Silicon Valley Investors Give Startups Survival Advice for Downturn (wsj.com) 45
After years of funneling cash into startups' grand ambitions, Silicon Valley's investors are engaging in the grim ritual of delivering survival advice to their portfolio companies. From a report: In recent online slide presentations, blog posts and social-media threads, venture-capital doyens including Lightspeed Venture Partners, Craft Ventures, Sequoia Capital and Y Combinator are telling the founders that they need to take emergency action for what could be the sharpest turn in more than a decade. Their advice includes cutting costs, preserving cash and jettisoning hopes that hedge funds or other investors will swoop in with big checks.
"The boom times of the last decade are unambiguously over," Lightspeed, which has backed companies including social network Snap and crypto exchange FTX, wrote in a dispatch for startup executives that was posted on Medium, a publishing platform, this month. The investors' admonitions are a departure from the growth-above-all mantra for startups in recent years, and come as the venture market is showing signs of sputtering. Funding for global startups -- at around $58 billion in commitments midway through the second quarter -- is on pace to drop by about one-fifth in the period compared with the previous quarter, according to analytics firm CB Insights. The tech-heavy Nasdaq Composite Index is down about 25% from its all-time high in November, and SoftBank Group, which has poured more than $100 billion into investments, this month reported a $26.2 billion loss in the first quarter as valuations plummeted in its portfolio of tech companies.
"The boom times of the last decade are unambiguously over," Lightspeed, which has backed companies including social network Snap and crypto exchange FTX, wrote in a dispatch for startup executives that was posted on Medium, a publishing platform, this month. The investors' admonitions are a departure from the growth-above-all mantra for startups in recent years, and come as the venture market is showing signs of sputtering. Funding for global startups -- at around $58 billion in commitments midway through the second quarter -- is on pace to drop by about one-fifth in the period compared with the previous quarter, according to analytics firm CB Insights. The tech-heavy Nasdaq Composite Index is down about 25% from its all-time high in November, and SoftBank Group, which has poured more than $100 billion into investments, this month reported a $26.2 billion loss in the first quarter as valuations plummeted in its portfolio of tech companies.
My advice? (Score:5, Insightful)
There's two ways to reduce inflation. The first is to make more stuff. You can wait for the free market to do that but the free market it's kind of lazy and always wants to do the least amount of effort for the most amount of profit. That means it's prone to rent seeking like we're seeing with the housing market where corporations are buying up all the houses and renting them back out.
What's the other way? Raise taxes on the rich, spend the money building cities and subsidizing education, see a large increase in productivity resulting in more goods and services, and down goes inflation. We did it in the 40s we did it in the '50s and we did it in the 60s and seventies. We even did it in the 80s due to a compromise between Ronald Reagan and the Democrats where he got all his military spending and they got their infrastructure spending.
Then in the 90s we started electing pro corporate politicians like Clinton and Bush Jr and even Obama and God help us Trump. Not to mention people like Mitch mcconnell, Ted Cruz and Joe Manchin. So we stopped building things and we stopped making up for the deficiencies in the free market..
We got away with it for a long time because we have 50 years of expansion and infrastructure spending. But those bills are coming due. Not that we didn't cause many a recession in the meantime but I think this one's going to be especially nasty.
What you should be asking yourself is this, why is it every time inflation needs to go down it has to come out of my hide? We gave 3.5 trillion dollars to the top 1% during the pandemic and then we act like a few thousand to the bottom 99 caused out of control inflation. As an American don't you get tired of being on the hook for the out of control spending of the 1%? I know I do.
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until the population breaks its addiction to consumption and turns to simplicity
You have to accept this is just as deluded though, this "return to primitivism" is not happening even on a long time, technology is not going to revert. Just as we wouldnt expect anyone today to give up their plumbing, AC, refrigerator etc people 40 years from now are not going to give up the advances they have access to.
"Simplicity" in the reality of where we are in 2022 and the next couple decades means evening out the wealth inequality today (not eliminating mind you, there will always be disparity but
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I said simplicity, not primitivism. Driving an old car, living in a modest place, not eating out, not going to expensive vacations, not leaving your home town, that kind of thing. A lot of people are doing that already, even if they are a fraction of the population. If you think that will never happen in America, you're forgetting that societies move in cycles. Some people are already pissed at the "technocratic class" like the software professionals who are making 5+x they do on little risk and they may we
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So you are describing 80% of the country already but not entirely by choice. Old cars have to come from somewhere in the first place, sometimes people like to eat out. What a modest house is depends on the person and the family, especially in a time when many people are locked out of housing in the first place. Society moves in cycles but when was the last time in the last 4 centuries that people turned back the clock on the advancements made?
Everything done under capitalism will come to eventually benef
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We can't choose to drive an Old Car if there isn't someone why buys a new one at some point. There is also a point when driving an old car, that it is more expensive to own then it would be to get a new one and keep it for a while.
A modest home too is very subjective. My home has less than 2000sq feet, and if it were located 20 miles in one direction it would be considered a big home, as most of the residence live in trailer homes, or if I go 20 miles in an other direction my home (being a prebuilt constru
Re:My advice? (Score:4, Insightful)
Their advice includes cutting costs, preserving cash and jettisoning hopes that hedge funds or other investors will swoop in with big checks.
If you have to be told this, then you have no place running a business.
Robert Reich covered this (Score:3, Interesting)
I said this a few times when those tax cuts went through (86% of which were for the top 1% and the remaining 14% were designed to expire during a Democratic presidency). e.g. that they'd be used for mergers & acquisitions + stock buy backs resulting in layoffs and recession. I was right. I just underestimated how much money we're willing to give to the 1%.
We have way, way too much her
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Present this to any CEO of a struggling start-up and they'll stare at you awkwardly, even if they share your obvious political leanings. Nothing in your post helps a VC-funded firm stay afloat in the here-and-now. Nothing.
You're just trying to shove your political screed down everyone's throats while pretending it has something to do with the topic at hand.
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Even the CEO of a struggling startup has an element of power to them that a fast food worker who can't get time off to vote just plain doesn't have. As things get worse because our ruling class is abandoning basic human decency in favor of Neo feudalism it's going to come down
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And if he's a Democrat? Still doesn't save his company. Dumbass.
Try staying on topic for once? Nobody gives a damn about your faux editorials.
Re:My advice? (Score:5, Insightful)
Don't allow politicians to tell you "the other guy" is to blame. I don't accept that from employees or my children, so why should I let people with the authority to make real change do it either?
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Re:My advice? (Score:5, Insightful)
96% of all jobs were created under Democrats (Score:3)
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And now that you regurgitated the standard mainstream talking points, it's time for a harsh doze of reality.
The main reason for inflation is demographics. Secondary reason is rolling back of globalization. Neither can be affected by local politics at this point. Funniest part in the whole thing is that having the significant wealth inequality actually makes systems weather this crisis better. Let me explain.
First one is pretty straight forward. Consider how value is generated in the economy over average lif
Finland uses the Euro and Sweden doesn't. (Score:1)
Finland uses the Euro and Sweden doesn't.
Only 1 country gets to set its own monetary policy and print it's own currency.
See if you can figure out which...
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Pattern I described was in place many decades before Euro was adopted in Finland, and hasn't changed after.
Re: Finland uses the Euro and Sweden doesn't. (Score:2)
Swedish Krona is linked to the Euro in any case so it does not really matter
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We did it in the 40s we did it in the '50s and we did it in the 60s and seventies.
The global reality in the decades after WWII is very different than it is now. Anything would have wor
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I refer you to my signature line.
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Lets hope nobody in politics takes an advice like that. First of all increasing taxes decreases legitimate business activity, but it does have an interesting side effect of creating entire industries, who work on getting around the taxes. So instead of worrying about business, people worry about their taxes.
Secondly, it doesn't matter one bit by how much you increase the taxes, inflation is a monetary phenomena, it is mostly caused by governments getting into business of money printing and once they have
YC? (Score:2)
Paywalled; how does it compare to the YC "leaked" letter to post-series-A, pre-product-market-fit startups?
https://techcrunch.com/2022/05... [techcrunch.com]
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For the paywall challenged.
https://archive.ph/sgOms [archive.ph]
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I don't know of a good metric for product-market fit that cannot be gamed; an experiental definition is when you "feel" that your product has hit the right nerve with your market so it spreads like fire (relative for your market) as your customers are buying and buying and telling others about it.
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If I recall correctly, "profit" used to be a popular one.
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Not necessarily; you can be profitable and doing sort of OK and not have the product that sets the market on fire; likewise, you can have such a product and not be profitable (e.g. because you are investing in R&D).
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If you can't make a product that sells profitably, your product does not fit the market. If you make a product that produces lots of profit, it fits the market regardless of what you think "on fire" means.
This is the problem. Too much marketing bullshit. "Product-market fit" is ultimately a statement about supply and demand. Either you can make a product at a price that fits market demand, or you can't.
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Not the product -- the product itself cannot be profitable or unprofitable -- but the company that makes it. Tesla has that PM "fit" but is not profitable because of other R&D as I understand.
It is more than supply and demand. E.g. your product can be poorly named, or your marketing is bad at explaining what it does because people cannot easily explain to other people what it is -- all of that is part of the product market fit: whether people like it and all that comes with it and are willing to pay for
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You're talking about the product-market fit of a company? That doesn't make sense.
If you mean the product-market fit of Tesla cars, evaluated by the profitability of Tesla, that's not what I said.
Tesla makes a product. Depending on what you think the atomic product unit is, you could define that as the base trim model 3, or the model 3 line, or all the cars together, whatever. There's a demand for that product, which scales depending on the price. The natural measure of that system is profit. R&D, start
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I don't think we're really in disagreement, if you sell $1 for 75c you'll find a great product market fit, so obviusly profit is key, I'm just allowing for room that it may come a little later after PMF and you can still be a great company, or that you can have profits but not have the PMF.
Brace for 20% interest rates (Score:1)
Re:Brace for 20% interest rates (Score:4, Interesting)
Divide by 4 and you'll be much closer to the mark.
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Yup. If there is hyperbole and panic when the Fed raises rates from very very low to very low in anticipation of achieving low, then it was past time to raise rates.
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Yup. If there is hyperbole and panic when the Fed raises rates from very very low to very low in anticipation of achieving low, then it was past time to raise rates.
You can't squeeze blood from a stone. 5% inflation is just a 5% tax hike, only it's a harder one to avoid. Most people are already on the brink of bankruptcy of have already gone that route (the large corps weren't buying up properties without sellers.) At some point people just stop trying and switch to barter, and while that level differs for every person, it is something that has a compounding effect built in: as more people opt-out entirely there's less labor on the market and more strain on industri
OMG that's awful... (Score:1)
Really sorry to hear. Oh well.
VCs are idiots (Score:4, Informative)
Oh noeses (Score:1)
What ever will they do? However will they survive in the real world, outside of the life they've grown accustomed to?
Oh, the horrors!