10 ms·

VC Meltdown

170 points by RickJWagner 4y ago

version_five 4y ago
> I can't mention the sub sector which I see as most hyped of all (Forum rules). But when the tide goes out in VC funding, you will find some real flotsam & jetsam left on the beach. It won't smell pretty. Does it rhyme with sockchain?
- formerkrogemp 4y ago
  The whole thing stinks. Cryptocurrency is a scam. SPACs are mostly a scam. Our American economy is basically just moving boxes back and forth and showing ads.
- silentsea90 4y ago
  Never understood the HN hate for BTC (not crypto as a whole which has plenty of scamming). If after 12 years you don't get it, I suppose you never will. Oh no, downvotes. Shocking.
  - ProjectArcturis 4y ago
    If after 12 years no one can come up with a use for BTC beyond speculation and crime, I suppose they never will.
    - silentsea90 4y ago
      BTC is sound money, even if not yet as widely used for transactions yet. We literally have the worst inflation in 40 years with the likes of Janet Yellen admitting they were wrong about 'transitory inflation', and yet we're good with Central Banks being allowed to dilute money. I encourage you to read about why Bitcoin makes sense as the ultimate store of value that fiat is pegged against. The book called The Bitcoin Standard is a great read.
  - ehnto 4y ago
    I imagine OP was talking about the odd marriage of crypto tech and VC business, which as you also noted, is a shitshow. But even though I do see value in BTC, it is hardly going well, and I don't mean the price.
    - silentsea90 4y ago
      Yes and no. I agree it is taking it's time to be used for transactions, but countries adopting it as legal tender is HUGE. So many payment apps (Venmo, Cash app etc) have adopted it as a medium of exchange. I would have liked it to be used more widely and am hopeful that lightning will get us there in due course of time, but I don't know with certainty what that path might look like.
  - MrMan 4y ago
    POW is what I hate not BTC itself, but they are inextricably linked.
dvt 4y ago
I am seeing so much doom and gloom, I don't think we're in for a "correction" any time soon. Everyone thinks they're Michael Burry these days. If all of Wall Street and their mom says it's going to crash, it's probably not crashing. My prediction is choppy seas until the midterms, and then back to all-time-highs. Housing will take a 30% haircut, and we'll probably see some of the over-extended corporate debt come to roost as well. But tech is going to be fine, and crypto will bounce back by EOY.
- nostrebored 4y ago
  But Michael Burry is predicting a correction?
  - dvt 4y ago
    His claim to fame is the 2008 housing market crash, so it's definitely on-brand. Survivorship bias in its purest form.
  - bloodyplonker22 4y ago
    When is he not?
    - MacsHeadroom 4y ago
      From 2010 through 2020
      - dvt 4y ago
        Except in 2015: https://nymag.com/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html https://nymag.com/intelligencer/2015/12/big-short-genius-say... And in 2019: https://www.bnnbloomberg.ca/the-big-short-s-michael-burry-explains-why-index-funds-are-like-subprime-cdos-1.1310874 https://www.bnnbloomberg.ca/the-big-short-s-michael-burry-ex...
      - mmastrac 4y ago
        He's called 20 of the last 2 recessions.
AnotherGoodName 4y ago
Ask HN: Is it time to revive fuckedcompany.com?
- rsuttongee 4y ago
  It sort of already exists (just without commentary): http://layoffs.fyi/ http://layoffs.fyi/
  - chrononaut 4y ago
    Ah neat. I wasn't aware of this. Looks like an opportunity to allow the time series to be adjustable at this point; I suspect "Transportation", "Food", and "Travel" will top that "Startup layoffs by industry since COVID-19" for quite some time.
- deleted 4y ago
  [deleted]
- api 4y ago
  Call the new one allmyapesgone.com or SPACtactularlyfucked.com
- smilespray 4y ago
  I had completely forgotten about that!
duxup 4y ago
As someone on the outside I find it hard to differentiate between whatever makes “brought the usual excesses” and whatever is going on now … VC land always seems to contain so much absurdity that I don’t know why it suddenly matters, or when it will.
- lumost 4y ago
  Anecdotally, there have been 2-4 partial washouts in the last 12 years of “bad” companies. However each time this came up, new money came in and saved the day. Bubbles have been called since 2013, in 2016 Uber, Lyft, and Wework all started looking shaky. The big crypto rumpus each resulted in a crash. Now, the problem is that if you took the pessimist view at any of these times - you’d have missed the big “wins”. But now we have 100 Billion dollar companies which may not be viable businesses. Few to none of the unicorns ever went down.
  - ceeplusplus 4y ago
    Thing is, if you got in early on Uber and Lyft you still did well. Only SoftBank really got screwed on that one. Same goes for all the pandemic companies crashing now like Zoom. They IPO'd at $62, meaning if you invested pre-IPO you got over 10x returns at the peak.
    - ummonk 4y ago
      And if you invested at IPO you’re still up 70%.
- gervwyk 4y ago
  Exactly, to me from what I read in the media, it almost feels like VCs are rooting for a haircut to gain more bargaining power with companies. It has become expensive to get a piece of the pie and they want it easier. Not that I don't agree that everything is inflated, just that the only ones who I read talking about the downturn are he VCs and not the founders. (Also saying this as an outsider with limited exposure)
- rr808 4y ago
gringoDan 4y ago
I agree with this to a certain extent. But it seems like this economic downturn is more a result of pumping the economy full of (near) zero-interest rate money and that cash inflating a growth stock bubble, as opposed to a tech bubble being inflated by VCs directly. In an economic downturn, VCs are going to have more power and preach more financial prudence. But VCs are awash in capital right now.[1] Their money needs to flow somewhere in order to provide a return to their LPs. How does that factor into this analysis? My hypothesis is that the negative unit-economic businesses that the article refers to will falter, but there are plenty of early-stage startups (the ones that didn't need a multi-billion dollar round from Softbank to win their category) that will be fine. [1] https://pitchbook.com/news/articles/vc-fundraising-venture-capital-asset-allocations-LP-GP-diligence https://pitchbook.com/news/articles/vc-fundraising-venture-c...
- lumost 4y ago
  Can LPs claw back money? If the market doesn’t look good this year and all of the LPs need to reallocate cash to public markets.. then why would the VCs hang onto it?
  - numbsafari 4y ago
    It depends on the terms. I know of at least one 2000s banking startup that was on track to make cash flow positive but had their cash clawed back by desperate investors that needed to cover other things. I used to own their CVS server (sparcserver 10) that I used as a random openbsd box for years. Bought it for $100 at their fire sale. Still had all their code on the HDD.
    - sokoloff 4y ago
      I bought a bunch of equipment at a failed dotcom auction in 2001 (and still use the desks). None of the computers were wiped, so we had a look around. My friend’s prediction was spot-on: “I bet you’ll find more porn than business plans on them…”
    - gedy 4y ago
VirusNewbie 4y ago
So if a VC can predict 1/10 companies that are going to be successful, does that mean they can pick 1/10 recessions/market crashes? All kidding aside, I agree with others here that the overreaction of doom and gloom really needs to be put in a wider context. The S&P has gone bonkers, RE has skyrocketed, and tech valuations are utter insanity. If the S&P falls another 10%, if RE crashes 35%, and tech valuations go to a third of what they were getting in the last two years....so what? That's what things were in ~2019? I bought a house 18 months ago and if it lost 35% of what it's valued now, I'd still be up from when I bought it. Sky high valuations will definitely kill some companies that were funded in the last two years, but will it affect most of them much? If Databricks and Discord and Stripe lose a few billion from their valuations, other than some grumpy employees does that kill the company? I don't see how it's cause for a crash...
- FollowingTheDao 4y ago
  Duplicate comment deleted.
  - deleted 4y ago
    [deleted]
  - VirusNewbie 4y ago
    I had people telling me nonsense back when I bought in 2009 as well, that houses would be had for pennies on the dollar. I put my money where my mouth was and they're poor and still renting. In the real estate crash of 2008, how much do you think houses went down? And you think house prices will crash more this time than in 2008?
    - hadtocreateacct 4y ago
      Anecdotal data point here. During the 2008 crash, I purchased a 2 bedroom / 1 bath home for $68k in foreclosure. It previously had a mortgage for $239k. Its current “Zestimate” is $286k.
    - UncleEntity 4y ago
morpheuskafka 4y ago
I'll be graduating and entering the job market in two years--does this mean I will be finding a job in the middle of a recession? I know all economics is speculative, but I'm to get a realistic sense of what all this means. On the one hand, I've seen the YC memo which writes as though a big crash is obviously on the horizon, but in daily life, it seems like the economy is still going strong, wages are higher across the board (from tech internships to my parent's retail job). I'm not hearing anyone outside of HN/tech talking about any recession. Is this downturn in CS/tech jobs a likely outcome or just speculation? Is there anything I should do/expect different to prepare?
- VirusNewbie 4y ago
  recessions usually affect the top tier and the bottom tier the most. Bottom tier will have trouble finding a job, and very top tier talent might have to settle for making 500k instead of 700k. The folks in the middle...well, mostly it doesn't affect them much. Literally a huge swathe of the tech community could just choose to ignore it and they'd go about their business. Sure you could get laid off but that happens in good times too, it's just not as talked about. If your chances of getting laid off go from 3% to 6%, you don't really live your life any differently. Good to be aware it can happen, but mostly just go about your day.
- devoutsalsa 4y ago
  Focus on being employable & excellent by having real accomplishments, humility, and great attitude. No matter how many people there are looking for work, there's always a shortage of people w/ these traits.
- ModernMech 4y ago
  > I'll be graduating and entering the job market in two years--does this mean I will be finding a job in the middle of a recession? I graduated college in 2008. By 2010 the job market was fine.
  - formerkrogemp 4y ago
    > I graduated college in 2008. By 2010 the job market was fine. I'm assuming that you mean in programming. I don't remember the job market being "fine" for many other industries.
matchagaucho 4y ago
I really don't envy late-stage VC at this point. They either need to double down or write-off their portfolios. And doubling down carries the possibility of replacing CEOs, and dozens of other nasty tooling decisions that rarely make a difference.
KennyBlanken 4y ago
> mentally this will test a lot of employees, especially senior, of VC backed businesses. ...as opposed to the rank and file who are now worrying about paying their bills?
avodonosov 4y ago
What is the root cause of the situation?
- aeyes 4y ago
  most basic but still mostly true explanation: printing a lot of money
  - pas 4y ago
    the printer has been on since... early 2000s, then after 2008 QE started... how come high inflation did not happen earlier?
- variant 4y ago
  Too much money chasing too few goods. - Low interest rates for years made money cheap (drives debt and stock market) - Stimulus during 2020 & 2021 has thrown an immense amount of cash into the economy
- Proven 4y ago
- trgn 4y ago
  Aggressive rebalancing of portfolios in face of global uncertainty (supply chain, war, interest rate hikes/QT). Lots of handwringing, but sell-off of last 3-4 months has been extremely localized to growth tech. All the rest pretty OK. It's just that wall street whales no longer have an appetite for speculation, and they pulled out fast and hard. This speculative money is going to return at some point (6 months, 2 years (?)), ironically likely to the same companies that saw 50% valuation cuts this year.
- freemint 4y ago
  Things becoming more expensive to buy. In this case partially because of increased energy prices due to constrained supply.
- adra 4y ago
  Fed does two primary things to regulate/stimulate the economy: - sets interest rate (how much is the loan rate that many banks will change you is the fed borrowing rate plus change) - print money aka quantitive easing or how much money to effectively give away from nothing by buying things like corporate bonds that then allows those companies to invest in ideally stimulate economic activity Since 2009, US interest rates have been rock bottom and QE largely stopped recently before COVID ended. That's because the economy was largely back on track . The Fed's plan was to start pulling the fictitious money out of the system by selling off those corporate bonds and around 2019 markets started to wobble. COVID forced everybody to print money again, but this time too much money was printed and people threw money at anything. Now that COVID isn't affecting the economy as significantly, travel, etc.. There is now out of control inflation somewhat related to supply shocks but also greatly exacerbated by cash in hand buyers looking to spend regardless of the cost. Now the fed has the opposite problem from 2009/2020 so they have to start making money more expensive again and start to extract money from the market once again. This is scaring the hell out of equity markets because there's less cheap money to help juice speculation and cheap expansion (think all the Ubers of the world who don't make enough money). Their business models start to go down south when there's no new bank to cover their largesse.
killjoywashere 4y ago
My worry is that we are headed into the twilight years of the baby boomers and there aren’t enough people in their 40s to fill the gap. It will be like Japan’s lost decade. Easily.
- fullshark 4y ago
  The plan is for immigrants to solve that problem in America, just need to get the proles on board politically.
  - bigDinosaur 4y ago
    America has always had huge amounts of immigration though. The entire country is built on it, just like other former British subjects like Australia and New Zealand. I'm genuinely unsure who has to get on board given that most Americans can trace heritage to immigrants? We're not talking about unskilled or illegal labour.
    - MrMan 4y ago
      we need immigrants to provide economic growth.
lpolovets 4y ago
(Context: I'm a VC, but while I graduated just after the dotcom bubble and worked as an engineer through the '08 recession, I was not a VC until ~10 years ago.) Directionally I agree with the post. Relative to a few months ago, there's more fear, and a much bigger emphasis now on cash efficiency, lower burn rates, etc. That said, I'm less pessimistic than the author and have different takes on a few of their points: Point 2: "VC funds have new investment periods of 5-6 years" -- it's more like 1.5-3 years these days. Which means that LPs can back an existing VC's new fund in 9 or 18 months, and that new fund will have lower entry prices and higher ownership. A lot of established LPs I've talked to appreciate that downturns can be the best time to deploy a new VC fund. I do agree with the author's conclusion that funds might shrink in size, and many funds -- especially less established ones -- will shut down. But I believe there will continue to be lots of capital available, especially at earlier stages. Point 3: "The compensation for software and business people will drop commensurately" -- this is the point I'm least certain about. Startup salaries have risen quickly in response to FAANG salaries. Once Google and FB started offering $400k and $600k total comp to sr engineers, startups raised their offers significantly as well. This is part of what's contributed to much bigger seed rounds in recent years: you now have to raise $4m to pay for your team of 6 in SF, instead of $2m. And if Google stops paying $400k and starts paying $250k then I do think startup salaries will drop as well. But if Google et al keep paying high comp, then I don't think startups will have much of a choice, and I think overall software comp will remain high. Point 4: "VCs will invest more in convertible debt" -- maybe. There are benefits to debt, which the author outlined, but also drawbacks. I think most investors who write big checks will still prefer equity rounds. I do think employee equity and options will start being rebased, which we're already seeing: https://pitchbook.com/news/articles/instacart-valuation-grocery-delivery-venture-capital https://pitchbook.com/news/articles/instacart-valuation-groc... Point 5: "Some sectors will really suffer" -- I agree with this. Here's a good take: https://twitter.com/lessin/status/1531713953293668352 https://twitter.com/lessin/status/1531713953293668352. Basically if a business model depended on the availability of cheap, abundant capital, then that business model will be hard to raise for in the near future. I think pure software companies will continue to attract capital at healthy (but lower) valuations. One big difference between today and 20 years ago is that you can build a real internet business with a small team. While valuations exploded in the last 2-3 years, it was not uncommon before then to see a startup raise $2m-$3m and get to $60k or $100k MRR. And that's a great run rate for a company with half a dozen people. Your burn with 6 people and $100k MRR is probably minimal, and your dependency on future funding is low.
tjr225 4y ago
The more and more I grow older I think these types of forums are pure unreadable garbage. There are nuggets of great information and wisdom here and there, but the people that dish that out aren't commenting that often. However; you have no way of knowing if a given poster- most of the posters you are reading from- have any fucking idea what they are talking about. I'm reminded of being told not to believe anything you read on the internet by my elders in the early 2000s... Instead what I find is that I'm participating in a massive maw of negativity and panic, almost a desired state of entropy and failure. I think it May Be Time To Stop Posting. I think I'll keep my head down and do my best to keep food on the table instead.
- Yhippa 4y ago
  Who knows what they are talking about when it comes to this stuff?
  - deleted 4y ago
    [deleted]
  - tjr225 4y ago
    Nobody! That’s what I’m saying! Sorry pal. Web 2.0 or 3.0 isn’t going to help any of us predict the future….
    - UmbertoNoEco 4y ago
      The best proof of that is to read some threads of 2,5,10,12 years ago and see how ridiculously wrong most of the predictions by the commenters were.
- kkfx 4y ago
  That's why we need usenet: back then nice posts, human knowledge flow, at least in some groups, while under all platforms, even the most open and targeted like HN platformisation effects bite.
- variant 4y ago
  Bogleheads is a forum of primarily disciplined investors interested in becoming wealthy over the long term via steady contributions to a risk diversified portfolio. It's a pretty knowledgeable community with a lot of high earners in medical & technology fields. These are investors who are diligently adding to their $VTI position not dabbling in high-risk venture capital backed companies. Easy to predict doom, though. If you do it enough, you'll eventually be right. These are strange times. Interest rates rising, inflation crazy but economy and job market is pretty hot. As a Bogleheader myself, I'll keep plunking money into my ETF's at discounted prices and believe it'll pay off long term. :)

170 points by RickJWagner 4y ago

> I can't mention the sub sector which I see as most hyped of all (Forum rules). But when the tide goes out in VC funding, you will find some real flotsam & jetsam left on the beach. It won't smell pretty. Does it rhyme with sockchain?

formerkrogemp 4y ago
The whole thing stinks. Cryptocurrency is a scam. SPACs are mostly a scam. Our American economy is basically just moving boxes back and forth and showing ads.
silentsea90 4y ago
Never understood the HN hate for BTC (not crypto as a whole which has plenty of scamming). If after 12 years you don't get it, I suppose you never will. Oh no, downvotes. Shocking.
- ProjectArcturis 4y ago
  If after 12 years no one can come up with a use for BTC beyond speculation and crime, I suppose they never will.
  - silentsea90 4y ago
    BTC is sound money, even if not yet as widely used for transactions yet. We literally have the worst inflation in 40 years with the likes of Janet Yellen admitting they were wrong about 'transitory inflation', and yet we're good with Central Banks being allowed to dilute money. I encourage you to read about why Bitcoin makes sense as the ultimate store of value that fiat is pegged against. The book called The Bitcoin Standard is a great read.
- ehnto 4y ago
  I imagine OP was talking about the odd marriage of crypto tech and VC business, which as you also noted, is a shitshow. But even though I do see value in BTC, it is hardly going well, and I don't mean the price.
  - silentsea90 4y ago
    Yes and no. I agree it is taking it's time to be used for transactions, but countries adopting it as legal tender is HUGE. So many payment apps (Venmo, Cash app etc) have adopted it as a medium of exchange. I would have liked it to be used more widely and am hopeful that lightning will get us there in due course of time, but I don't know with certainty what that path might look like.
- MrMan 4y ago
  POW is what I hate not BTC itself, but they are inextricably linked.

dvt 4y ago

I am seeing so much doom and gloom, I don't think we're in for a "correction" any time soon. Everyone thinks they're Michael Burry these days. If all of Wall Street and their mom says it's going to crash, it's probably not crashing. My prediction is choppy seas until the midterms, and then back to all-time-highs. Housing will take a 30% haircut, and we'll probably see some of the over-extended corporate debt come to roost as well. But tech is going to be fine, and crypto will bounce back by EOY.

nostrebored 4y ago
But Michael Burry is predicting a correction?
- dvt 4y ago
  His claim to fame is the 2008 housing market crash, so it's definitely on-brand. Survivorship bias in its purest form.
- bloodyplonker22 4y ago
  When is he not?
  - MacsHeadroom 4y ago
    From 2010 through 2020
    - dvt 4y ago
      Except in 2015: https://nymag.com/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html https://nymag.com/intelligencer/2015/12/big-short-genius-say... And in 2019: https://www.bnnbloomberg.ca/the-big-short-s-michael-burry-explains-why-index-funds-are-like-subprime-cdos-1.1310874 https://www.bnnbloomberg.ca/the-big-short-s-michael-burry-ex...
    - mmastrac 4y ago
      He's called 20 of the last 2 recessions.

AnotherGoodName 4y ago

Ask HN: Is it time to revive fuckedcompany.com?

rsuttongee 4y ago
It sort of already exists (just without commentary): http://layoffs.fyi/ http://layoffs.fyi/
- chrononaut 4y ago
  Ah neat. I wasn't aware of this. Looks like an opportunity to allow the time series to be adjustable at this point; I suspect "Transportation", "Food", and "Travel" will top that "Startup layoffs by industry since COVID-19" for quite some time.
deleted 4y ago
[deleted]
api 4y ago
Call the new one allmyapesgone.com or SPACtactularlyfucked.com
smilespray 4y ago
I had completely forgotten about that!

duxup 4y ago

As someone on the outside I find it hard to differentiate between whatever makes “brought the usual excesses” and whatever is going on now … VC land always seems to contain so much absurdity that I don’t know why it suddenly matters, or when it will.

lumost 4y ago
Anecdotally, there have been 2-4 partial washouts in the last 12 years of “bad” companies. However each time this came up, new money came in and saved the day. Bubbles have been called since 2013, in 2016 Uber, Lyft, and Wework all started looking shaky. The big crypto rumpus each resulted in a crash. Now, the problem is that if you took the pessimist view at any of these times - you’d have missed the big “wins”. But now we have 100 Billion dollar companies which may not be viable businesses. Few to none of the unicorns ever went down.
- ceeplusplus 4y ago
  Thing is, if you got in early on Uber and Lyft you still did well. Only SoftBank really got screwed on that one. Same goes for all the pandemic companies crashing now like Zoom. They IPO'd at $62, meaning if you invested pre-IPO you got over 10x returns at the peak.
  - ummonk 4y ago
    And if you invested at IPO you’re still up 70%.
gervwyk 4y ago
Exactly, to me from what I read in the media, it almost feels like VCs are rooting for a haircut to gain more bargaining power with companies. It has become expensive to get a piece of the pie and they want it easier. Not that I don't agree that everything is inflated, just that the only ones who I read talking about the downturn are he VCs and not the founders. (Also saying this as an outsider with limited exposure)
rr808 4y ago

gringoDan 4y ago

I agree with this to a certain extent. But it seems like this economic downturn is more a result of pumping the economy full of (near) zero-interest rate money and that cash inflating a growth stock bubble, as opposed to a tech bubble being inflated by VCs directly. In an economic downturn, VCs are going to have more power and preach more financial prudence. But VCs are awash in capital right now.[1] Their money needs to flow somewhere in order to provide a return to their LPs. How does that factor into this analysis? My hypothesis is that the negative unit-economic businesses that the article refers to will falter, but there are plenty of early-stage startups (the ones that didn't need a multi-billion dollar round from Softbank to win their category) that will be fine. [1] https://pitchbook.com/news/articles/vc-fundraising-venture-capital-asset-allocations-LP-GP-diligence https://pitchbook.com/news/articles/vc-fundraising-venture-c...

lumost 4y ago
Can LPs claw back money? If the market doesn’t look good this year and all of the LPs need to reallocate cash to public markets.. then why would the VCs hang onto it?
- numbsafari 4y ago
  It depends on the terms. I know of at least one 2000s banking startup that was on track to make cash flow positive but had their cash clawed back by desperate investors that needed to cover other things. I used to own their CVS server (sparcserver 10) that I used as a random openbsd box for years. Bought it for $100 at their fire sale. Still had all their code on the HDD.
  - sokoloff 4y ago
    I bought a bunch of equipment at a failed dotcom auction in 2001 (and still use the desks). None of the computers were wiped, so we had a look around. My friend’s prediction was spot-on: “I bet you’ll find more porn than business plans on them…”
  - gedy 4y ago

VirusNewbie 4y ago

So if a VC can predict 1/10 companies that are going to be successful, does that mean they can pick 1/10 recessions/market crashes? All kidding aside, I agree with others here that the overreaction of doom and gloom really needs to be put in a wider context. The S&P has gone bonkers, RE has skyrocketed, and tech valuations are utter insanity. If the S&P falls another 10%, if RE crashes 35%, and tech valuations go to a third of what they were getting in the last two years....so what? That's what things were in ~2019? I bought a house 18 months ago and if it lost 35% of what it's valued now, I'd still be up from when I bought it. Sky high valuations will definitely kill some companies that were funded in the last two years, but will it affect most of them much? If Databricks and Discord and Stripe lose a few billion from their valuations, other than some grumpy employees does that kill the company? I don't see how it's cause for a crash...

FollowingTheDao 4y ago
Duplicate comment deleted.
- deleted 4y ago
  [deleted]
- VirusNewbie 4y ago
  I had people telling me nonsense back when I bought in 2009 as well, that houses would be had for pennies on the dollar. I put my money where my mouth was and they're poor and still renting. In the real estate crash of 2008, how much do you think houses went down? And you think house prices will crash more this time than in 2008?
  - hadtocreateacct 4y ago
    Anecdotal data point here. During the 2008 crash, I purchased a 2 bedroom / 1 bath home for $68k in foreclosure. It previously had a mortgage for $239k. Its current “Zestimate” is $286k.
  - UncleEntity 4y ago

morpheuskafka 4y ago

I'll be graduating and entering the job market in two years--does this mean I will be finding a job in the middle of a recession? I know all economics is speculative, but I'm to get a realistic sense of what all this means. On the one hand, I've seen the YC memo which writes as though a big crash is obviously on the horizon, but in daily life, it seems like the economy is still going strong, wages are higher across the board (from tech internships to my parent's retail job). I'm not hearing anyone outside of HN/tech talking about any recession. Is this downturn in CS/tech jobs a likely outcome or just speculation? Is there anything I should do/expect different to prepare?

VirusNewbie 4y ago
recessions usually affect the top tier and the bottom tier the most. Bottom tier will have trouble finding a job, and very top tier talent might have to settle for making 500k instead of 700k. The folks in the middle...well, mostly it doesn't affect them much. Literally a huge swathe of the tech community could just choose to ignore it and they'd go about their business. Sure you could get laid off but that happens in good times too, it's just not as talked about. If your chances of getting laid off go from 3% to 6%, you don't really live your life any differently. Good to be aware it can happen, but mostly just go about your day.
devoutsalsa 4y ago
Focus on being employable & excellent by having real accomplishments, humility, and great attitude. No matter how many people there are looking for work, there's always a shortage of people w/ these traits.
ModernMech 4y ago
> I'll be graduating and entering the job market in two years--does this mean I will be finding a job in the middle of a recession? I graduated college in 2008. By 2010 the job market was fine.
- formerkrogemp 4y ago
  > I graduated college in 2008. By 2010 the job market was fine. I'm assuming that you mean in programming. I don't remember the job market being "fine" for many other industries.

matchagaucho 4y ago

I really don't envy late-stage VC at this point. They either need to double down or write-off their portfolios. And doubling down carries the possibility of replacing CEOs, and dozens of other nasty tooling decisions that rarely make a difference.

KennyBlanken 4y ago

> mentally this will test a lot of employees, especially senior, of VC backed businesses. ...as opposed to the rank and file who are now worrying about paying their bills?

avodonosov 4y ago

What is the root cause of the situation?

aeyes 4y ago
most basic but still mostly true explanation: printing a lot of money
- pas 4y ago
  the printer has been on since... early 2000s, then after 2008 QE started... how come high inflation did not happen earlier?
variant 4y ago
Too much money chasing too few goods. - Low interest rates for years made money cheap (drives debt and stock market) - Stimulus during 2020 & 2021 has thrown an immense amount of cash into the economy
Proven 4y ago
trgn 4y ago
Aggressive rebalancing of portfolios in face of global uncertainty (supply chain, war, interest rate hikes/QT). Lots of handwringing, but sell-off of last 3-4 months has been extremely localized to growth tech. All the rest pretty OK. It's just that wall street whales no longer have an appetite for speculation, and they pulled out fast and hard. This speculative money is going to return at some point (6 months, 2 years (?)), ironically likely to the same companies that saw 50% valuation cuts this year.
freemint 4y ago
Things becoming more expensive to buy. In this case partially because of increased energy prices due to constrained supply.
adra 4y ago
Fed does two primary things to regulate/stimulate the economy: - sets interest rate (how much is the loan rate that many banks will change you is the fed borrowing rate plus change) - print money aka quantitive easing or how much money to effectively give away from nothing by buying things like corporate bonds that then allows those companies to invest in ideally stimulate economic activity Since 2009, US interest rates have been rock bottom and QE largely stopped recently before COVID ended. That's because the economy was largely back on track . The Fed's plan was to start pulling the fictitious money out of the system by selling off those corporate bonds and around 2019 markets started to wobble. COVID forced everybody to print money again, but this time too much money was printed and people threw money at anything. Now that COVID isn't affecting the economy as significantly, travel, etc.. There is now out of control inflation somewhat related to supply shocks but also greatly exacerbated by cash in hand buyers looking to spend regardless of the cost. Now the fed has the opposite problem from 2009/2020 so they have to start making money more expensive again and start to extract money from the market once again. This is scaring the hell out of equity markets because there's less cheap money to help juice speculation and cheap expansion (think all the Ubers of the world who don't make enough money). Their business models start to go down south when there's no new bank to cover their largesse.

killjoywashere 4y ago

My worry is that we are headed into the twilight years of the baby boomers and there aren’t enough people in their 40s to fill the gap. It will be like Japan’s lost decade. Easily.

fullshark 4y ago
The plan is for immigrants to solve that problem in America, just need to get the proles on board politically.
- bigDinosaur 4y ago
  America has always had huge amounts of immigration though. The entire country is built on it, just like other former British subjects like Australia and New Zealand. I'm genuinely unsure who has to get on board given that most Americans can trace heritage to immigrants? We're not talking about unskilled or illegal labour.
  - MrMan 4y ago
    we need immigrants to provide economic growth.

lpolovets 4y ago

(Context: I'm a VC, but while I graduated just after the dotcom bubble and worked as an engineer through the '08 recession, I was not a VC until ~10 years ago.) Directionally I agree with the post. Relative to a few months ago, there's more fear, and a much bigger emphasis now on cash efficiency, lower burn rates, etc. That said, I'm less pessimistic than the author and have different takes on a few of their points: Point 2: "VC funds have new investment periods of 5-6 years" -- it's more like 1.5-3 years these days. Which means that LPs can back an existing VC's new fund in 9 or 18 months, and that new fund will have lower entry prices and higher ownership. A lot of established LPs I've talked to appreciate that downturns can be the best time to deploy a new VC fund. I do agree with the author's conclusion that funds might shrink in size, and many funds -- especially less established ones -- will shut down. But I believe there will continue to be lots of capital available, especially at earlier stages. Point 3: "The compensation for software and business people will drop commensurately" -- this is the point I'm least certain about. Startup salaries have risen quickly in response to FAANG salaries. Once Google and FB started offering $400k and $600k total comp to sr engineers, startups raised their offers significantly as well. This is part of what's contributed to much bigger seed rounds in recent years: you now have to raise $4m to pay for your team of 6 in SF, instead of $2m. And if Google stops paying $400k and starts paying $250k then I do think startup salaries will drop as well. But if Google et al keep paying high comp, then I don't think startups will have much of a choice, and I think overall software comp will remain high. Point 4: "VCs will invest more in convertible debt" -- maybe. There are benefits to debt, which the author outlined, but also drawbacks. I think most investors who write big checks will still prefer equity rounds. I do think employee equity and options will start being rebased, which we're already seeing: https://pitchbook.com/news/articles/instacart-valuation-grocery-delivery-venture-capital https://pitchbook.com/news/articles/instacart-valuation-groc... Point 5: "Some sectors will really suffer" -- I agree with this. Here's a good take: https://twitter.com/lessin/status/1531713953293668352 https://twitter.com/lessin/status/1531713953293668352. Basically if a business model depended on the availability of cheap, abundant capital, then that business model will be hard to raise for in the near future. I think pure software companies will continue to attract capital at healthy (but lower) valuations. One big difference between today and 20 years ago is that you can build a real internet business with a small team. While valuations exploded in the last 2-3 years, it was not uncommon before then to see a startup raise $2m-$3m and get to $60k or $100k MRR. And that's a great run rate for a company with half a dozen people. Your burn with 6 people and $100k MRR is probably minimal, and your dependency on future funding is low.

tjr225 4y ago

The more and more I grow older I think these types of forums are pure unreadable garbage. There are nuggets of great information and wisdom here and there, but the people that dish that out aren't commenting that often. However; you have no way of knowing if a given poster- most of the posters you are reading from- have any fucking idea what they are talking about. I'm reminded of being told not to believe anything you read on the internet by my elders in the early 2000s... Instead what I find is that I'm participating in a massive maw of negativity and panic, almost a desired state of entropy and failure. I think it May Be Time To Stop Posting. I think I'll keep my head down and do my best to keep food on the table instead.

Yhippa 4y ago
Who knows what they are talking about when it comes to this stuff?
- deleted 4y ago
  [deleted]
- tjr225 4y ago
  Nobody! That’s what I’m saying! Sorry pal. Web 2.0 or 3.0 isn’t going to help any of us predict the future….
  - UmbertoNoEco 4y ago
    The best proof of that is to read some threads of 2,5,10,12 years ago and see how ridiculously wrong most of the predictions by the commenters were.
kkfx 4y ago
That's why we need usenet: back then nice posts, human knowledge flow, at least in some groups, while under all platforms, even the most open and targeted like HN platformisation effects bite.
variant 4y ago
Bogleheads is a forum of primarily disciplined investors interested in becoming wealthy over the long term via steady contributions to a risk diversified portfolio. It's a pretty knowledgeable community with a lot of high earners in medical & technology fields. These are investors who are diligently adding to their $VTI position not dabbling in high-risk venture capital backed companies. Easy to predict doom, though. If you do it enough, you'll eventually be right. These are strange times. Interest rates rising, inflation crazy but economy and job market is pretty hot. As a Bogleheader myself, I'll keep plunking money into my ETF's at discounted prices and believe it'll pay off long term. :)