rise in USA and Europe. Not to say the early 2020 China lockdowns could not have caused later inflation, but is that what you are claiming?
  - refurb 4y ago
    China didn't start it's Covid lockdown until after inflation started.
- rzazueta 4y ago
  A lot of the "inflation" is straight up corporate profiteering at this point. How else do you explain the record profits many companies experienced during and after the pandemic before the threat of rate hikes? The answer to the why of all of this is super easy: greed.
  - throwawaylinux 4y ago
    I don't find that answer very satisfactory at all. Did they suddenly become greedy in 2020 where previously they were foregoing profit out of the goodness of their hearts? Corporations are a tool, like a hammer. They're not good or evil. They exist and operate as they are permitted to. And human nature hasn't changed either, everyone is "greedy" to a first order approximation. So what has changed? What conditions have changed between now and then?
dominotw 4y ago
>So the fed is going to increase the rate, sure. I believe fed is on a pause.
SkyMarshal 4y ago
When the Fed raises rates, they do so by reducing the quantity of money in the economy until rates hit their target. There's just less money sloshing around to be invested, and the banks and financial firms who are closest to money issuance and the Fed are more quickly and severely impacted by that.
jagtesh 4y ago
> I don't understand what it changes for vc Their portfolio companies can go bankrupt. It is a Darwinian (survival of the fittest) moment for all the companies at this time. We’re experiencing a (likely) shrinking economy, with fewer customers who are spending more conservatively. VCs want their companies to succeed and preserve wealth.
PheonixPharts 4y ago
What you're missing is the larger picture. Anyone paying attention in the industry knew in 2019, pre-pandemic, that something wasn't quite right. Companies were hiring way more people than they needed, growing way too fast, building products that didn't make sense, pivoting to increasingly user hostile products, etc. But it kept going because VC and other investor money just kept flowing in. Then pandemic hit. Everyone who thought things weren't right in 2019 expected the reality check to finally be cashed and for a major industry correction to happen. It should have happened. But it didn't. Instead the Fed poured incredible amounts of money into the market. We saw stocks instantly u-turn and companies that in 2019 you were suspicious of were all of a sudden getting even more ridiculous valuations. This happened for what is in retrospect and obvious reason: Big name investors and VCs needed time to cash out. And they got it. We saw two years of record numbers of IPOs. Myself and many others pointed out over a year ago that something wasn't right, that this looked like investors rushing to cash in their chips and get out before everything came crashing down. Inflation started to rise, and indeed the game came to an end. Now we're going to see a crash that will be much harder than we though we would have seen in 2020 because policy has allowed already unhealthy companies to explode and grow even larger. And they're all interconnected so it's going to be ugly. How many of your company's customers are other start ups or other tech companies? We have a generation of companies led by people who have never really seen a recession, forget one that impacts tech, completely clueless about what's coming. First we saw consumer spending absolutely wreck big name companies bottom lines. But this is very likely to start spreading as more startups that depend on other startups revenue streams start to miss their targets. This current generation of founders might be clueless about recession and major downturns, but the people in charge at places like Sequoia sure as hell aren't.
- Apofis 4y ago
  Me thinks you're overstating it because you don't understand how VC's function. Venture Capitalists borrow money from Investment Bankers based on percentages. The market has lost all of its gains during the pandemic, that trend is still bearish. The risk percentages were adjusted, and now there's less money to go around. It's seriously basic math.
  - 4y ago
finikytou 4y ago
they want to create an event to what things will be in motion. a reset. it helps them clean their investments that will not work. usually there are two ways to do it. make someone else invest after your round or create a scenario in which it doesn't make sense for anyone to invest (except if you are an obvious winner with an amazing product). just as inflation is a buzzword that allows companies to mark up their price way more than they were before (but even when the inflation numbers were low or 1% I can garantee you that those companies products prices were increasing more than that. It is just that thanks to "inflation" they cant mark up to 10-20% now.) It is a scam and the looser as always will be the blue collar and the middle class.

by polote 4y ago

JCM9 4y ago

The market has cycles where is goes from loving startups that burn cash with the aim of “growing big” and then figuring out the business to absolutely despising these models and flushing them out of the system. We’re at that pivot point now in the cycle. Startups with cash on hand and generating cash from operations will have some bumps in the road and probably take a big hit to their valuation, but with make it through. Startups still trying to figure out how they’re going to “make money” and without a ton of cash on hand to give them a long runway likely won’t make it through the next 18 months.

baybal2 4y ago

twayt 4y ago

On the outside, VC should theoretically be about value investing in the best startups that have sound fundamentals and can grow. Practically, when the market is optimistic and everyone wants to invest in high growth startups, the game can become about "passing the bag". Invest in a company at a low valuation in their seed or series A and wait for a later stage investor to come in and be the one left holding the bag. Ideally, the startup generates enough hype to IPO and then all the investors have a successful exit. You can see this trajectory with startups like WeWork. When the market is not that optimistic anymore and people are in conservation mode, there's no one to pass the bag to anymore so VCs have to appropriately adjust which businesses they are going to invest in and the valuation. This is why hype, signaling and FOMO plays such an important role in fundraising. It is about whether the startup can generate enough promise to convince others that they're a high growth investment vehicle and not as much about whether they are profitable in the short term.

throwawaylinux 4y ago

Is there significant inflation due to the Ukraine war? Inflation started to take off about April last year, and was 7.9% at the end of February this year when Russia invaded Ukraine. Since then it rose about a half percent and then started to drop, as sanctions have been implemented.

FormFollowsFunc 4y ago
Inflation in America has more to do with the COVID lock downs in China. Ukraine is having more of an effect on Europe which is highly dependent on gas from Russia.
- throwawaylinux 4y ago
  What's the data or reasoning behind your claim? Inflation in Europe also started an upward trajectory early last year and became unusually high well before the war in Ukraine. There were also very few COVID lockdowns in China in 2021, most were in early 2020 and then some major ones occurred in 2022 but those, like Ukraine, were well after inflation started to rise in USA and Europe. Not to say the early 2020 China lockdowns could not have caused later inflation, but is that what you are claiming?
- refurb 4y ago
  China didn't start it's Covid lockdown until after inflation started.
rzazueta 4y ago
A lot of the "inflation" is straight up corporate profiteering at this point. How else do you explain the record profits many companies experienced during and after the pandemic before the threat of rate hikes? The answer to the why of all of this is super easy: greed.
- throwawaylinux 4y ago
  I don't find that answer very satisfactory at all. Did they suddenly become greedy in 2020 where previously they were foregoing profit out of the goodness of their hearts? Corporations are a tool, like a hammer. They're not good or evil. They exist and operate as they are permitted to. And human nature hasn't changed either, everyone is "greedy" to a first order approximation. So what has changed? What conditions have changed between now and then?

dominotw 4y ago

>So the fed is going to increase the rate, sure. I believe fed is on a pause.

SkyMarshal 4y ago

When the Fed raises rates, they do so by reducing the quantity of money in the economy until rates hit their target. There's just less money sloshing around to be invested, and the banks and financial firms who are closest to money issuance and the Fed are more quickly and severely impacted by that.

jagtesh 4y ago

> I don't understand what it changes for vc Their portfolio companies can go bankrupt. It is a Darwinian (survival of the fittest) moment for all the companies at this time. We’re experiencing a (likely) shrinking economy, with fewer customers who are spending more conservatively. VCs want their companies to succeed and preserve wealth.

PheonixPharts 4y ago

What you're missing is the larger picture. Anyone paying attention in the industry knew in 2019, pre-pandemic, that something wasn't quite right. Companies were hiring way more people than they needed, growing way too fast, building products that didn't make sense, pivoting to increasingly user hostile products, etc. But it kept going because VC and other investor money just kept flowing in. Then pandemic hit. Everyone who thought things weren't right in 2019 expected the reality check to finally be cashed and for a major industry correction to happen. It should have happened. But it didn't. Instead the Fed poured incredible amounts of money into the market. We saw stocks instantly u-turn and companies that in 2019 you were suspicious of were all of a sudden getting even more ridiculous valuations. This happened for what is in retrospect and obvious reason: Big name investors and VCs needed time to cash out. And they got it. We saw two years of record numbers of IPOs. Myself and many others pointed out over a year ago that something wasn't right, that this looked like investors rushing to cash in their chips and get out before everything came crashing down. Inflation started to rise, and indeed the game came to an end. Now we're going to see a crash that will be much harder than we though we would have seen in 2020 because policy has allowed already unhealthy companies to explode and grow even larger. And they're all interconnected so it's going to be ugly. How many of your company's customers are other start ups or other tech companies? We have a generation of companies led by people who have never really seen a recession, forget one that impacts tech, completely clueless about what's coming. First we saw consumer spending absolutely wreck big name companies bottom lines. But this is very likely to start spreading as more startups that depend on other startups revenue streams start to miss their targets. This current generation of founders might be clueless about recession and major downturns, but the people in charge at places like Sequoia sure as hell aren't.

Apofis 4y ago
Me thinks you're overstating it because you don't understand how VC's function. Venture Capitalists borrow money from Investment Bankers based on percentages. The market has lost all of its gains during the pandemic, that trend is still bearish. The risk percentages were adjusted, and now there's less money to go around. It's seriously basic math.
- 4y ago

finikytou 4y ago

they want to create an event to what things will be in motion. a reset. it helps them clean their investments that will not work. usually there are two ways to do it. make someone else invest after your round or create a scenario in which it doesn't make sense for anyone to invest (except if you are an obvious winner with an amazing product). just as inflation is a buzzword that allows companies to mark up their price way more than they were before (but even when the inflation numbers were low or 1% I can garantee you that those companies products prices were increasing more than that. It is just that thanks to "inflation" they cant mark up to 10-20% now.) It is a scam and the looser as always will be the blue collar and the middle class.