Y Combinator Advises Founders To 'Plan For the Worst' Amid Market Teardown (techcrunch.com) 13
Y Combinator, a Silicon Valley kingmaker, is advising its portfolio founders to "plan for the worst" as startups across the globe scramble to navigate a sharp reversal after a 13-year bull run. From a report: The investment firm -- whose early backings include investments in Dropbox, Coinbase, Airbnb and Reddit -- this week suggested startups to cut their expenses and focus on extending their runways within the next 30 days. Those who don't have the runway to "reach default alive," the firm said in the letter, titled "Economic Downturn," YC is strongly suggesting that they consider raising money.
"If your plan is to raise money in the next 6-12 months, you might be raising at the peak of the downturn. Remember that your chances of success are extremely low even if your company is doing well. We recommend you change your plan," it said. The note from YC, which backs hundreds of young startups a year, is a signal that the market teardown that has significantly slashed the value of a large number of tech companies including giants such as Shopify and Netflix in recent weeks is trickling down to the early-stage startups universe.
"If your plan is to raise money in the next 6-12 months, you might be raising at the peak of the downturn. Remember that your chances of success are extremely low even if your company is doing well. We recommend you change your plan," it said. The note from YC, which backs hundreds of young startups a year, is a signal that the market teardown that has significantly slashed the value of a large number of tech companies including giants such as Shopify and Netflix in recent weeks is trickling down to the early-stage startups universe.
Economic pandemic (Score:5, Interesting)
Re:Economic pandemic (Score:5, Insightful)
They’re right. Look at how many of today’s giants were forged in the dot com bust at the turn of the millennium. Amazon and Google, most obviously, were both still in their relative infancy. And then as we got to the Great Recession we saw Facebook exploding as dozens of other social networks died out.
These times are when the weak are culled and the giants of the next generation are determined.
Re: (Score:2)
These times are when the weak are culled and the giants of the next generation are determined.
Utill they are "Too Big To Fail" where they can be taxpayer funded until the end of time.
Re: (Score:3)
My takeaway from TFA can be summed up by this quote:
Yes, that is absolutely right in a downturn. Unfortunately, few in history had been able to predict when a downturn would come.
Another famous saying was "the market can stay irrational longer than you can stay solvent".
Many startups failed because they didn't burn quickly enough to expand and let their competitor ate all the marketshare first. It doesn't mean their competitor won't crash when downturn comes, but it doesn't matter when your company had already faded away.
nothing cause a recession quite like (Score:1)
nothing cause a recession quite like preparing for a possible recession.
Not sure why some bearish advice is news... (Score:2)
Y Combinator isn't even a person with a single point of view. It's a company. For all we know, the people who advised investing in some of the successful startups mentioned have nothing to do with this advice. Oh, and while we're at it, just mentioning the "hits" they they've made isn't useful unless you figure out how many "strikes" they've had so that you can figure out their batting average.
I flat out don't believe prognostication like this. It's fact free fluff. Financial "clickbait" meant to get their
Re:Not sure why some bearish advice is news... (Score:4, Insightful)
Saying, 'Prepare early if you see tough times ahead', seems like sound advice.
Re: Not sure why some bearish advice is news... (Score:3)
The invest millions in obvious ponzi schemes (Score:1)
There was a incredibly stupid story about YC investing in some fintech company that was an obvious ponzi scheme, promising 5% APY for saving money in their app/bank, as well as 5% cash back on purchases.
No wonder they are running for the hills.