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Dizzying Ride May Be Ending for Startups

nytimes.com

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Re: Dizzying Ride May Be Ending for Startups

#61

Post by learc83 »

xienze wrote: post #39
austenallred wrote: post #32

Earlier quoted context omitted.

A good strategy as an analyst is to predict a downturn coming. You can be wrong for six or seven years, and then if/when there is a downturn you say, "I told you so!"

The thing is though, there are just as many people saying "it's different this time". The person predicting a downturn will inevitably be right. The other person... not so much :).

There will inevitably be a downturn. When people say "it's different this time" they don't mean that there can never be a downturn, they mean that when it happens can't be predicted by looking at past events. And they mean that when it happens it will be different--perhaps not as bad.

There is a huge difference between this time and last time. The internet is much more mature for one. People depend on web apps now in a way that's not going to change just because the market swings.

Another thing that's different is that people spend more time on software distractions when the economy tanks, not less, so a global downturn is likely to drive consumer spending away from the real world into the virtual.

Re: Dizzying Ride May Be Ending for Startups

#64

Post by lbrandy »

hvs wrote: post #14

For those of you too young to remember, there were numerous articles written about the bubble bursting before it finally did in 2000-01. It wasn't a surprise that it did, just that no one knew precisely when it would. My point is that arguing that people have said this bubble was about to burst and that it hasn't yet isn't an argument that it won't.

> arguing that people have said this bubble was about to burst and that it hasn't yet isn't an argument that it won't.

The reverse isn't an argument, either.

There's essentially zero information content in a claim that "the bubble" will burst sometime between now and the heat death of the universe.

Re: Dizzying Ride May Be Ending for Startups

#65

Post by HillaryBriss »

Alex3917 wrote: post #11

I think a lot of companies who raised seed funding prior to 2010 or 2012 did so at excessively low valuations, and then tried to make up for it later by raising at excessively high valuations once they hit. The 'bubble' over the last couple years that's driven up pre-seed valuations should actually make the current crop of startups more stable over the long run. Also, the decaying state of physical infrastructure in…

Ok. Yes.

But when will San Francisco/San Jose/Palo Alto go back to being simple, boring cities with high real estate prices that are no longer at the center of the global software hurricane?

Re: Dizzying Ride May Be Ending for Startups

#66

Post by nilkn »

code4tee wrote: post #60

The only people that don't see a bubble at the moment are the people inside the bubbles. If your business has real revenue and real profit then there isn't much to worry about. If your business is valued on "hype" and theoretical valuations then you have reason to worry.

I'm so glad I work at a company right now that has never taken funding and is legitimately profitable. Hiring and expansion have been hard when you don't have access to far more cash than you could ever generate yourself, but it's hard to put a number on knowing that you won't be affected much by an industry downturn (doubly so since none of our customers are software companies).

Re: Dizzying Ride May Be Ending for Startups

#67

Post by surfearth »

chollida1 wrote: post #13

Fidelity has just marked its shares down from $30.72 at the end of June to $22.91 for the end of September. To be fair, I think these markdowns have more to do with who is investing than the companies themselves. VC's do portfolio valuations much less frequently than mutual funds, PE firms or hedge funds do and they give less negative scrutiny to the valuation than the aforementioned firms do, the reason for this....…

No PE firms allow quarterly redemptions in traditional fund vehicles. PE firms and VC firms use precisely the same legal structure and are both generally required to value assets and report to partners on a quarterly basis. Some PE larger PE firms will have quarterly/semi-annual audits, but most PE and VC firms audit their financial statements (and thus valuations) annually.

Also note that most funds calculate fees on committed capital during the investment period (typically five years) and subsequently on invested cost, not fair value, afterword. Therefore the portfolio valuation has little to do with management fee calculations.

Re: Dizzying Ride May Be Ending for Startups

#68

Post by AdieuToLogic »

debacle wrote: post #57
sp332 wrote: post #20

Earlier quoted context omitted.

A pegasus doesn't have a horn. A flying unicorn is usually called an "alicorn" but also pegacorn, unisus, or unipeg. /pedantic

To be far more pedantic, Pegasus is the name of a single flying horse, it's not the name for horses with wings.

Obligatory Futurama reference:

  You are technically correct, the best kind
  of correct
:-)

Re: Dizzying Ride May Be Ending for Startups

#69

Post by jacquesm »

ChuckMcM wrote: post #59
bcantrill wrote: post #46

Earlier quoted context omitted.

You're misunderstanding the essential point of @hvs's comment: it's not that some people predicted the bust (though that was certainly true), it's that the articles that indicated a bust was coming helped instill a collective sense the boom couldn't last forever. This is very important because it preconditions everyone for the bust -- and when the bust comes, it accelerates stunningly quickly. Having lived through tw…

This is exactly right, bubbles are a sort of "mass hysteria" where everyone in the herd is trying to get the most for themselves. Generally to be successful you need otherwise rational people to put aside reason and to invest in the belief that things are going up. And they do, and you get these things. And when that belief is dispelled, they go elsewhere. What isn't well spelled out is how people step out of the bub…

I'm pretty sure the chapter 7 won't fly because of illegitimate removal of resources from the company knowing you're headed for chapter 7.

Re: Dizzying Ride May Be Ending for Startups

#70

Post by creamyhorror »

hvs wrote: post #14

For those of you too young to remember, there were numerous articles written about the bubble bursting before it finally did in 2000-01. It wasn't a surprise that it did, just that no one knew precisely when it would. My point is that arguing that people have said this bubble was about to burst and that it hasn't yet isn't an argument that it won't.

"Unicorns Dropping Like Flies: First Dropbox; Then Square; Now Fidelity Cuts Snapchat Valuation By 25%" - Zero Hedge

https://news.ycombinator.com/item?id=10546947

* Dropbox was warned by its investment bankers that it would be unable to go public at a valuation anywhere near close to what its last private round (which had most recently risen to $10 billion from $4 billion a year ago) valued it at.

* Square, last private valuation of $6bn, $3.9bn at IPO

* Snapchat, written down 25% by Fidelity ($31 -> $23)

* Combined "valuation" of all US unicorns is $486 billion. Their combined profit? $0.

The cresting wave of immense private valuations is crashing onto the rocky shore of public markets. Funding is going to shrivel.

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