Startups are pummeled in the ‘great unwinding’
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Re: Startups are pummeled in the ‘great unwinding’
#2Isn't this just accelerating the inevitable for many of these companies?
Re: Startups are pummeled in the ‘great unwinding’
#3I've heard numerous times startups have had a hard time getting a smaller amount of funding from angels and VCs. As in, "I want $500k" and "no, we only do deals with $1M+", or something like that. I thought that was crazy. This is probably the pendulum swinging back, as pendulums do.
I am interested in how this situation affects larger companies. My guess is since they're so much larger this time around than back in 08-09, and since tech didn't really change all that much in the past ten years or so, there might be greater structural pressure for startups in terms of hiring talent and market direction, because the big guys have so much liquidity and are entrenched in many different verticals. It'll be interesting to see how it all plays out.
Re: Startups are pummeled in the ‘great unwinding’
#4I've heard numerous times startups have had a hard time getting a smaller amount of funding from angels and VCs. As in, "I want $500k" and "no, we only do deals with $1M+", or something like that. I thought that was crazy. This is probably the pendulum swinging back, as pendulums do. I am interested in how this situation affects larger companies. My guess is since they're so much larger this time around than back in…
I think they get bullied into larger deals that inflate their valuation beyond what they think they're worth. It works in a growing market to fundraise beyond your valuation and then grow into it. It doesn't work when the market turns down. If your runway is sufficiently short, you'll be fundraising a down round in a down economy which will slash your valuation and make it harder to get good terms.
Re: Startups are pummeled in the ‘great unwinding’
#5Classpass was founded in 2013. Wonderschool was founded in 2012. Can we stop calling companies that age a startup? Or at least stop using them as examples? I mean, the article then goes on to call Airbnb a "home rental start-up". It isn't a start-up, it is over a decade old and has over 10,000 employees.
Re: Startups are pummeled in the ‘great unwinding’
#6It's hardly unique to startups, and has more to do with the industries they're in than the company size. Mine is still hiring very aggressively but we are in the health research industry which didn't face the same sort of "unwinding", and have always been remote so there's no empty office we're obligated to pay rent for. Meanwhile I have friends in very established publicly traded companies who have been laid off or had their benefits cut already. One lost all company matching on 401ks this year.
VCs remember that there are some very successful companies that came out of the 2008 recession, and many are doing a lot more than usual to help the more promising parts of their portfolio weather this storm.
This article fails to highlight how any of these startups (on that note, how is AirBnB a startup) are worse positioned than their larger competitors. Not one of the ways that workers are impacted that are mentioned in the article is unique to any size of public or private company.
Re: Startups are pummeled in the ‘great unwinding’
#7Isn't this just accelerating the inevitable for many of these companies?
Yes and no. Certainly the unit economics for some start ups always looked problematic. But for others, it's not hard to see how they would have solid businesses in normal times, but have no resources to weather this downturn.
I mean, it's not like people are never going to travel again or eat out at restaurants. But I certainly wouldn't want to be a travel startup or restaurant startup (at least of the dine-in variety) today.
Re: Startups are pummeled in the ‘great unwinding’
#8I've heard numerous times startups have had a hard time getting a smaller amount of funding from angels and VCs. As in, "I want $500k" and "no, we only do deals with $1M+", or something like that. I thought that was crazy. This is probably the pendulum swinging back, as pendulums do. I am interested in how this situation affects larger companies. My guess is since they're so much larger this time around than back in…
From what I've been hearing VCs are worried this is going to last awhile, and so they don't want to give small amounts of money to a company knowing it isn't enough to ride through this. If you only ask for enough funding for a year and the VCs believe the economy won't improve for another two then they aren't going to put money in.
Re: Startups are pummeled in the ‘great unwinding’
#9I've heard numerous times startups have had a hard time getting a smaller amount of funding from angels and VCs. As in, "I want $500k" and "no, we only do deals with $1M+", or something like that. I thought that was crazy. This is probably the pendulum swinging back, as pendulums do. I am interested in how this situation affects larger companies. My guess is since they're so much larger this time around than back in…
The problem is smaller funded startups create smaller returns, and take away money that could be deployed in more promising startups that would benefit from larger deals. The money isn’t going out because it’s just not worth it at those levels.