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Startups Once Showered with Cash Now Have to Work for It

nytimes.com

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Re: Startups Once Showered with Cash Now Have to Work for It

#11

Post by manigandham »

carsongross wrote: post #9

This is bad news for bootstrapped startups. If cash stops being a cocaine-tier obsession for these guys, we might have to compete with them. Sad.

This is great news for bootstrapped companies which are likely used to running lean, might actually be profitable, and can outrun and outlast an inflated competitor.

Major cashflow changes tend to be disastrous for most companies, it's just not that easy to realign everything. If you're up against a competitor that has raised a lot easy money and now needs to show results, you should be happy to see this.

Re: Startups Once Showered with Cash Now Have to Work for It

#12

Post by endymi0n »

bsbechtel wrote: post #10
JBReefer wrote: post #8

Earlier quoted context omitted.

Also called a "down round"

Which means the most recent investor's investment is underwater, but not necessarily the company as a whole.

That and usually all employees' stock options when talking liquidation preferences, with some of them knowing and some not. At that point prepare for talent bleed until either some very good plans and news or a long, slow death.

Re: Startups Once Showered with Cash Now Have to Work for It

#14

Post by joelrunyon »

carsongross wrote: post #9

This is bad news for bootstrapped startups. If cash stops being a cocaine-tier obsession for these guys, we might have to compete with them. Sad.

I think it's the opposite.

The people that are used to easy VC money (without growth or a business model) will probably wash out of the ecosystem. I doubt they're going to reshape their business structure to be a bootstrapper competitive one.

Re: Startups Once Showered with Cash Now Have to Work for It

#15

Post by ChuckMcM »

alecbaldwinlol wrote: post #2

Money that comes easily, goes easily. Where did the VCs get the money from [1][2]? If they didn't break a sweat, they won't hesitate to throw it around without asking questions about profitability. EDIT: People who are downvoting are trying to hide the truth of the market, whether it's a bubble or not, this is the source of the money and in turn, your livelihood ;) [1] Probably from banks who got it from the gov't wh…

There are some great web sites on how venture capital works, I can recommend https://hbr.org/1998/11/how-venture-capital-works for the basic model (this was pre-dot-com bubble bursting so it got tweaked) and Fred Wilson's summary (http://avc.com/2014/05/vc-fund-economics/) is a good followup.

edit: Wright->Wilson, thanks gist.

Re: Startups Once Showered with Cash Now Have to Work for It

#16

Post by ChuckMcM »

hammock wrote: post #3

How many startups are "underwater" now- they are unable to raise additional funding at their current/previous valuation?

You can't really answer that question until a startup goes to raise more money and can't get a favorable term sheet. So its kind of like the uncertainty principal. And startups, knowing that funding has been pulled back, are working harder to not have to even ask the question (they cut costs, try to boost revenue, extend the runway they have past this current period)

Re: Startups Once Showered with Cash Now Have to Work for It

#17

Post by swingbridge »

This is generally a good sign for the market. Not so good for bloated startups without a viable business model or cash positive finances (including probably the majority of the unicorns out there at the moment). For such firms it's about to be a bloodbath, but hard facts are that there's a lot of junk out there that got funded in loftier times and now needs to be flushed out of the system.

For lean startups with a strong business model and profitability, or a clear and viable path to profitability, washing out the junk startups will only help.

Re: Startups Once Showered with Cash Now Have to Work for It

#18

Post by darpa_escapee »

carsongross wrote: post #9

This is bad news for bootstrapped startups. If cash stops being a cocaine-tier obsession for these guys, we might have to compete with them. Sad.

How did the definition of bootstrapped business get redefined as "running a questionably sustainable business on millions of outside investors' dollars"?

Re: Startups Once Showered with Cash Now Have to Work for It

#19

Post by aswanson »

swingbridge wrote: post #17

This is generally a good sign for the market. Not so good for bloated startups without a viable business model or cash positive finances (including probably the majority of the unicorns out there at the moment). For such firms it's about to be a bloodbath, but hard facts are that there's a lot of junk out there that got funded in loftier times and now needs to be flushed out of the system. For lean startups with a st…

Yup, same as it ever was. I remember back in 2001 saying to myself, "Good, all the bullshit is flushed out. Anything that survives this is real and should be invested in." Too bad I didnt put a few thousand into YHOO and AMZN back then: http://finance.yahoo.com/q/hp?s=AMZN&a=04&b=16&c=1997&d=04&e...

Re: Startups Once Showered with Cash Now Have to Work for It

#20

Post by paulpauper »

aswanson wrote: post #19
swingbridge wrote: post #17

This is generally a good sign for the market. Not so good for bloated startups without a viable business model or cash positive finances (including probably the majority of the unicorns out there at the moment). For such firms it's about to be a bloodbath, but hard facts are that there's a lot of junk out there that got funded in loftier times and now needs to be flushed out of the system. For lean startups with a st…

Yup, same as it ever was. I remember back in 2001 saying to myself, "Good, all the bullshit is flushed out. Anything that survives this is real and should be invested in." Too bad I didnt put a few thousand into YHOO and AMZN back then: http://finance.yahoo.com/q/hp?s=AMZN&a=04&b=16&c=1997&d=04&e...

AMZN and GOOG would have been great investments and still are
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