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And so it begins. A large wave of unprofitable startups that raised in 2021/2022 are going to fail at becoming profitable and be forced into fire sales or bank

And so it begins. A large wave of unprofitable startups that raised in 2021/2022 are going to fail at becoming profitable and be forced into fire sales or bankruptcy over the next 12 months. The capital constriction really started in Q3 2022. Here's a graph: https://techcrunch.com/wp-content/uploads/2023/03/Screenshot-2023-03-28-at-9.06.04-AM.png https://techcrunch.com/wp-content/uploads/2023/03/Screenshot... If I had to guess, bankruptcies like this peak sometime next year since many of these companies will find a way to last 24 months on their last fundraise. Another recent example is Clutter, a moving company that raised $300m, who was forced into a fire sale for $30m.

tempsy 3y ago
Yes feels like we've seen surprisingly few shutdowns.
- opportune 3y ago
  A lot of companies that raised a lot in 2021-22 didn’t hire much because the labor market was so tight. Also, I think many knew that the availability of capital was unnaturally high and that they shouldn’t plan as if those conditions would continue.
- fidotron 3y ago
  A huge part of modern startup culture is to put on a happy face in all situations to project an aura of confidence. Cynics would call it fake it until you make it, but for many businesses if they don’t look secure they will find it harder to get new customers in order to survive.
moneywoes 3y ago
What's the opportunity here, bigger companies consolidate markets?
- fairity 3y ago
  I think behind most big failures (at least the ones where meaningful revenue was generated) is a healthy, sustainable business idea. Oftentimes, the founders just grew too fast or flew too close to the sun. So, there’s an opportunity to pick up the pieces and rebuild, or start from scratch with the learnings. In most cases, the firm handling liquidation auctions off the firm’s assets, so if you have the motivation to pick up the pieces and grind out a sustainable business, you can usually purchase the tech and customer lists for six or low seven figures (varies based on size of business of course). If you actually pursue this, my advice is to make your offer as simple as possible (don’t ask for a bunch of diligence) and set an expiration on your offer so they don’t shop around. The liquidators are often not incentivized to maximize value - they just want to finish the project as painlessly as possible.

tempsy 3y ago

Yes feels like we've seen surprisingly few shutdowns.

opportune 3y ago
A lot of companies that raised a lot in 2021-22 didn’t hire much because the labor market was so tight. Also, I think many knew that the availability of capital was unnaturally high and that they shouldn’t plan as if those conditions would continue.
fidotron 3y ago
A huge part of modern startup culture is to put on a happy face in all situations to project an aura of confidence. Cynics would call it fake it until you make it, but for many businesses if they don’t look secure they will find it harder to get new customers in order to survive.

moneywoes 3y ago

What's the opportunity here, bigger companies consolidate markets?

fairity 3y ago
I think behind most big failures (at least the ones where meaningful revenue was generated) is a healthy, sustainable business idea. Oftentimes, the founders just grew too fast or flew too close to the sun. So, there’s an opportunity to pick up the pieces and rebuild, or start from scratch with the learnings. In most cases, the firm handling liquidation auctions off the firm’s assets, so if you have the motivation to pick up the pieces and grind out a sustainable business, you can usually purchase the tech and customer lists for six or low seven figures (varies based on size of business of course). If you actually pursue this, my advice is to make your offer as simple as possible (don’t ask for a bunch of diligence) and set an expiration on your offer so they don’t shop around. The liquidators are often not incentivized to maximize value - they just want to finish the project as painlessly as possible.