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Of course he's cherry-picking "pandemic businesses". A lot of these businesses that he uses as examples are actually bad businesses, pandemic or not. There are

Of course he's cherry-picking "pandemic businesses". A lot of these businesses that he uses as examples are actually bad businesses, pandemic or not. There are plenty of great enterprise SAAS businesses that will have a slight slowdown in revenue growth for a while, but will more than thrive in the long term. These bloggers always act like everything is binary. "It's a shite business or a great one."

pseudosavant 4y ago
Toward the end he writes: > Ok, what about the silver lining? > > Good business will have the time of their life. Fast-growing, profitable startups will have the opportunity to buy out struggling competitors, invest in an environment where CAC will decrease, and hire people with fair compensation packages. Startups with positive cash flows are the cool kids again - until the next exuberance of course. He nails the fundamentally poor businesses, but points out how it is a prime opportunity for sound businesses.
- aetherson 4y ago
  I worked at companies that survived both the 2008 and 2001 crashes, and indeed perhaps were overall helped by those crashes. Nobody was having "the time of their life." It may be true that businesses with good underlying economics are ultimately helped by these crashes, but they're tense, uncomfortable experiences all around.
  - nbstme 4y ago
    Agree. It's not enjoyable to work in a bad macro environment. My point is that companies that have significant cash flows won't have to lay off employees and might even continue to hire, acquire businesses and consolidate their business. They will expand, not contract like the rest of the market.
    - aetherson 4y ago
      One thing that I think works against businesses expanding right now -- even profitable businesses -- is that with it having been like 12+ years since anyone worked in a bad macro environment is that nobody really knows how their company behaves in a recession. Like, sure, you're profitable right now, but right now we're not in a recession, the bad times are pretty limited to just the tech sector. If the whole economy does go into recession, do your customers vanish on you? Even if you were around in 2008, your business is probably different now in 2022, and you don't really know what the pressures are going to be like. In this environment, I think lots of companies that have fundamentally sound businesses are still going to be very conservative. (Not disagreeing with you, exactly, just adding more thoughts and some context for why it's not enjoyable to work in a bad macro even if your business is ultimately the healthier for it.)
    - tyrfing 4y ago
      Sure, if you're working at Google in 2000, you're fine. However, cash flow isn't enough, and a lot of tech is very cyclical. If a business has already hired to sustain growth which doesn't appear, they will lay people off. Advertising is leveraged on the state of the economy, and in a contraction will shrink more than goods sales, so a company relying on it will lay people off or have some very ugly financials. If software is licensed by head or usage and all your customers are shrinking, your revenue will be directly impacted. It's very hard to forecast these effects, but so much of tech revenue is fueled by advertising, consumer discretionary spending, and venture capital [1] that assuming a business cycle contraction is irrelevant strikes me as incredibly foolish. A fantastic and profitable business over the long term can be affected by macroeconomic effects. 1. Bridgewater estimates 10% of AMZN/GOOG/FB revenue, 44 billion/year, comes from startups. Startup revenue from other startups will likely be much higher on average.
    - andrekandre 4y ago
      > acquire businesses and consolidate their business. They will expand, not contract like the rest of the market. exactly, downturns are an opportunity for the big players to "buy cheap", expand their marketshare, then wait things out and "sell dear" when things get hot again
- lmeyerov 4y ago
  YEP. We're very much in this camp. We cooled on VC for the last 2-3 years just to work through deep tech + business fundamentals in the graph space with good customers. That was very much against the grain because adjacent companies (graph DBs, while we are compute-tier graph intelligence) were raising megarounds to do self-similar things with little effective relative differentiation from the perspective of customers. By us instead focusing on things like category creation, profitability, & ease of use, each customer & hire now means growing the pie, not digging the hole deeper. That included some very unsexy things like valuing solutions engineers to work closely with customers to truly tackle their problems. Maybe a good time to say: That also means we are now getting way more enterprise/gov customers than ability to support them, so if you are into rapids.ai (gpu dataframes), dask, seaborn, streamlit, igraph, graph neural nets, etc. esp for tricky core graph problems like detecting fraud, security breaches, mapping supply chains, ... plz email build@graphistry.com :)
nbstme 4y ago
Hey, thanks for your comment! I'm not cherry-picking pandemic businesses. Monday, Lemonade, Oscar, Facebook, and Datadog aren't "pandemic businesses." All tech stocks took a hit and suffered from the reversion to the mean. I agree that average businesses that took off thanks to the "pandemic effect" will continue to decline while good SaaS businesses with significant cash flows will thrive long-term. A great business as a fair price is always a good deal. Time to buy.

pseudosavant 4y ago

Toward the end he writes: > Ok, what about the silver lining? > > Good business will have the time of their life. Fast-growing, profitable startups will have the opportunity to buy out struggling competitors, invest in an environment where CAC will decrease, and hire people with fair compensation packages. Startups with positive cash flows are the cool kids again - until the next exuberance of course. He nails the fundamentally poor businesses, but points out how it is a prime opportunity for sound businesses.

aetherson 4y ago
I worked at companies that survived both the 2008 and 2001 crashes, and indeed perhaps were overall helped by those crashes. Nobody was having "the time of their life." It may be true that businesses with good underlying economics are ultimately helped by these crashes, but they're tense, uncomfortable experiences all around.
- nbstme 4y ago
  Agree. It's not enjoyable to work in a bad macro environment. My point is that companies that have significant cash flows won't have to lay off employees and might even continue to hire, acquire businesses and consolidate their business. They will expand, not contract like the rest of the market.
  - aetherson 4y ago
    One thing that I think works against businesses expanding right now -- even profitable businesses -- is that with it having been like 12+ years since anyone worked in a bad macro environment is that nobody really knows how their company behaves in a recession. Like, sure, you're profitable right now, but right now we're not in a recession, the bad times are pretty limited to just the tech sector. If the whole economy does go into recession, do your customers vanish on you? Even if you were around in 2008, your business is probably different now in 2022, and you don't really know what the pressures are going to be like. In this environment, I think lots of companies that have fundamentally sound businesses are still going to be very conservative. (Not disagreeing with you, exactly, just adding more thoughts and some context for why it's not enjoyable to work in a bad macro even if your business is ultimately the healthier for it.)
  - tyrfing 4y ago
    Sure, if you're working at Google in 2000, you're fine. However, cash flow isn't enough, and a lot of tech is very cyclical. If a business has already hired to sustain growth which doesn't appear, they will lay people off. Advertising is leveraged on the state of the economy, and in a contraction will shrink more than goods sales, so a company relying on it will lay people off or have some very ugly financials. If software is licensed by head or usage and all your customers are shrinking, your revenue will be directly impacted. It's very hard to forecast these effects, but so much of tech revenue is fueled by advertising, consumer discretionary spending, and venture capital [1] that assuming a business cycle contraction is irrelevant strikes me as incredibly foolish. A fantastic and profitable business over the long term can be affected by macroeconomic effects. 1. Bridgewater estimates 10% of AMZN/GOOG/FB revenue, 44 billion/year, comes from startups. Startup revenue from other startups will likely be much higher on average.
  - andrekandre 4y ago
    > acquire businesses and consolidate their business. They will expand, not contract like the rest of the market. exactly, downturns are an opportunity for the big players to "buy cheap", expand their marketshare, then wait things out and "sell dear" when things get hot again
lmeyerov 4y ago
YEP. We're very much in this camp. We cooled on VC for the last 2-3 years just to work through deep tech + business fundamentals in the graph space with good customers. That was very much against the grain because adjacent companies (graph DBs, while we are compute-tier graph intelligence) were raising megarounds to do self-similar things with little effective relative differentiation from the perspective of customers. By us instead focusing on things like category creation, profitability, & ease of use, each customer & hire now means growing the pie, not digging the hole deeper. That included some very unsexy things like valuing solutions engineers to work closely with customers to truly tackle their problems. Maybe a good time to say: That also means we are now getting way more enterprise/gov customers than ability to support them, so if you are into rapids.ai (gpu dataframes), dask, seaborn, streamlit, igraph, graph neural nets, etc. esp for tricky core graph problems like detecting fraud, security breaches, mapping supply chains, ... plz email build@graphistry.com :)

nbstme 4y ago

Hey, thanks for your comment! I'm not cherry-picking pandemic businesses. Monday, Lemonade, Oscar, Facebook, and Datadog aren't "pandemic businesses." All tech stocks took a hit and suffered from the reversion to the mean. I agree that average businesses that took off thanks to the "pandemic effect" will continue to decline while good SaaS businesses with significant cash flows will thrive long-term. A great business as a fair price is always a good deal. Time to buy.