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

Re: Startups are pummeled in the ‘great unwinding’

#191

Post by dchyrdvh » Sat, Apr 04, 2020, 11:15 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…

They live in 700K houses with 3K a month payments. Mortgages will be suspended: banks don't want foreclosures. Again, the tech bros are in the top 5% by income and assets. If they sink, then 95% will have been underwater already.

Re: Startups are pummeled in the ‘great unwinding’

#192

Post by danielmunro » Sat, Apr 04, 2020, 11:16 PM UTC

ilikehurdles wrote: post #6

It'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…

I was laid off last week (yes, it was a startup), do you have a link to a careers page?

Re: Startups are pummeled in the ‘great unwinding’

#193

Post by dopamean » Sat, Apr 04, 2020, 11:17 PM UTC

irrational wrote: post #184

I work for a Fortune 150 company as a programmer. I've had lots of people ask me why I don't move to California and work for a startup. The main reason is because I'm risk adverse and I really don't like the Bay Area (I spent many years living in San Ramon, Alameda, Newark, etc. in my youth and have no desire to ever return). Now I have a new reason to be grateful I work for a Fortune 150 company. I've been able to w…

it's averse not adverse

Re: Startups are pummeled in the ‘great unwinding’

#194

Post by wozniacki » Sat, Apr 04, 2020, 11:21 PM UTC

akiselev wrote: post #139

wozniacki wrote: post #100

Earlier quoted context omitted.

If a business - any business whether a takeaway restaurant or a food hall or a white table cloth sitdown - cannot scrape by for more than a few weeks without steady revenue, wouldnt you say they are in a highly saturated niche or a highly saturated location or both or that they don't serve anything distinctive whether its their food or the experience, that couldnt be replaced by any other Joe Homecook with comparable…

Most businesses operate that way for the same reason Starbucks doesn't check your ID every time you go to the counter to pick up a coffee. It's cheaper to just make another coffee in the rare scenario someone takes someone else's cup than to slow down everything. It is the optimal happy path that leads to far more productivity.

Are you sure youre replying to my comment?

My comment was calling into question the viability & competitiveness of most restaurants that cannot weather a sudden change of fortunes. They are not be confused with long-lived, well-run and meticulously managed restaurants that stand the test of time because they offer something compelling. Most restaurants don't fit that bill and never had those ingredients baked into their DNA, to begin with.

Peter Thiel has opined on this in splendid detail:

  In 2001, my co-workers at PayPal and I would often get lunch on
  Castro Street in Mountain View, Calif. We had our pick of restaurants,
  starting with obvious categories like Indian, sushi and burgers. There were more 
  options once we settled on a type: North Indian or South Indian, cheaper or
  fancier, and so on. In contrast to the competitive local restaurant market,
   PayPal was then the only email-based payments company in the world. We 
  employed fewer people than the restaurants on Castro Street did, but our 
  business was much more valuable than all those restaurants combined. Starting
  a new South Indian restaurant is a really hard way to make money. If you lose
  sight of competitive reality and focus on trivial differentiating factors—maybe 
  you think your naan is superior because of your great-grandmother's recipe—your
  business is unlikely to survive….

  The history of progress is a history of better monopoly businesses replacing 
  incumbents. Monopolies drive progress because the promise of years or even 
  decades of monopoly profits provides a powerful incentive to innovate.

[1] Peter Thiel Will Not Be Opening A South Indian Restaurant In Silicon Valley

https://dealbreaker.com/2014/09/peter-thiel-will-not-be-open...

Re: Startups are pummeled in the ‘great unwinding’

#195

Post by kirktrue » Sat, Apr 04, 2020, 11:24 PM UTC

dchyrdvh wrote: post #81

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?

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.

Just to make sure I am understanding you, are you stating that the top 30% of employees have 3-5 years of savings socked away that they can get to easily?

If that’s true, well, I guess I am not in the top 30% of employees of big tech firms.

Re: Startups are pummeled in the ‘great unwinding’

#196

Post by learc83 » Sat, Apr 04, 2020, 11:25 PM UTC

lumost wrote: post #177

hn_throwaway_99 wrote: post #147

Earlier quoted context omitted.

Yes, everyone fully understands with travel at a complete standstill, none of these companies are viable if the current situation were the norm. But the current situation is not the norm, people will eventually get back to travelling a lot, and when they do there will be plenty of economic activity to support large companies in the travel business.

An extended shutdown with shut borders may have long-term effects on consumer's willingness and desire to travel. If the travel industry remains shut down for the next 12 months it's not unreasonable to think that the travel industry wouldn't fully recover for 10 years.

Or maybe pent up demand will have the opposite effect. There's no way to know.

I've had the same thoughts about the restaurant industry. Will lockdowns create a generation of home cooks, or will be so tired of staying in that the restaurant industry booms after this is over?

Re: Startups are pummeled in the ‘great unwinding’

#197

Post by agrajag » Sat, Apr 04, 2020, 11:29 PM UTC

aeyes wrote: post #167

qqqwerty wrote: post #159

Earlier quoted context omitted.

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.

Because most (all?) of the large companies issue RSUs now, not options, with the quantity of RSUs determined at issue time.

Re: Startups are pummeled in the ‘great unwinding’

#198

Post by estreeper » Sat, Apr 04, 2020, 11:31 PM UTC

wlesieutre wrote: post #127

0x0001 wrote: post #107

Earlier quoted context omitted.

Not all startups require VC capital, some of us are just running without venture funding just clients money, some startups are in better shape because are on right market on the right time. You just need to be in the right time.

> some of us are just running without venture funding just clients money That sort of startup probably also counts as a “traditional small businesses.”

Receiving investment, or not, or making money, or not, has nothing to do with whether or not a company is a "startup" (at least in the YC sense).

Startup = Growth

http://www.paulgraham.com/growth.html

Re: Startups are pummeled in the ‘great unwinding’

#199

Post by eriktrautman » Sat, Apr 04, 2020, 11:33 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.

The poster said 'better shape' not 'good shape'. A biz that's dead in X months of runway is still in better shape than one that's dead in a week.

Re: Startups are pummeled in the ‘great unwinding’

#200

Post by twic » Sat, Apr 04, 2020, 11:34 PM UTC

scarface74 wrote: post #114

0x0001 wrote: post #107

Earlier quoted context omitted.

Not all startups require VC capital, some of us are just running without venture funding just clients money, some startups are in better shape because are on right market on the right time. You just need to be in the right time.

And you’re probably not looking for a large exit. You are trying that unheard of concept of spending less than you make. What you are doing is running a “lifestyle business”. That’s not a negative despite what the tech bro’s think. I hate the idea of success for a company seems to be “we got another round of funding while losing money”.

That's not a lifestyle business, it's just a business.