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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

#91

Post by austenallred »

zzalpha wrote: post #76
learc83 wrote: post #61

Earlier quoted context omitted.

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…

There is a huge difference between this time and last time. Is it, though? Instead of overvalued companies based on the theory of "put it on the internet", we have overvalued companies based on the theory of "put it on the internet and get a billion users". Companies that, by and large, struggle to break even without telling a compelling story for how they'll monetize (let alone achieve or retain) that huge projected…

> Companies that, by and large, struggle to break even without telling a compelling story for how they'll monetize (let alone achieve or retain) that huge projected subscriber base.

The companies we're talking about in this discussion, late-stage (Series D and on) startups, already have a large and quickly growing user base. And, yes, most of them have real revenue.

There are, of course, some that don't. Take Snapchat for example. Is it really that difficult to see how Snapchat will monetize?

Everyone worried about whether or not Facebook would ever be able to monetize, but it brought in $4 Billion in revenue last quarter. Last quarter! Twitter isn't growing as quickly as some would like (only 4 million new users per quarter) and has its own share of problems, but it's still on track to bring in ~$2 Billion in revenue this year. It lowered revenue projections for the last quarter of 2015... to $650-710 million.

You mention Uber: Uber's gross revenue is expected to hit a run rate of about $10 billion by the end of next year. Even with Uber only taking 20% (=$2B of that), that's $2 billion in revenue. And they're still growing 300% year over year. That is a holy shit number.

So, yes, there is objectively a big difference between this time and last time.

Could those companies be overvalued? Certainly. Do they need to start bringing in more profit? Yes, but even the most bearish investors admit that takes a lot of time. There may even be a downturn in the market, but it is not going to be 2000 all over again, when every tech company with the exception of a couple vanishes overnight into thin air.

Re: Dizzying Ride May Be Ending for Startups

#92

Post by icelancer »

andy_ppp wrote: post #56

I actually think the opposite, that we are in a period of history where all the software (and arguably businesses) people use day to day go from being crap to fantastic. A gold rush for good startups I think. The returns from sitting the right group of people in a room and getting them to make doing something a few orders of magnitude better than it was before is always going to be fantastic.

I think your theory and the one outlined in the original post are not mutually exclusive. There will be a culling of the chaff.

Re: Dizzying Ride May Be Ending for Startups

#93

Post by [deleted] »

zaidf wrote: post #88
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 peo…

[deleted]

Re: Dizzying Ride May Be Ending for Startups

#94

Post by giaour »

VLM wrote: post #81
iamsohungry wrote: post #22

Earlier quoted context omitted.

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…

That analogy would make sense, except for the fact that rhinos are real and very intimidating. Shouldn't a rhino be a unicorn that has survived an IPO or something?

Re: Dizzying Ride May Be Ending for Startups

#95

Post by ryanSrich »

exelius wrote: post #48
paragpatelone wrote: post #31

Earlier quoted context omitted.

There is a bubble at the seed stage. There are tons of people (accredited investors) investing that stage and tons of incubators/accelerators to help introduce those startups to those investors. Platforms like Angel list are helping fund allot more companies at the seed stage by having syndicates. Now even non-accredited investors will be able to invest in startups[1]. So the seed stage is bubbling up. http://www.usn…

It's not really possible for there to be a bubble at the seed stage -- valuations at that stage are "paper" values because there's zero liquidity. Companies also tend not to stay in the seed stage for long enough to cause an asset bubble; they are either able to acquire follow-on funding (at which point they're no longer a "seed" company) or they aren't and they disappear. The seed stage is increasingly crowded, but…

It's also worth noting that obtaining Series A Funding[1] is more difficult than ever. The bubble is not with growth stage companies, it's with massive Unicorns that earn 0 dollars.

1. http://firstround.com/review/what-the-seed-funding-boom-mean...

Re: Dizzying Ride May Be Ending for Startups

#96

Post by ocdtrekkie »

jacquesm wrote: post #71
ocdtrekkie wrote: post #49

Earlier quoted context omitted.

Exactly. When I say things that seem outrageous, and get downvoted or called out, like claiming Google is past it's peak, I'm aware it may take a couple years for public opinion or actual monetary figures to catch up. I called the antitrust investigations around Android which have been opening up this year, a couple years ago. People are quick to downvote and say you're crazy, but often, you're just early. And it can…

I have a watch in my drawer that's exactly right twice every day.

Your watch is wrong for 1438 out of 1440 minutes each day, or 99.86% of the time, assuming minute precision. I haven't made a very high percentage of bad calls yet, AFAIK. Clever one-liners that are barely relevant to the topic really don't add anything to the conversation.

Re: Dizzying Ride May Be Ending for Startups

#98

Post by zzalpha »

austenallred wrote: post #91
zzalpha wrote: post #76

Earlier quoted context omitted.

There is a huge difference between this time and last time. Is it, though? Instead of overvalued companies based on the theory of "put it on the internet", we have overvalued companies based on the theory of "put it on the internet and get a billion users". Companies that, by and large, struggle to break even without telling a compelling story for how they'll monetize (let alone achieve or retain) that huge projected…

> Companies that, by and large, struggle to break even without telling a compelling story for how they'll monetize (let alone achieve or retain) that huge projected subscriber base. The companies we're talking about in this discussion, late-stage (Series D and on) startups, already have a large and quickly growing user base. And, yes, most of them have real revenue. There are, of course, some that don't. Take Snapcha…

Everyone worried about whether or not Facebook would ever be able to monetize, but it brought in $4 Billion in revenue last quarter. Last quarter!

So let's do a little math. From this:

http://www.forbes.com/sites/kathleenchaykowski/2015/04/22/fa...

We see 1.44 billion monthly active users. That translates to about $12 a year per user.

Think about that.

Now think about the potential growth curve.

And you're telling me I should be impressed?

Now, if they can find a way to continue to push that per-user revenue number up, great, let's see how that goes. But their numbers today only show great promise.

Meanwhile, using Facebook as your benchmark is incredibly disingenuous. Of all the internet companies today, they have the largest subscriber base, the greatest retention, and the greatest daily active engagement.

Snapchat doesn't come close.

Twitter isn't growing as quickly as some would like (only 4 million new users per quarter) and has its own share of problems, but it's still on track to bring in ~$2 Billion in revenue this year.

Twitter can't break even. They report 320MM monthly active users which means they're pulling in about $7 per user per year in revenues, less than Facebook, and with a growth curve that's even more alarming.

Again, you're not seeing the forest for the trees, here.

Uber's gross revenue is expected to hit a run rate of about $10 billion by the end of next year.

And, mark my words, in 5 years they will be shut down by regulators and class action lawsuits as folks realize they're making $10B a year on the backs of illegal contract workers.

Re: Dizzying Ride May Be Ending for Startups

#99

Post by jacquesm »

ocdtrekkie wrote: post #96
jacquesm wrote: post #71

Earlier quoted context omitted.

I have a watch in my drawer that's exactly right twice every day.

Your watch is wrong for 1438 out of 1440 minutes each day, or 99.86% of the time, assuming minute precision. I haven't made a very high percentage of bad calls yet, AFAIK. Clever one-liners that are barely relevant to the topic really don't add anything to the conversation.

If you use milliseconds you can even make that 99.99% or higher!

The point is, that watch is verifiable accurate twice daily, you can look at it and will tell you exactly the right time. It will do so 365 days per year, which is 730 times. This is a very large number of accurate predictions without being useful at all.

The only kind of useful predictions are the ones that you are prepared to back with either money or deeds. Words alone really don't cut it, in fact, with words alone your accuracy decreases.

A good way to find out where people stand on a prediction is to ask them to back that prediction with money. If you're willing to stake $500 on each of your predictions then you may still be wrong but you'll be a lot more careful with what it is exactly that you predict than if there is no downside to you for your prediction being wrong.

Re: Dizzying Ride May Be Ending for Startups

#100

Post by bredren »

tmaly wrote: post #18

I was doing a paid internship at Intel in 1999 out in Portland, OR. I remember seeing huge numbers of new hires every week. I met people out in Portland that were hired to due VB programming with no programming experience. A few months later, the music stopped and there were too few chairs to go around. I always think of the Austrian business cycle when I see such huge upswings in things

I was also at Intel in Hillsboro on a paid internship at this time. I recall a ton of projects across so many areas, with loose management. There was a guy in a QA group I worked in who just day traded.
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