Startups are pummeled in the ‘great unwinding’ • Hacker News Board

Re: Startups are pummeled in the ‘great unwinding’

#161

Post by TheOtherHobbes » Sat, Apr 04, 2020, 10:18 PM UTC

derekdahmer wrote: post #98

julius_set wrote: post #62

So I’m curious will property and rental prices drop in San Francisco now that funding is drying up? Can’t seem to find much information about that. For example a friend of mine who was laid off still has to pay $3300 / month for his studio. Curious how long this will last for?

Employees with high salaries at the larger more stable tech companies are doing most of the Bay Area home buying. Think FAANG, stripe, twitter, slack, etc. These companies can weather economic downturns without laying off people so Bay Area house prices don’t drop much. This was the case in 2000 and 2009. Supply is also dropping as tons of homeowners are refinancing, which balances out any drop in demand. The biggest…

Anyone who thinks FAANG will survive without a contraction is deluding themselves. What happens to the ad market during a depression? How about luxury IT hardware? Entertainment subscriptions? Web services?

If there isn't a bounceback in three months or so, the entire tech sector will deflate like a balloon.

FAANG will probably survive in some form because of cash reserves, but there will absolutely be cancelled projects and mass lay-offs. And those will have an effect on the the property and rental markets, on startup funding, and on everyone's cash flow.

Business is a herd phenomenon, and as soon as panic spreads through the herd it reverses direction - until some new excuse for optimism appears.

Re: Startups are pummeled in the ‘great unwinding’

#162

Post by oiasdjfoiasd » Sat, Apr 04, 2020, 10:18 PM UTC

dominotw wrote: post #93

julius_set wrote: post #62

So I’m curious will property and rental prices drop in San Francisco now that funding is drying up? Can’t seem to find much information about that. For example a friend of mine who was laid off still has to pay $3300 / month for his studio. Curious how long this will last for?

I think its unlikely because everyone knows its going to right back up once this blows over. So demand should hold constant.

that sounds like pretty wishful thinking.

Re: Startups are pummeled in the ‘great unwinding’

#163

Post by Marsymars » Sat, Apr 04, 2020, 10:22 PM UTC

xiaolingxiao wrote: post #112

BillinghamJ wrote: post #75

Earlier quoted context omitted.

Our board and investors have made it clear they think it's highly unlikely any meaningful funding will be able to progress until early 2022 at this point. Recently-funded or reasonably conservative startups should be able to do okay with that, but ones without a lot of runway are going to be in a really difficult position.

Did your investors give some justification for the 2 year time span? For example, did they account for the possibility that many business won't open until September, or a second wave of infection that will hit late fall, followed by say, recession in full swing all of 2021.

I expect they're basing two years on the time a vaccine will take to get to market, and judging that everything that happens prior to then won't help much.

Re: Startups are pummeled in the ‘great unwinding’

#164

Post by bdcravens » Sat, Apr 04, 2020, 10:24 PM UTC

closeparen wrote: post #106

rexreed wrote: post #79

I'm sorry for some of my schadenfreude here, but really, so many of these startups are overfunded with way too many employees to begin with. They've often paid top dollar for expensive technical talent in locations with very high cost of living. I can't wait to see a pull back to solid fundamentals. I don't see why a daily vacation rental company honestly needs 240 highly paid employees. One company cited in the arti…

Why is it so offensive to people in this industry that our skills are valued? Sometimes it seems a little crazy to me too, but I'm not, like, excited to need to live with 5 roommates 90 minutes away from work again like you seem to be.

I can't speak to your skillset or your job, but there are a lot of people working in our industry not because their skills are valued, but because investor dollars are often thrown at growing headcount.

Re: Startups are pummeled in the ‘great unwinding’

#165

Post by Akaahn » Sat, Apr 04, 2020, 10:24 PM UTC

Startups are having their great reckoning. No longer can they just come up with fancy catch lines, and get bought by a billion dollar company. Now they actually have to provide something unique, something useful, something worthy of them actually being acquired.

Re: Startups are pummeled in the ‘great unwinding’

#166

Post by gjs278 » Sat, Apr 04, 2020, 10:24 PM UTC

qppo wrote: post #54

Startups are in way better shape than traditional small businesses. By our very nature, we need months of runway just to keep running. We're designed to weather this kind of storm because "zero revenue" is the default state. Hearing about Bird cutting 30% of their workforce is awful. But it's nothing compared to the thin-margin Mom & Pop, or medium sized private enterprise that had 1 week of cash on hand and ceased o…

your startup is going to fail lol

Re: Startups are pummeled in the ‘great unwinding’

#167

Post by aeyes » Sat, Apr 04, 2020, 10:28 PM UTC

qqqwerty wrote: post #159

dchyrdvh wrote: post #81

Earlier quoted context omitted.

These prices are set by the top 30% employees of the big tech firms. Unless there are massive layoffs there (e.g. 250k employees are let go) and this situation lasts for a few years (they have savings for 3-5 years usually), I wouldn't expect the prices to move.

Stock options and RSU's are a big part of the compensation packages for that group. So lower stock prices are essentially pay cuts. And unlike 2008, many of these companies are more mature and much more exposed to the broader economy. Cloud computing, Ads, GSuite, etc... There are a handful tech companies that will probably thrive (Netflix, Zoom, etc...), but most of them are probably going to see big drops in revenu…

Why are lower stock prices pay cuts? Strike price is rarely fixed, usually it is some percantage of current stock price. So if stock price falls you get more shares.

You have no way of knowing what the price might be when you are able to exercise your options. You also don't have to exercise them, it's your choice. Equity compensation is always a gamble.

Re: Startups are pummeled in the ‘great unwinding’

#168

Post by bdcravens » Sat, Apr 04, 2020, 10:28 PM UTC

gamblor956 wrote: post #46

School-Cotton wrote: post #15

Earlier quoted context omitted.

For better or worse, in colloquial American English, "startup" means a particular type of company, and is only weakly correlated with age.

To most of America, the term "startup" means a vaguely tech-ish company which doesn't know how to make a profit. As a former techie, I strongly agree with that usage.

The company I work for has been profitable from day one. I think we'd be proud to say then that we were never a startup :-)

Re: Startups are pummeled in the ‘great unwinding’

#169

Post by hogFeast » Sat, Apr 04, 2020, 10:30 PM UTC

missedthecue wrote: post #58

hogFeast wrote: post #45

Earlier quoted context omitted.

The reason AirBnb is a startup is because it makes no money. A company stops being a startup when you aren't relying on someone cutting you a check every month to keep it all going. Most of these companies will now fold. The number of employees or, even, revenue is irrelevant.

I still see Tesla commonly called a startup

I would have been in that camp. But it is probably unfair.

I still think the company is a dumpster fire but the big investments that Musk is making are, in part, driven by actual revenue.

...now that isn't wholly true. Musk seems to be able to keep raising debt without hitting equity. Over and over, he just finds utter idiots to keep bailing him out. The deal with the Chinese govt was incredible. Eventually, this will run out of road but the bankruptcy will show that Telsa did create some value.

Re: Startups are pummeled in the ‘great unwinding’

#170

Post by 0xff00ffee » Sat, Apr 04, 2020, 10:31 PM UTC

scarface74 wrote: post #84

qppo wrote: post #54

Startups are in way better shape than traditional small businesses. By our very nature, we need months of runway just to keep running. We're designed to weather this kind of storm because "zero revenue" is the default state. Hearing about Bird cutting 30% of their workforce is awful. But it's nothing compared to the thin-margin Mom & Pop, or medium sized private enterprise that had 1 week of cash on hand and ceased o…

You weren’t around in 2000 or 2008 were you? Your startup is only in “better shape” as long as VCs are willing to keep funding you. VCs are only willing to keep funding you if they have confidence that you will have a profitable exit.

RIP The Pets Dot COM sock puppet. I was there to see him live fast and die hard. (I don't acknowledge his zombification.)