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

Re: Startups are pummeled in the ‘great unwinding’

#341

Post by jariel » Sun, Apr 05, 2020, 6:10 AM UTC

filmgirlcw wrote: post #138

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…

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…

No, it's not myopic.

Startups lose money, which means they are usually raising capital for runway, and can conserve as well.

Moreover, many startups don't have working capital requirements, retail rents, inventory etc..

Finally, a lot of products are digital and some booming.

So it's fair to say many startups have an advantage.

Re: Startups are pummeled in the ‘great unwinding’

#342

Post by 0x202020 » Sun, Apr 05, 2020, 6:13 AM UTC

boojing wrote: post #314

0x202020 wrote: post #296

I’ve got an esports side project that was starting to get some interest within the community and generate non-trivial MRR (~4k mo). I have a closed alpha that a few teams in the league were using, and I was talking at some level to basically everyone that could be in the market for the current version of the problem. I was looking into getting a business/sales partner in order to have more success on the business sid…

Interesting. If you don't mind me asking; how did you make contact with the first few teams? Was the early exposure from sharing parts of the project through social platforms or directly reaching out to the teams?

I have existing contact with some people in a few of the organizations which has come following the game over the last few years on a personal level. I’ve travelled to some events, have conversations with some players but mostly coaches, analysts and production team members, and have been around the scene on a hardcore fan basis for a long time. Last season I created a fantasy league app and some advance stats collection. This season I didn’t feel like doing the fantasy app again because there were good enough options out there but got some requests for stats/rankings from some of the people I know. So I started that then pivoted it into a platform instead of creating a bunch of spreadsheets (even though I still end up doing that for them sometimes)

Re: Startups are pummeled in the ‘great unwinding’

#343

Post by mikeg8 » Sun, Apr 05, 2020, 6:17 AM UTC

tjr225 wrote: post #185

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…

Schadenfreude is an absolute awful response to this. A lot of us are just trying to put food on the table and pay off student loans.

The schadenfreude isn’t necessarily directed towards individuals who choose to work at a startup and have the misfortune of being laid off. I believe it was meant towards an overly aggressive/ borderline reckless leadership mentality that has founders raise tens/hundreds of millions in capital, pump a majority into explosive, unfettered growth objectives, without having to exercise much of the fiscal conservatism that many other industries try to operate by. Working for a startup is inherently risky, but more so when founders are too aggressive and do not leave themselves options to retain employees during an unexpected crisis. If a positive outcome of this event is more conservative spending strategies by founders, that’s great. However, based on past patterns, that may be unlikely. And as an employee choosing to work in that world, YOU have to accept those possible realities.

Re: Startups are pummeled in the ‘great unwinding’

#344

Post by Spooky23 » Sun, Apr 05, 2020, 6:21 AM UTC

JimTheMan wrote: post #274

Spooky23 wrote: post #255

Earlier quoted context omitted.

“Better” in that you still exist. A friend’s medical practice will implode April 30... their business is down 90% and they won’t be able to pay rent or the employees. They are only staying open in hope for some sort of aid or debt jubilee. The partners will lose pretty much everything. People with cash aren’t going to keep plowing money into startups, they are going to buy depressed assets. Every leveraged real estat…

Out of curiosity, would you be able to elaborate on the type of practice? I wouldn't imagine they are a GP? This crisis would increase their traffic. Cosmetic surgery?

Oral surgeon.

Re: Startups are pummeled in the ‘great unwinding’

#345

Post by sfj » Sun, Apr 05, 2020, 6:22 AM UTC

invertY wrote: post #212

Ctrl+F "Ecology" Ctrl+F "CMBS" Ctrl+F "Reits" Ctrl+F "Repo" Oh, wow. You guys are totes not ready for the next stuff.

I know the others, but what does ecology have to do with it?

Re: Startups are pummeled in the ‘great unwinding’

#346

Post by Marazan » Sun, Apr 05, 2020, 6:33 AM UTC

anthony_r wrote: post #89

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…

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.

Re: Startups are pummeled in the ‘great unwinding’

#347

Post by alexis_fr » Sun, Apr 05, 2020, 6:47 AM UTC

avip wrote: post #117

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…

I work for a well funded + product + paying customers + whatever su. Since inception of covid-19 the vast majority of customers withheld pretty much everything (some violated signed contracts). Some are MIA and impossible to communicate with. It's a global turmoil and it's too soon to make assumptions about how great of a shape we're in. Are we better off than baristas? Likely.

This. I had revenue for 5 people but didn’t succeed to find them, just 1, so I feel very well off and I keep the positions open. However, we’re on a corporate market that errs in the side of luxury, and even with an incredibly safe runway, I can’t assume I’ll still have customers in one year...

Re: Startups are pummeled in the ‘great unwinding’

#348

Post by starpilot » Sun, Apr 05, 2020, 6:48 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…

Working for an electric utility. It's incredibly stable and no one has been let go. We still have all our contractors with us as well and are hiring in a few areas. People will always need power.

Re: Startups are pummeled in the ‘great unwinding’

#349

Post by agensaequivocum » Sun, Apr 05, 2020, 7:02 AM UTC

tdfx wrote: post #148

pixelmonkey wrote: post #109

One of my good friends is a restaurant owner in NYC and my spouse is a doctor/surgeon in NYC. Startups aren't pummeled -- they're insulated. Restaurant owners and doctors are pummeled. And all of you who thought incompetent federal government leadership was OK in this modern world -- you were bamboozled. You can start apologizing now.

If this crop of federal leadership is rotten, I'm not seeing much hope in the possible followup cohorts. The US government has effectively delegated responsibility for the crisis to state governments, and they all seem to be following the same stupid "stay in your home" model. Federal and state, their only solution has been to throw money at the problem, but that doesn't work when you've got no one around who can exe…

> The US government has effectively delegated responsibility for the crisis to state governments

Because it is the state governments' responsibility.

Re: Startups are pummeled in the ‘great unwinding’

#350

Post by otterley » Sun, Apr 05, 2020, 7:03 AM UTC

TheOtherHobbes wrote: post #161

derekdahmer wrote: post #98

Earlier quoted context omitted.

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 proj…

Only two of the FAANG companies get most of their revenue from ads, and all of those companies are weathering the storm rather well (except perhaps Google, but I can’t say for certain).

Facebook is struggling to keep up with site demand; more people are using it to communicate while shut in during this period of uncertainty.

Apple has enough cash on hand to not sell a single product for months - maybe years - and still keep paying everyone. But they have plenty of subscription-based revenue coming in anyway.

Amazon can barely keep up with demand to the extent that they are hiring 100,000 people and denying shipments of nonessential goods. (disclaimer: I work for AWS but have no inside information here; I read the same news stories everyone else does.)

Netflix is entertaining more people than ever who are stuck at home.

Google is, well, Google, and like Apple, awash in cash.

It’s not the FAANG companies we need to worry about; it’s the startups that were based on great ideas but needed the space and investment to incubate them but are now rapidly being depleted of oxygen.