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More startups throw in the towel, unable to raise money for their ideas
- Trouble_007 3y agohttps://archive.is/ZRFkh https://archive.is/ZRFkh
- deleted 3y ago[deleted]
- nradov 3y agoThe notion that a pizza robot company was once valued at $2B is absolutely hilarious.
- yborg 3y agoStandard VC play, right? Especially if you are trying to pump some grift, blow it up to the paper $1B valuation so WSJ will write a breathless article on the new unicorn and fake it until they exit it.
- ProjectArcturis 3y agoThe weird thing is, that already pretty much exists? You can see a semi-automated pizza maker at the food stand at Costco. It's pretty fun to watch.
- deleted 3y ago[deleted]
- fullshark 3y agoMuch more efficient too than what Zume did, at least the saucing part: Zume: https://youtu.be/TkhWonFm-Lw https://youtu.be/TkhWonFm-Lw Costco: https://www.youtube.com/watch?v=c-E2Cz59_5A https://www.youtube.com/watch?v=c-E2Cz59_5A
- activiation 3y agoI would not say much more efficient... It seems much more natural though
- nradov 3y agoOh wow, that's rich. The Zume co-founder talking about their robot making terrible pizzas "with love" is truly peak Silicon Valley hype. Chef's kiss. But she seems to have failed upward with VC funding for a new food startup so it's all good I guess.
- derefr 3y agoI mean, the value probably wasn't in its potential to make pizza. Any more than Boston Dynamics' value is in its potential to make robot dogs play fetch. Pre-IPO valuation is almost always about what else you could hypothetically pivot into doing, given the tech (and competencies) you've built up. One step further: startups know this, and VCs know that startups know this. So when you see a startup "making a pizza robot", they're probably not actually "making a pizza robot." That "business model" is really just an early proof-of-concept milestone to aim for while building up tech (and competencies) that can address much more interesting markets. And if you're a VC, they'll tell you as much in their pitch deck. Though they won't ever mention that in any of their marketing. Since, what if the pizza-robot thing does take off? May as well keep it around as a vertical for their tech, in that case.
- deleted 3y ago[deleted]
- satvikpendem 3y agoSomething similar was parodied hilariously in Silicon Valley: https://www.youtube.com/watch?v=LYu-d6y5HRo https://www.youtube.com/watch?v=LYu-d6y5HRo
- Trouble_007 3y agoA Spontaneous Disassembly Event? ... Has the Bubble...
- deleted 3y ago[deleted]
- lagniappe 3y agoPersonally, I believe that for -most- software idea cases if I won't bootstrap it, then I don't believe in it enough, and/or can't get others to believe in it enough. I've been on the VC side and the boot side, spending your own money just hits different.
- dsaavy 3y agoAbsolutely - when me and my team spend $50k to experiment (which is chump change for a funded company) and it fails, that hurts. It's coming out of my pockets. And because of that, I remember it and my team remembers it. But it's also allowed us to focus solely on the problems our customers actually have and will spend money for. It forces service/product-market fit before attempts to scale. We are a services business so it is different than SaaS, but same principles apply. There are benefits to bootstrap and benefits to funded. I feel as if bootstrapping first is a great way to learn the lessons needed to be successful when you do something funded later on.
- lagniappe 3y agoI agree. I also want to add that this isn't me saying VC doesn't have a role, it's more that I view VC as more useful when it comes to a proven product that must now scale workforce/infra.
- 0xdeadbeefbabe 3y ago> $50k to experiment (which is chump change for a funded company) Because funded companies have more chumps per dollar.
- that_guy_iain 3y agoI think the issue is, for a lot of these people they don't have enough capital to bootstrap it. Let's look at a large number of YC launches we see on here. Often they're 1-2 years after they joined YC. They took 1-2 years to get to launch with a team of employees. Sure, they had customers before the launch but really at that point it was still lets see what works and experiement and change ideas and whatnot. I'm currently trying to bootstrap a source-available SaaS Subscription and Billing software. I've taken 3-months to work on the MVP by myself and still not got a MVP ready. (Almost there, working on final stuff like documentation and whatnot) Not many people can commit to that long before seeing if the idea is going anywhere. There are quite a few people who can't afford to work full time on their bootstrap idea for 3-6 months without an income.
- notacoward 3y agoIs the problem really that there's no money, or that what money exists is busy chasing only a few product areas (like third-tier AI startups)? AFAICT funding for anything that wasn't the VCs' obsession du jour has been hard to find for quite a while. If it's also drying up for "target area" startups that have both questionable vision and questionable leadership (and many are worse in both dimensions) then that almost seems like a good thing.
- sirspacey 3y agoGreat points, but yes there really is “no money.” LPs are the real decision-makers on capital allocation and almost all of them are pension funds. Pension funds have almost zero chance of staying solvent unless they can drive above market returns. Right now that can be done on interest rates alone. Zero interest rates meant they had to deploy capital, so many VCs were able to raise. But most VCs will never get a chance to raise another fund. Like you pointed out: don’t be fooled by all the info out there about how VCs’ think. Watch what they do. Like everyone, when it’s not clear how to deliver an expected outcome they flock to “what everyone else is doing.” Today that’s generative AI. It’s a lottery, a few VCs will get lucky. But the volume of future capital available to raise has collapsed & there’s no indication it will recover. Worse, incumbents have captured almost all the advantage of AI’s current capabilities. So VCs are going to return to funding startups in their social network, for the “hot topic” they must have an allocation in to stay relevant, and put all their eggs in the safest (perceived) basket. Most will be out of a job as soon when the money runs out.
- 0zemp3c 3y ago> LPs are the real decision-makers on capital allocation is this true? afaik they hand over their money and trust the partners to allocate > and almost all of them are pension funds. pension funds can go to taxpayers for a bailout and CalPERs has done so before this is why it is not a great idea for pension funds to play in venture capital...it isn't fair for taxpayers who have to pay out the losses to keep the pensions running
- 3y ago
- lgleason 3y agoThe market was frothy and some bad ideas that should have failed earlier didn't because of cheap money that has dried up. Startups that can make it right now are more likely to succeed long term. This is the natural cycle that weeds out the weak companies.
- JohnFen 3y agoIt's been my experience that starting a company is best done when the market looks unfavorable to starting a company. It's counterintuitive, but works for me.
- namaria 3y agoI've also experienced this (not in terms of starting companies tho). I've had most success doing things that were generally considered 'a bad idea', whereas when I've followed common sense I've found stiff competition, crowded spaces, noisy environments (in many different senses), etc.
- sirspacey 3y agoIt’s myopic to reduce the startup extinction event to a loss of VC. The point of VC is that some businesses (like LinkedIn, Google, Apple, etc.) require multiple rounds of capital to get to a sustainable business model. But just stating that isn’t instructive. What’s more important, esp. for founders, is why that is the case: It’s because providing a better way isn’t a sustainable business practice. Markets lock in the familiar vs. the effective. So you quite literally have to create new markets to deliver new & better ways of creating value. There are many ways to fail at that with honest effort, including due to factors outside your control. Beloved products, that deliver real value & better social impact, die all the time. I know it can seem from the outside that whipping up hype & raising money is a founder’s job. But very few founders have or ever will win on such a narrow approach. It’s smart to raise on the latest trend because it maximizes capital. But it won’t save you from the fact that buyer’s are not rational - B2B or otherwise - and markets reward incubants.
- samsquire 3y agoI have a lot of thoughts on this, so please bear with me. I think it's interesting that the model we use to evaluate ideas and fund companies is so terrible. Starting a company is always dangerous and risky and that's extremely sad. Why is starting a business so hard in 2023? I think we need an "explicit demand signal" and I think it can be technological one and a semantic one. Kickstarter is the nearest to this I can think of but kickstarter is only a primitive marketplace - for example, I don't see services listed. But I want to see vector semantic models used to capture the meaning of business processes and identify weaknesses and match problems to imaginary products and synthesise products. Think automatic market understanding and differentiation. It would be indexed per organisation and across society. There's a carrying capacity for every market. An average city can only support a certain number of coffee shops or X of kind of venue. So we have competition. A lot of people grinding their gears competing needlessly. It's such a waste. One of my ideas was "attention camping", which is waiting for something to match your idea of something you find interesting or want to pay attention to. If I had a commitment to buy from a large number of people, then my business would be a lot safer, except I'm an unknown quantity.
- JohnFen 3y ago> Why is starting a business so hard in 2023? Honestly, I don't think it's any harder now than it has been before (in my adult life, anyway). It's always been very hard. Same with running a business post-startup.
- orzig 3y agoI'm definitely open to more models for funding, but it didn't seem like Kickstarter really worked even for what should have been its sweet spot. Definitely tell me if I'm wrong, but the fact that they had to put out this blog post suggested that the dynamics of its usage never really fit: https://www.kickstarter.com/blog/kickstarter-is-not-a-store https://www.kickstarter.com/blog/kickstarter-is-not-a-store
- JohnFen 3y agoCrowdfunding is a terrible way of financing a startup. It can be a reasonable way of financing a product, if done carefully and thoughtfully.
- arthurofbabylon 3y agoCall me cynical, but I didn't find this recent wave of startups to be innovative. It was defined by a systemic deployment of playbook tactics, copying what worked elsewhere. Nothing new, just trying to capture industries/value. Perhaps with the deterioration of venture capital infrastructure we will see more innovation – that is wholly new solutions and paradigms. I also think it is worth pointing out that historically (not recently) a lot of startups began not in order to make money but to provide real value to humans/society. I like to remind people that it is easier to make money when you first build something that people value than to build something that people value once you've made money.
- jarym 3y agoI think we saw this in some Hollywood studios - they find a movie that worked and treat it as a 'playbook' to just rinse-and-repeat it in all variations. Eventually, audiences just become fatigued and the 'business creatives' lose to some other genuinely creative theme that takes hold. Then they return to exploit it :-(
- warent 3y agoNothing new, just trying to capture industries/value. None of what you said sounds cynical imo, just un-businesslike I suppose. Who cares about shifting paradigms / something brand new? Not every business has to change the world. Most shouldn't. The whole point of a business is to capture value full stop. Not to play around with lofty surreal visions of grandeur.
- oofta-boofta 3y agoJuicero raised $118.5m, the other shoe was bound to drop. I don't think the current landscape of VC funds actually knows how to spot value even if it sat on their face and called them daddy. They're throwing darts at a board, basically.
- JohnFen 3y agoThe cold fact is that nobody is good at this. Predicting the future is inherently a fool's game. VCs mitigate this by dealing in multiple ventures at the same time. Aggregate movements are easier to predict and, as VCs themselves often state, it doesn't matter if 90% of their investments don't pan out, because the 10% that do more than make up for the loss.
- deleted 3y ago[deleted]
- danielvaughn 3y agoI'd been working as a founding engineer with a startup for the past couple of years. It was my first experience actually trying to raise money, and I had no idea how hard it actually was. I hear stories about other companies with literally nothing more than a mockup get millions of dollars, and we had a full tech stack and couldn't get more than $20K. Crazy.
- WeylandYutani 3y agoBusiness is still a personality game. Some people just have that magnetism and can talk millions out of investors. People like Trump or Steve Jobs are special like that.
- JohnFen 3y ago100% this. Early on, I learned that there were broadly two types of people. "Inside people" and "outside people". Inside people are the ones who are at their best developing the product, outside people are at their best marketing the product, getting investor interest, etc. It's very rare that a single person can perform well in both roles. For this reason, I would never start a business by myself. At a minimum, I need a partner who can be the outside person. Another significant thing founders need to do is to be really honest about the limits of their abilities and to find other ways of doing the things they're bad at.
- danielvaughn 3y agoI think you're right. The storyteller is so important.
- Solvency 3y agoHonest question: why not hire a designer then and get some better mock-ups?
- danielvaughn 3y agoThe crux of my comment is that I genuinely don't understand why we weren't able to secure funding. I mention the mockups only to point out that they didn't have a working product, whereas we did/do. If I had to guess, I'd say they were able to "tell the money story" better than we were. That is, being able to say to investors "you give us [x] amount of money and we're shooting for [y] amount of revenue in [z] number of years". I felt like we had a compelling pitch, but for some reason investors just never committed.
- dpflan 3y agoIs the SPAC exit still a relevant strategy these days?
- pphysch 3y agoI would argue it's primarily psychological, rather than financial (interest rates) or economic (value creation). IPOs, like shitcoins, have become simple pyramid schemes. Eventually, the mass bagholders get wise to as what's going on, and demand for such schemes falter. In a decade or so, amnesia will allow for the cycle to repeat.
- satvikpendem 3y agoIf you need to raise money to stay afloat, you're not going to be successful (except in a very minority of cases like Airbnb and Uber but your startup will most likely not be at that level). Your startup should be profitable on a unit economic level and you should be using VC to scale that model, not to prop up a failing business. Often VC is also for signaling to the market for valuation, as the Retool founder says: > We actually didn't need the money (we're cashflow-positive). In fact, we haven't touched the money from our Series B (in 2020) nor our Series C (in 2021). But raising money is helpful because a) it gets prospective customers interested in the product (oh, X company raised, let me check out what their product does), b) it gets prospective employees interested, c) it allows people externally to see that the company is making progress rapidly (I wish we could post revenue metrics here, but I... think that's a bad idea?), and d) we sold very little in this round (1.4%, so there is minimal dilution to employees), for those advantages. > TBH, fundraising is kind of like charades: it's a way to signal you are doing well, without telling people your private company metrics. I wish we never needed to fundraise, and could just focus on building great products and working with customers instead. :) https://news.ycombinator.com/item?id=32264454#32264969 https://news.ycombinator.com/item?id=32264454#32264969
- Solvency 3y agoI don't get how raising all of this money doesn't cause significant dilution. And doesn't it also subject your company to increasing terms and conditions that might be antithetical or orthogonal to your interests/mission? It just seems like this is CEO speak and the reality is probably more dicey..
- satvikpendem 3y ago> we sold very little in this round (1.4%, so there is minimal dilution to employees) If they sell very little, then they're not as subject to dilution as well as control (since the shares they'd sell are also voting shares). It's the same way Facebook was able to grow while keeping Zuckerberg as the sole majority voting power on the board, he sold very little of the actual company while pumping the valuation.
- 3y ago
- mrandish 3y agoAs a long-time serial entrepreneur who has done startups in four different decades, some of which were quite successful: my opinion is that the large quantities of relatively easy money of the previous cycle wasn't generally a good thing.
- Animats 3y ago“Most of the companies we are handling now frankly deserved to have gone out of business a year or two ago.” - liquidator. - Making pizzas with an off the shelf industrial robot. (It's been done.) - Auto loans. ("But our auto loans are different!")
- krm01 3y agoThere's a noteworthy pattern I've observed over the last 24 months. I founded a design subscription service for startups [1]. Many founders are increasingly tapping into subscription based services, whether that’s for design, development, sales etc. to help them reach a certain level of scalability. Historically we’d have a harder time getting clients, but for many startups having these plug & play teams makes the startup much more lean. You don’t have to provide a gazillion employee benefits or other cash draining things. its nuts how so many startups just burn through their VC money buying things that do not directly impact their product and business. A startup should do nothing except build something people love. To do so find more economic and effecient ways to get to product market fit asap. You can do all of the fun stuff later. [1] http://fairpixels.pro http://fairpixels.pro
- encodedrose 3y agoSimilar story for cloud services, we've seen startups burn through 100K in AWS credits before they even launch a product.
- Dudester230602 3y agoThe "Kubernetes is actually not overcomplicated" crowd, I presume?
- avbanks 3y agoI hate to say it but it isn't though. In 2023 you'll probably want Automated rollouts and rollbacks, Storage orchestration, Secret and configuration management, Service discovery and load balancing, Self-healing, Horizontal scaling, Automatic bin packing (on vms) k8's gives you this if you want BUT you don't even have to use those things.
- sitkack 3y agoIt is fine to use the cloud for your initial landing zone project. But once you are n-weeks in, you really should have 1/2 or full rack at a colo with enough bandwidth and storage to backup your on two servers. I'd start with DO or Hetzner, https://www.hetzner.com/cloud https://www.hetzner.com/cloud And then move to own hardware in a colo. https://www.supermicro.com/en/products/aplus https://www.supermicro.com/en/products/aplus At the same time, I'd probably keep each project as I went. From day-0 you should have some form of cloud presence in all the providers, at least a root of trust landing zone you can work from to build out infra should you need to.
- mihaic 3y agoBesides the reasons people have already stated on why recent start-ups failed, it seems to me that the world recently has at the same time become more complex AND also simpler: the complexity that each individual company/employee needs to handle has increased, while everyone seems to be engaging in the same types of complexity (every company uses a Slack, GSuite, driving online ads somehow, etc). The economy is tight, requirements from customers are high and there are fewer niches. Any worthwhile product in these conditions (at least in tech) needs a lot of baking time, which actually only a company with pre-existing cash-flow can afford. Unless VC actually develop some patience on returns, I can't see much innovation happening in the next few years.
- gareth_untether 3y agoI suspect there’s going to be a lot of low hanging fruit with AR apps over the next couple of years thanks to Apple.
- jcadam 3y agoWhat's the AR equivalent of a 'fart app'?
- amelius 3y agoUsing AI to make everybody around you lose their clothes?
- deleted 3y ago[deleted]
- thot_experiment 3y agozero percent chance tim apple/zark will allow this, 100% chance the first mass market headset that you actually own will have this
- masfuerte 3y agoX-ray specs.
- exp-prohibited 3y ago[dead]
- sys_64738 3y agoBecause most of these startup ideas are rubbish and won't be viable in the marketplace. That's the real reason they can't raise money. Really, if the people with the startup put their own money into the product or took out loans in their own name then it would show it's serious. But most startups should just die.
- pedalpete 3y agoI'm curious to see what the fallout will be for the VC industry. Can somebody correct my wrong assumptions here... They have a ton of funds that need to be deployed in an approx 4-5 year period. If they don't deploy the funds, they don't get their carry, they also won't be able to raise another fund. Will they end up throwing a large amount of money at a smaller number of start-ups? More VCs will chase the best deals, raising the price of those start-ups. Then the 2nd tier companies will probably follow. Or will VCs return funds to LPs? Give up on the being VCs and say "I always loved being an operator, so now I'm returning to that". I think this is good for the tech industry long-term. The SaaS companies that have been raising huge $$ don't need the dollars, and many weren't offering real value. I think we're seeing more money flow into deep-tech, particularly energy, environment, and health.
- umeshunni 3y ago> I think we're seeing more money flow into deep-tech, particularly energy, environment, and health. Those sectors rarely make sense for the VC funded model where money has to be returned in ~10 years. Will they end up throwing a large amount of money at a smaller number of start-ups? > More VCs will chase the best deals, raising the price of those start-ups. Then the 2nd tier companies will probably follow. > Will VCs return funds to LPs? Give up on the being VCs and say "I always loved being an operator, so now I'm returning to that" Both of those are likely outcomes. You'll likely see more late stage deals, competing with the likes of Fidelity.
- michelb 3y agoAdd a slide about AI. Fixed.