The WeWork saga is especially instructive.
Startups are pummeled in the ‘great unwinding’
371–380 of 443 posts
Re: Startups are pummeled in the ‘great unwinding’
#372I'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.
In my experience the pareto principle is hard at work in VC funded startups that went for rapid headcount expansion.
Re: Startups are pummeled in the ‘great unwinding’
#373Earlier quoted context omitted.
This is the thing I've seen a lot of tech people missing, they are all "I'll be fine, my company already works from home and our business isn't effected". Yes, but what about your customers businesses? What if they stop paying? Or what about _their_ customers. The entire economy is going to be hit hard, and that will ripple through.
I think startups that cater to providing services to government funded organizations will probably do better, especially with all this new government debt globally in the form of "stimulus".
I don't expect that will turn out to be the case as funding will be reallocated across various government programs in an extreme manner. The impact of Hurricane Katrina on DHS programs is a comparatively small example of what can happen after an event like this.
Companies large enough to serve multiple different organizations may be able to re-balance their services.
Re: Startups are pummeled in the ‘great unwinding’
#374Earlier quoted context omitted.
It's known that some businesses won't open until September - that's the current target for sports stadiums, for example. Even after September, there will be a lot of unknowns with massive economic implications. Will cruising recover in 1 year, or in 10 years? How much more friction will there be on international travel, and for how long? What's the risk of a coronavirus resurgence, both globally and locally? How diff…
I hope cruising only recovers with big reforms including: * Cruise firms pay their taxes and aren't allowed to use flags of convenience * They're required to look after and pay their staff properly * They're required to dramatically improve their fuel usage and efficiency * They're required to protect the environment, in particular their mooring and waste disposal practices * They're required to improve their onboard…
I have no clue about most businesses but I'm pretty sure the cruise industry is going to be decimated by this.
Re: Startups are pummeled in the ‘great unwinding’
#375Earlier quoted context omitted.
It'll be a couple more months before we can say with certainty, but I think Sweden has done an excellent job of balancing economic, life and liberty trade offs.
I heard an interview of someone from the Swedish chamber of commerce. He said "Social distancing is part of Swedish culture." Having spent a decent amount of time in Stockholm, I don't disagree. I remember the custom on mass transit is to stay quiet and as far away from any other passenger as possible...unless there's been drinking.
This doesn't apply to kids in schools though. If kids are a big transmission vector then not shutting down schools will have a big effect.
Re: Startups are pummeled in the ‘great unwinding’
#376Earlier quoted context omitted.
You know the numbers. 90%+ of startups fail. In an economic downturn, it's more like 99%+. If you're trying to put food on your table, startups are probably the wrong place to turn.
Can you explain how your argument doesn't apply to local businesses as well? And I would hope you would see the problem with telling people not to work at local businesses. Ultimately the only companies built to weather something like this is the larger multinational corporations and in times like these, it kills both startups and local businesses alike.
I don't think being multi-national confers much of an advantage considering this has spread across the globe.
Companies providing essential services (supermarkets, healthcare) will probably be fine. Otherwise having lots of cash on hand or no liabilities (rent, debt, etc).
Re: Startups are pummeled in the ‘great unwinding’
#377I've been contracting lately and I'm on two active contracts. One of the two is winding down. I've been billing at $155/hour via an agency (to be clear, their fee added on top of that $155). They offered me $90,000 salary to go employee. They upped that to $100,000 when I said no (I thought we were done but I said no again). Their thinking is they can take advantage of the situation to get cheap engineering staff. If…
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.
Re: Startups are pummeled in the ‘great unwinding’
#378Earlier quoted context omitted.
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 sti…
Facebooks problem won't be lack of users, it will be lack of advertisers.
Re: Startups are pummeled in the ‘great unwinding’
#379Earlier 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…
> Supply is also dropping as tons of homeowners are refinancing, which balances out any drop in demand. Can you explain this? How does refinancing affect housing supply?
Refinancing and selling
your home are both ways to get cash. The best time to refinance is when 1) rates are at their lowest 2) your home value is at its highest and 3) you can get good ROI on that cash. Typically people look for ROI either by investing it in the currently down market or using it for down payment on a second rental property.
All three of those apply at this moment so record numbers of people have been getting refi’s this month. When fed rates eventually go up perhaps next year people will shift back to selling, or simply holding while they wait for their perceived home value to recover. Either way you have less people selling homes.
Not an expert - this is just what has been explained to me so take it with a grain of salt. Also this falls apart if the market is flooded with foreclosures.
Re: Startups are pummeled in the ‘great unwinding’
#380Is the narrative that big companies are safe havens for job seekers actually true? Isn't Airbnb a "big" company?
Airbnb is working on pulling out all the stops to try and prevent layoffs. They might not succeed, but if they were a smaller company they wouldn't even have anything to try.
Is there anything inherent in their size which means they can weather the storm?