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Startups that are worth saving will be saved. Cashflow won't be what kills some of these startups.

warent 4y ago
I don't really know much about venture capital but this sounds like a gross oversimplification. More like, the startups that are saved will be a mixed bag of worthwhile startups and dead-end startups. Meanwhile some worthwhile ones will sadly be left behind with the dead-end ones.
- sql-spy 4y ago
  Ofcourse it is an oversimplification but it really is that simple. If the business is profitable, it will survive. If its still relying on free money to pay the bills, its time to make it profitable.
  - PeterisP 4y ago
    The fact whether a startup has positive cashflow or not isn't really reflective of whether that is a worthwhile startup or a bad one, but rather whether it's at an early stage or a relatively mature one. The most bestest startup in the world would still be relying on investor's money to pay the bills if it's just starting to build its product and the time to make it profitable will come in a year or two or more (e.g. a biotech startup can take many, many years until the product gets approved for patients and earns its first cent). Yes, if a business has "grown up" from being a startup and is fully self-funding not only its operations but also its growth, then it will survive, but the definition of a startup is something that's still trying to reach that stage and isn't there yet.
    - illiarian 4y ago
      > The fact whether a startup has positive cashflow or not isn't really reflective of whether that is a worthwhile startup or a bad one, but rather whether it's at an early stage or a relatively mature one. For the past 10 years or so none of the "successful wrothwhile startups" have positive cash flows, and those that seemingly do still manage to post hundreds of millions of dollars in losses yera after year after year. The whole modern startup business is either "work at a loss until a successful exit for the founders" or "work at a loss forever with no expectation of profitability for some reason". None of them are worthy.
    - JumpCrisscross 4y ago
      > whether a startup has positive cashflow or not isn't really reflective of whether that is a worthwhile startup or a bad one A start-up that fails because of this mismanaged their treasury, didn’t pull money in time, couldn’t borrow against their claims and couldn’t convince anyone to advance payroll. That’s reflective on leadership. It’s a teachable moment. But it points to deeper naivety.
  - deleted 4y ago
    [deleted]
- wpietri 4y ago
  Depends on your perspective. One of the articles of faith in this industry is that good startups get investment and succeed, while bad ones fail. To whatever extent that's true, it won't be particularly worse here. Startups who made treasury management errors and are experiencing cash crunches can make very good cases for bridge loans and extra investment from their existing investors. If their investors are like, "nah, pass" then that's a pretty good reason to question their potential generally.
  - giraffe_lady 4y ago
    I'm normally very against the HN norm of just naming a fallacy and considering an entire argument dismissed but in this case I think it does apply. This is not a Just World, some unworkable companies will get bridge funding because of their connections and no other reason. Aside from that timing is always a thing. There's certainly a company out there that is 8 months away from proving the soundness of their idea that now only has six months of funding, or whatever. The idea that in every case, "the market" or whatever will arrive at the most perfectly correct conclusion is silly at any time, but particularly in one of uncertainty and upheaval.
    - wpietri 4y ago
      Yeah, I'm not arguing that "whatever will arrive at the most perfectly correct conclusion". (And I don't think that sql-spy was arguing that either.) What I'm saying is that I don't think this particular circumstance is going to be any less just than usual. Indeed, I think there's good reason to expect it to be more just given that what we're talking about is mostly a short-term cash crunch that's easily explained. E.g., one company is raising $1 bn for bridge loans: https://techcrunch.com/2023/03/11/brex-ceo-is-trying-to-raise-over-1-billion-in-a-weekend-for-svb-related-bridge-loans/ https://techcrunch.com/2023/03/11/brex-ceo-is-trying-to-rais... That kind of support is not something marginal startups have access to in normal times.
    - sql-spy 4y ago
      Circumstances changed. Running a startup means time is never on your side. If you are still 8 months away from proving "soundness" of your idea then you are already too late.
swatcoder 4y ago
By design, venture-backed startups are about sticking a plate of spaghetti to a wall to look for the sticky bits. There are few sure tells of what startups are “worth saving” until they’re already quite successful. Assuming that the SVB unwinding is more than a hiccup in cash availability, what will determine who gets saved will mostly come down to affinity and luck. Promise and value are a sort of first pass filter, but startups are just plain noisy and chaotic field.
rat9988 4y ago
Does someone have a name for this fallacy?
- mhb 4y ago
  Tautology
  - wongarsu 4y ago
    "Startups that are worth saving will be saved" feels like the same category of statement as "It's always in the last place I look". They both describe common sense behavior (save things worth saving, or stop searching once you found what you're looking for). But they are not tautologies in the strict sense, you can make them false; and quite frequently they are false in practice, mostly due to imperfect information.
- the-dude 4y ago
  https://en.wikipedia.org/wiki/Just-world_hypothesis https://en.wikipedia.org/wiki/Just-world_hypothesis
youngtaff 4y ago
Startups that can be sold will be saved… From a pure financial point of view Uber would never be viewed as a startup that was worth saving… for it’s investors the whole point of the IPO was to cash out and leave someone else holding the loss making baby

I don't really know much about venture capital but this sounds like a gross oversimplification. More like, the startups that are saved will be a mixed bag of worthwhile startups and dead-end startups. Meanwhile some worthwhile ones will sadly be left behind with the dead-end ones.

sql-spy 4y ago
Ofcourse it is an oversimplification but it really is that simple. If the business is profitable, it will survive. If its still relying on free money to pay the bills, its time to make it profitable.
- PeterisP 4y ago
  The fact whether a startup has positive cashflow or not isn't really reflective of whether that is a worthwhile startup or a bad one, but rather whether it's at an early stage or a relatively mature one. The most bestest startup in the world would still be relying on investor's money to pay the bills if it's just starting to build its product and the time to make it profitable will come in a year or two or more (e.g. a biotech startup can take many, many years until the product gets approved for patients and earns its first cent). Yes, if a business has "grown up" from being a startup and is fully self-funding not only its operations but also its growth, then it will survive, but the definition of a startup is something that's still trying to reach that stage and isn't there yet.
  - illiarian 4y ago
    > The fact whether a startup has positive cashflow or not isn't really reflective of whether that is a worthwhile startup or a bad one, but rather whether it's at an early stage or a relatively mature one. For the past 10 years or so none of the "successful wrothwhile startups" have positive cash flows, and those that seemingly do still manage to post hundreds of millions of dollars in losses yera after year after year. The whole modern startup business is either "work at a loss until a successful exit for the founders" or "work at a loss forever with no expectation of profitability for some reason". None of them are worthy.
  - JumpCrisscross 4y ago
    > whether a startup has positive cashflow or not isn't really reflective of whether that is a worthwhile startup or a bad one A start-up that fails because of this mismanaged their treasury, didn’t pull money in time, couldn’t borrow against their claims and couldn’t convince anyone to advance payroll. That’s reflective on leadership. It’s a teachable moment. But it points to deeper naivety.
- deleted 4y ago
  [deleted]
wpietri 4y ago
Depends on your perspective. One of the articles of faith in this industry is that good startups get investment and succeed, while bad ones fail. To whatever extent that's true, it won't be particularly worse here. Startups who made treasury management errors and are experiencing cash crunches can make very good cases for bridge loans and extra investment from their existing investors. If their investors are like, "nah, pass" then that's a pretty good reason to question their potential generally.
- giraffe_lady 4y ago
  I'm normally very against the HN norm of just naming a fallacy and considering an entire argument dismissed but in this case I think it does apply. This is not a Just World, some unworkable companies will get bridge funding because of their connections and no other reason. Aside from that timing is always a thing. There's certainly a company out there that is 8 months away from proving the soundness of their idea that now only has six months of funding, or whatever. The idea that in every case, "the market" or whatever will arrive at the most perfectly correct conclusion is silly at any time, but particularly in one of uncertainty and upheaval.
  - wpietri 4y ago
    Yeah, I'm not arguing that "whatever will arrive at the most perfectly correct conclusion". (And I don't think that sql-spy was arguing that either.) What I'm saying is that I don't think this particular circumstance is going to be any less just than usual. Indeed, I think there's good reason to expect it to be more just given that what we're talking about is mostly a short-term cash crunch that's easily explained. E.g., one company is raising $1 bn for bridge loans: https://techcrunch.com/2023/03/11/brex-ceo-is-trying-to-raise-over-1-billion-in-a-weekend-for-svb-related-bridge-loans/ https://techcrunch.com/2023/03/11/brex-ceo-is-trying-to-rais... That kind of support is not something marginal startups have access to in normal times.
  - sql-spy 4y ago
    Circumstances changed. Running a startup means time is never on your side. If you are still 8 months away from proving "soundness" of your idea then you are already too late.

swatcoder 4y ago

By design, venture-backed startups are about sticking a plate of spaghetti to a wall to look for the sticky bits. There are few sure tells of what startups are “worth saving” until they’re already quite successful. Assuming that the SVB unwinding is more than a hiccup in cash availability, what will determine who gets saved will mostly come down to affinity and luck. Promise and value are a sort of first pass filter, but startups are just plain noisy and chaotic field.

rat9988 4y ago

Does someone have a name for this fallacy?

mhb 4y ago
Tautology
- wongarsu 4y ago
  "Startups that are worth saving will be saved" feels like the same category of statement as "It's always in the last place I look". They both describe common sense behavior (save things worth saving, or stop searching once you found what you're looking for). But they are not tautologies in the strict sense, you can make them false; and quite frequently they are false in practice, mostly due to imperfect information.
the-dude 4y ago
https://en.wikipedia.org/wiki/Just-world_hypothesis https://en.wikipedia.org/wiki/Just-world_hypothesis

youngtaff 4y ago

Startups that can be sold will be saved… From a pure financial point of view Uber would never be viewed as a startup that was worth saving… for it’s investors the whole point of the IPO was to cash out and leave someone else holding the loss making baby