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

Re: Startups are pummeled in the ‘great unwinding’

#381

Post by barry-cotter » Sun, Apr 05, 2020, 10:41 AM UTC

muse900 wrote: post #244

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…

Small-medium hotel owner here, that used to write code for a living. What just happened in my industry, is forcing me to go look for a job. I don't think we are going to open for summer season or even if we do its not gonna make enough to live by. Hundreds or thousands of years ago, a few had all the wealth and then most people were poor. We even had slaves. I can't believe that in 2020 and with all the knowledge we'…

> I can't believe that in 2020 and with all the knowledge we've acquired as humanity we've allowed a few people to acquire all the wealth.

This is the most prosperous time in human history. There are more people alive right now than ever before. They live longer healthier lives and they’re more educated than ever before.

On every continent but Africa people are richer now than was the case after WWII. In the US, the richest country that has ever existed people are just coming out of one of the longest economic expansions in history.

Re: Startups are pummeled in the ‘great unwinding’

#382

Post by bitreality » Sun, Apr 05, 2020, 10:41 AM UTC

nostrebored wrote: post #356

mmahemoff wrote: post #312

Earlier quoted context omitted.

Working 99 out of every 100 years is quite sound.

No, about every 8 years we see contractions.

Right but they didn't result in Hilton / Disney having 80-90% revenue drops overnight. This is a very unique contraction. Even in the depths of 2008, DisneyWorld still had a steady flow of visitors, and Hilton hotels across the world still welcomed guests.

Re: Startups are pummeled in the ‘great unwinding’

#383

Post by makomk » Sun, Apr 05, 2020, 10:47 AM UTC

nostrebored wrote: post #356

mmahemoff wrote: post #312

Earlier quoted context omitted.

Working 99 out of every 100 years is quite sound.

No, about every 8 years we see contractions.

This is rather worse than your typical 8-year contraction. Like, experts aren't sure if it's going to be better or worse than the Great Depression and they're not optimistic based on what we've seen so far levels of bad.

Re: Startups are pummeled in the ‘great unwinding’

#384

Post by jononor » Sun, Apr 05, 2020, 10:56 AM UTC

tim333 wrote: post #310

filmgirlcw wrote: post #138

Earlier quoted context omitted.

This strikes me as wishful thinking and also incredibly myopic about the realities facing many startups. A startup that recently closed a big round (and the need to close the round wasn’t necessitated by massive debt or existing expenses — so think almost all of the money can be used as future runway) might be in a better short-term position than a business that is relying on net-30 or net-90 payments from clients th…

>nothing inherent to being a “startup” that will make it any better at weathering the future I can think of a few things: a) expecting no revenue for a while anyway b) mostly can work from home / remote c) early startups can cut back to a few founders on ramen None of that really applies to mom and pop restaurants / retail etc.

Assuming a "tech startup". d) Little to no costs with many-month wind-down period. A lease contract for a restaurant or shop might be 1-2 years, and one is still on the hook for that despite 0 income due to closed shop.

Re: Startups are pummeled in the ‘great unwinding’

#385

Post by hnarn » Sun, Apr 05, 2020, 11:12 AM 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…

> We're designed to weather this kind of storm because "zero revenue" is the default state.

This is completely contrary to what common sense would tell you if you ask yourself "what corporation would best survive a depression". Pick and choose any qualities, any sector, any background and be honest with yourself.

My bet for what company I would prefer to own is something along the lines of:

- Industrial manufacturing of common goods that are necessary for people, not industries, without many external factors where you are not exceedingly (more than others) exposed to price fluctuations of other goods. This could be ketchup, medicine, toilet paper, you name it.

- A long history of sustained profit leading to cash on hand which you can use to compensate for downturns that you can be almost 100% sure are temporary.

- Infrastructure in place that you can scale down and then back up without losing massive amounts of competence or inventory quality.

Here's what I wouldn't like to have:

- Complex technical software development that is completely optional for both people and industries, completely dependent on external factors and therefore heavily hit by economical downturn.

- An unknown company with no history (startup) with zero cash on hand to compensate for a downturn that you can't even know if it's temporary or if you need to pivot completely.

- Severe penalties for scaling down as key intellectual competence disappears from the company, causing double work when resumed and possibly a lower quality product going forward, making it even harder to sell.

I'm not trying to get you down, but don't kid yourself. This is definitely not the type of climate where you would elect to be a tech start-up.

Re: Startups are pummeled in the ‘great unwinding’

#386

Post by [deleted] » Sun, Apr 05, 2020, 11:20 AM UTC

tonyedgecombe wrote: post #377

battery_cowboy wrote: post #357

Earlier quoted context omitted.

Get an engineer for a year or two at the cut-rate price and once they've gotten ingrained into your org and code base they'll head off when (if?) the economy recovers. Not very forward-thinking.

There is no guarantee those high salaries will come back quickly or at all. This event might well usher in a more cost-conscious era.

[deleted]

Re: Startups are pummeled in the ‘great unwinding’

#387

Post by unnouinceput » Sun, Apr 05, 2020, 11:44 AM UTC

Quote: "We purposefully and intentionally did not have any video on to protect privacy as we delivered the news live to individuals"

Translation: We are SoB's and we DGaF about you to the full extent to not even look you in the face when giving you the finger.

Re: Startups are pummeled in the ‘great unwinding’

#388

Post by anthony_r » Sun, Apr 05, 2020, 11:45 AM UTC

Marazan wrote: post #346

anthony_r wrote: post #89

Earlier quoted context omitted.

See also the "Austrian business cycle theory". But the bust, while clearing the economy of a lot of mal-investment, goes on for quite a painful while before the previous level of output/employment/prosperity is matched. https://en.wikipedia.org/wiki/Austrian_business_cycle_theory

Ah yes, ABCT. First, assume the market is made up of rational actors. Second, assume that sustained irrational investment choices have been made by the rational actors.

What is "rational". I don't think that this theory assumes anything about "rationality".

It's many of the other economic theories that are built on the pinnacle of "rationality".

Re: Startups are pummeled in the ‘great unwinding’

#389

Post by [deleted] » Sun, Apr 05, 2020, 11:47 AM UTC

sumedh wrote: post #218

marcosdumay wrote: post #118

Earlier quoted context omitted.

The GP is not complaining that our skills are valued, it's complaining that those companies have an awful low productivity. You know, people filling low productivity jobs means that our skills aren't valued enough.

> it's complaining that those companies have an awful low productivity. That is just human nature, once the company starts going big and has the funds, the managers start empire building.

[deleted]

Re: Startups are pummeled in the ‘great unwinding’

#390

Post by sagarm » Sun, Apr 05, 2020, 11:51 AM UTC

murderfs wrote: post #369

meritt wrote: post #279

Earlier quoted context omitted.

> which is totally doable at even half the salary you’re talking about. Half that salary? That's $150k, or after taxes, about ~$8k/mo. or $3k/mo for everything else after your alloted $5k/mo. Yes, people can survive on a lot less, but why in the world would you want to live in the Bay area just to eek by on such a paltry net outcome without nearly enough to set aside for the rainy day that's coming soon. And more imp…

Mortgage interest and property tax are tax-deductible, so if you're subtracting from after-tax income, it's more like $3-4k/month.

Because of the SALT cap in the 2017 tax bill, property tax is effectively no longer deductible.

The MID is also worth much less because of the higher standard deduction and the SALT cap.