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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

#81

Post by VLM »

iamsohungry wrote: post #22
jgrahamc wrote: post #9

It's time for a new term: a "Pegasus" (a different kind of mythical horse than a unicorn): https://twitter.com/jgrahamc/status/658702918200250368 Pegasus (n) 1. Mythical winged horse; 2. Silicon Valley 'unicorn' with high gross margin. i.e. one that might actually take off.

God, "unicorn" is already stupid enough.

On the bright side, if you found that annoying, I've heard rhinos as being unicorns that became hopelessly obese and are dying out, with the fairly obvious business analogies. They're not dead unicorns because they're not dead. They're on the way though! And until the seemingly inevitable bankruptcy or shutdown, they're living rhinos. They'll be dead unicorns unless something turns around, sure. Or I guess you could call them dead rhinos?

A quick internet search of rhino and bubble and stuff like that has found nothing, I've only heard this verbally a couple times.

"Do you have a contingency plan for rolling your your (whatever) off (whatever)? They're a rhino, you know about that, right?"

Re: Dizzying Ride May Be Ending for Startups

#82

Post by jacquesm »

angersock wrote: post #77
jacquesm wrote: post #69

Earlier quoted context omitted.

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.

Eh? What're you talking about? Months ago, we started a re-org to streamline our management and to help focus on our core competencies. We wanted to put more wood behind fewer arrows, and so divested ourselves of our legacy customers and technology so we could focus on our growth strengths. Now, today, surely, the growth numbers haven't been there, but we wish all the best to our former coworkers and business assets…

As long as you still own DroppedBox, no problem. But if you divest DroppedBox you'd better hope there isn't any dispute once that chapter 7 hits about the price you made for it and/or any ties of investors and or principals from 'DropBox' with those of 'DroppedBox'.

Really, bankruptcy fraud is nothing to joke about, it is a very common trick to try to remove assets from a company that is on the skids but it usually does not end well.

If you divest the whole then that's perfectly possible but you're going to be under a microscope if you declare bankruptcy a very short time later.

See also 'clawback'.

Re: Dizzying Ride May Be Ending for Startups

#83

Post by austenallred »

creamyhorror wrote: post #70
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 priv…

There's a difference between a correction in the market (or more specifically a correction with regard to a few companies) and a bursting of a bubble.

Tech investment volume today is much, much smaller than it was in the 2000s, despite the fact that the number of people on the Internet has grown by two orders of magnitude. Actually the funding per person online has remained almost on a flat line from 2002 to today.

There's some frothiness in the late-stage market still, and but those are the companies that are being corrected. That's largely happening because none of them are IPOing, and with interest rates being practically 0 investors have to put their money somewhere. So they build some losses into a late-stage portfolio theory instead of distributing it in the S&P 500.

Some of those companies will end up with lower valuations, but that's always happened, and that's built into the IPO model. In other words, even if several late-stage "unicorns" completely failed (and some undoubtedly will), that doesn't mean that the entirety of tech will be viewed as worthless. The only way it is worthless is if the companies won't eventually generate profits. Last time that was largely the case because the unit economics were bad. This time we see real revenue coming through and the unit economics are there for most companies.

I remember all of HN being positive that Instagram selling for $1B to Facebook was the height of the bubble. But now Instagram is returning >$500m in revenue to Facebook per year. Turns out it was a very, very savvy purchase.

All of the current tech "unicorns" combined are worth 2/3 of Microsoft. You can make the argument that owning all of Twitter, Amazon, Square, Snapchat, Dropbox, Uber, Zenefits, etc. would be worse than owning 2/3 of Microsoft, but I could definitely see the other side of that argument, as well.

Re: Dizzying Ride May Be Ending for Startups

#84

Post by fletchrichman »

creamyhorror wrote: post #70
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 priv…

profit != success of a company. some of the best companies in the world run a deficit and its a smart thing to do. https://medium.com/@girlziplocked/why-amazon-isn-t-a-fucking.... so the fact that they have no profit means nothing.

Re: Dizzying Ride May Be Ending for Startups

#85

Post by VLM »

Alex3917 wrote: post #23
idlewords wrote: post #15

Earlier quoted context omitted.

The fact that our roads are crappy is going to turn people into shut-ins?

Basically, yes. I think better examples though would be: - A rapid increase in states requiring HS students to complete some of their classes online in order to save money. - Folks being unable to get treatment for all sorts of health conditions and mental illnesses. - The prison system not providing adequate job training or rehabilitation. - The costs of college education increasing while the quality of that educati…

"SF specializes in creating companies that are essentially 'New York as a Service' bc its infrastructure sucks."

I've also heard the "mom" variation. I've never heard "mom" equated with "New York" but it is insightful in its own strange way.

Re: Dizzying Ride May Be Ending for Startups

#86

Post by fletchrichman »

jgrahamc wrote: post #9

It's time for a new term: a "Pegasus" (a different kind of mythical horse than a unicorn): https://twitter.com/jgrahamc/status/658702918200250368 Pegasus (n) 1. Mythical winged horse; 2. Silicon Valley 'unicorn' with high gross margin. i.e. one that might actually take off.

No, the new term is "Cockroach" - https://medium.com/@caterina/the-age-of-the-cockroach-5a720d...

Re: Dizzying Ride May Be Ending for Startups

#87

Post by LoSboccacc »

austenallred wrote: post #83
creamyhorror wrote: post #70

Earlier quoted context omitted.

"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 priv…

There's a difference between a correction in the market (or more specifically a correction with regard to a few companies) and a bursting of a bubble. Tech investment volume today is much, much smaller than it was in the 2000s, despite the fact that the number of people on the Internet has grown by two orders of magnitude. Actually the funding per person online has remained almost on a flat line from 2002 to today. T…

Much investment is in private equity anyway, so the market should be fine and dandy

Re: Dizzying Ride May Be Ending for Startups

#88

Post by zaidf »

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.

Sure, but I bet you there weren't any articles in 1993 about a bubble that ultimately burst in 2000. The insanity with the current argument for a bubble is that we have people who have been screaming "bubble!" since 2006, starting with the myspace and youtube acquisitions. At some point predicting that there is a bubble loses meaning if the prediction doesn't have a time constraint(ultimately, all companies and people die.)

Re: Dizzying Ride May Be Ending for Startups

#89

Post by ericd »

vincent_s wrote: post #34
rdlecler1 wrote: post #2

If Fidelity just did a 25% write down on SnapChat on the most senior portion of a $600m investment round, and assuming that Fidelity has at least a 1x liquidity pref/ratchet, then SnapChat is now valued at $462M floor, not $15 billion.

What about other investors who also have liquidity preferences?

The latest investment/liquidity pref is usually satisfied first.

Re: Dizzying Ride May Be Ending for Startups

#90

Post by icelancer »

nilkn wrote: post #66
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).

Yup. The only debt we have is a rotating LOC for physical inventory (we ship hard goods) of which we have 2x in cash on hand, but obviously debt service of inventory is more efficient than cash service of inventory.

I read HN and other sites and I am just in shock of the fact people are creating... basically nothing sustainable and hoping it will somehow magically become sustainable? It boggles the mind.

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