2 ms·

I think it’s a precautionary measure. It’ll be easier to raise more money in future if you’re lean.

by f6v 3y ago

mywittyname 3y ago
But when companies have 50-to-infinity years of runway, does that even matter? If anything, these massive companies will benefit when they can pick up struggling startups with great tech for a 1/1000th of their peak private valuation.
jrockway 3y ago
I totally get why startups would want to be lean during high interest rate times; the next round of funding is never assured, and when money costs 7% a year, it's almost assured to NOT happen. You have to fight for you life under those circumstances. (The startup I work at got bought at a very good price for the acquirer as a result of the wider economic situation. It's nice to have a job though, so I can't complain.) But, Microsoft, Meta, Google, etc. are not raising money on the open market; they have treasuries and revenue. I really think there's a lot of complexity going on here; interest rates going up didn't cut consumer spending by that much, so discretionary purchases didn't decrease, which meant that people were still buying ads and funding these companies. (I guess Microsoft doesn't make any money off of ads, but Google and Meta do.) I am guessing that people didn't expect the discretionary purchases to remain steady; in the past, interest rate increase = unemployment increase = nobody buying anything, but that appears to not be happening this time. Additionally, on the tech side of things, hype about AI is giving investors a serious fear of missing out, so there is definitely a bit of investment happening. So all in all, I think these are very weird times, and it's hard for anyone to plan. You can guess, you can hope, but at the end of the day, we don't really know. We know what caused recessions in the past, but we don't know what the 10 year horizon looks like for "there is a deadly disease, everyone work from home and buy as much stuff from China as possible, oops they are all sick so only the highest bidder gets their thing, and oh btw you don't have to pay off your student loans anymore so bid away!" It made the $ worth a lot less. That's about it.

I think it’s a precautionary measure. It’ll be easier to raise more money in future if you’re lean.

by f6v 3y ago

I think it’s a precautionary measure. It’ll be easier to raise more money in future if you’re lean.

But when companies have 50-to-infinity years of runway, does that even matter? If anything, these massive companies will benefit when they can pick up struggling startups with great tech for a 1/1000th of their peak private valuation.

jrockway 3y ago

I totally get why startups would want to be lean during high interest rate times; the next round of funding is never assured, and when money costs 7% a year, it's almost assured to NOT happen. You have to fight for you life under those circumstances. (The startup I work at got bought at a very good price for the acquirer as a result of the wider economic situation. It's nice to have a job though, so I can't complain.) But, Microsoft, Meta, Google, etc. are not raising money on the open market; they have treasuries and revenue. I really think there's a lot of complexity going on here; interest rates going up didn't cut consumer spending by that much, so discretionary purchases didn't decrease, which meant that people were still buying ads and funding these companies. (I guess Microsoft doesn't make any money off of ads, but Google and Meta do.) I am guessing that people didn't expect the discretionary purchases to remain steady; in the past, interest rate increase = unemployment increase = nobody buying anything, but that appears to not be happening this time. Additionally, on the tech side of things, hype about AI is giving investors a serious fear of missing out, so there is definitely a bit of investment happening. So all in all, I think these are very weird times, and it's hard for anyone to plan. You can guess, you can hope, but at the end of the day, we don't really know. We know what caused recessions in the past, but we don't know what the 10 year horizon looks like for "there is a deadly disease, everyone work from home and buy as much stuff from China as possible, oops they are all sick so only the highest bidder gets their thing, and oh btw you don't have to pay off your student loans anymore so bid away!" It made the $ worth a lot less. That's about it.