What May Be Coming To Startups, 2022 Edition (eladgil.com) 39
Elad Gil, a high-profile angel investor, writes: The high level view is that things have yet to get truly bad in private tech. 2021-2022 were an anomaly due to COVID policies which both created an incredibly cheap low interest money environment, pumped the stock market, and facilitated adoption of certain types of tech. This environment led to both excess in fundraising but also in hiring. This means that as money transitions back to to "normal" levels teams that were hired too far ahead need to shrink. Many areas (hiring plans, valuations, time venture capital raised lasts, etc) are roughly reseting to 2018/2019 norms, which themselves were all time highs prior to the COVID era.
If interest rates and money supply continue to tighten and a recession happens, then things should get worse. The below largely deals with the base case of things roughly stay where they are now. More likely, things will get worse before they get better. Nonetheless, it is still a great time to start a company. So what do the next few quarters look like?
1. Valuations will continue to drop and are not stable yet.
2. Top up rounds: Many companies are doing quick top-up rounds to add 6-18 months of runway and ensure the company has 36 months of cash to outlast any economic downturns or recessions.
3. Money leaving the market: Many investors who can invest in either public or private companies are mainly just focusing on public companies. This not only includes hedge funds, but also family offices and in some cases traditional venture funds. They view public markets as superior in terms of multiples and returns. Why invest in a $5B valuation private tech company with $50M in ARR when you can invest at a $5B valuation for a public company adding $50M in ARR every two months? Public companies are also liquid at most moments so you can exit the position more easily, and you can also hedge the position.
If interest rates and money supply continue to tighten and a recession happens, then things should get worse. The below largely deals with the base case of things roughly stay where they are now. More likely, things will get worse before they get better. Nonetheless, it is still a great time to start a company. So what do the next few quarters look like?
1. Valuations will continue to drop and are not stable yet.
2. Top up rounds: Many companies are doing quick top-up rounds to add 6-18 months of runway and ensure the company has 36 months of cash to outlast any economic downturns or recessions.
3. Money leaving the market: Many investors who can invest in either public or private companies are mainly just focusing on public companies. This not only includes hedge funds, but also family offices and in some cases traditional venture funds. They view public markets as superior in terms of multiples and returns. Why invest in a $5B valuation private tech company with $50M in ARR when you can invest at a $5B valuation for a public company adding $50M in ARR every two months? Public companies are also liquid at most moments so you can exit the position more easily, and you can also hedge the position.
Friendly angel (Score:1)
Hail, hail,
Fire and snow.
Call the angel
We will go.
Far away.
For to see.
Friendly Angel
Come to me.
Hail, hail,
Fire and snow.
Call the angel
We must go.
Far to come
Far to see
Friendly Angel
Come to me.
Actual problem (Score:4, Insightful)
Demographics. We were swimming in capital last two decades because the biggest generation in history was in it's capital rich stage, chasing that extra 1% return all at once. That's how we got Enron. That's how we got subprime. That's how we got crypto.
These people are now mass retiring. When you retire, you go from highest risk tolerance to lowest of your life. In last parts of your life before retirement, you take every little bit you have, and you try to invest it for maximum returns. After you retire, you can't afford volatility anymore as you'll never earn more money to shield you from losses, so you take that capital and convert it to stable low income things. Government bonds and so on.
We're rapidly shifting from maximum cheap capital chasing low amount of opportunities to minimum expensive capital chasing the same low amount of opportunities.
That means that the most risky ones are going to start falling off. That's startups. Tech. Crypto. And it's going to accelerate as more and more boomers leave the workforce.
Re: (Score:2)
Primary goal for investments is creating value which can be used to produce returns.
The main reason why we had to bribe developing nations not to just go with easiest and most successful way of creating value in this market, building coal plants is BECAUSE they're of the highest possible value/return ratio in a capital poor scenario that is a norm in developing nations. Everything that's less good in this regard is what falls off in capital poor environment.
This is just one of the reasons why narratives abo
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Chinabot, Chinabot, advertising field where his nation's dumping drove prices down.
Chinabot, Chinabot, still not knowing that even then, capital costs for entire installation have to be paid upfront for PV installations, unlike coal plants where coal plant itself (=investment upfront) is actually a small portion of the whole, and fuel is pay as you go. Which makes capital poor environments a very poorly suited even for heavily dumped solar.
Cheaper doesn't always mean practical (Score:2)
Wind and solar are cheaper after all. However, being cheaper after all does not by itself make a technology practical to deploy, particularly in financial situations where one finds it more difficult to find investors to cover capital expenses (CapEx) compared to operation expenses (OpEx).
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Nope, erratic and intermittent power is not equivalent to what a coal plant can deliver 24x7.
Fail.
Re: (Score:2)
Considering our UID numbers, I guess whoever told us that Chinese are good at math lied.
Re: (Score:1)
Disprove my assertion coal plant provides 24x7 base load energy while wind farm even in ocean off east coast has puny 0.58 capacity factor and solar 0.1 to 0.25 in USA, and of course no base load capaccity without storage system
Re: (Score:1)
oh you're claiming USA is going to run short on coal?
USA can produce more of any fossil fuel than it uses.
Get a clue.
That Luckyo character lives in your brain rent free. Meanwhile you have nothing to counter me.
Re: (Score:1)
do you have facts to contradict my assertion coal plants can provide 24x7 base load power while solar and wind don't?
All you have are insults; grow up little boy.
Re: (Score:2)
When you fundamentally don't understand what money printing works off and confuse cause and effect as a result.
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When you continue to not understand how capital fundamentally works and also demonstrate that you fundamentally don't understand credit either, and advertising that fact as "something this other guy doesn't understand".
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Your head is only too big to be buried in the current hole in your imagination.
Re: Actual problem (Score:2)
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Well, when you count most of the population as "their puppets", effectively dismissing humanity of majority of the entire generation as irrelevant...
You do walk the same ideological line as your predecessors who made the same claims.
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I have read exactly what you said, and crimes against humanity by your ideological predecessors are about as well documented as they could be.
I say that because in their extreme dismissal of value of individual life, they didn't bother documenting their victims.
so all this (Score:2)
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Capitalism is horrible, yes, but socialism is required for the basic essentials, because ca
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I'm dating a girl from Osslo (Norway) who tells me that Norway is the last socialist country left in Europe. She has what I consider to be amusingly horrific stories about life there, things that they can't get, things they aren't allowed to have, the fact that groceries stores are closed on weekends because "workers need rest" - and their housing market isn't any better than ours.
Seems pretty early in the EV game... (Score:1)
re: (Score:1)