
Hot Tech Startups May Have Higher Funding Hurdles - code4tee
http://www.nytimes.com/2015/08/25/technology/hot-tech-start-ups-may-have-higher-funding-hurdles.html?hp&action=click&pgtype=Homepage&module=a-lede-package-region&region=top-news&WT.nav=top-news
======
code4tee
There's a lot of high valued piles of crap in the tech space at the moment.
Flushing the toilet a few times to rid the system of such junk is ultimately a
needed cleansing.

Tech startups that can show viable business models with actual profits will
weather the storm. However for those that are living on 'user growth' and
hype, well it's going to be a bumpy ride.

~~~
rhizome
Problem is, it makes things tough for everybody, not just crap hucksters. If
the bad companies were financially banished that would be one thing, but after
a crash _everybody_ will be tarred with a "startup" brush.

~~~
birken
Well if you are a startup that makes profit or has a long runway that is well
managed, it doesn't matter what anybody else thinks about you.

In boom times it can be a challenge to control burn for even well-run
companies because the markets for things like employees or office space become
distorted due to high demand. In bust times these expenses naturally go down,
which helps well-run companies.

~~~
lbotos
What is a "long runway" for a startup? We are super transparent at my current
startup and have what I'd say is "solid" runway but I'd love some perspective.

~~~
birken
A long runway would be long enough to meet a huge milestone with your current
funding. Given a standard milestone (reaching profitability, reach
profitability in some markets, user growth to XYZ threshold), 1.5 years is
probably solid and 2.5-3 years is "long".

Practically speaking, there is little difference between 3 years and 10 years
of runway, because a company that stagnates for 3 years is likely to lose key
employees and momentum whether or not there is money left in the bank. The
goal of a startup isn't necessarily to survive at all costs, it is to make
sure to survive long enough to see if the concept works.

That is where there is no exact answer, because it depends. If you are a
startup where increasing revenue isn't on the near-term road map, you might
want to be more conservative because you will eventually be depending on
investors in the future. If you are a startup with really strong unit
economics and a path to profitability, you can be more aggressive because in
the worst case scenario you can probably reach profitability via the backdoor
(layoffs, cutting expenses, etc).

------
sudo_bang_bang
If this proves to be a correction that eliminates some startups that don't
have a business model then so be it. Startups shouldn't be owned as some sort
of novelty items by investors or acquirers, they should be revenue producing.
VC money won't go away for good businesses, and you shouldn't be scared if you
are producing value for the economy. And you know what, in the end, it might
even stabilize the Bay Area real estate market, which isn't all that bad in my
opinion.

------
seiji
Key quote: _“Lots of founders today weren’t around in 1999 and they don’t know
a thing about financial markets beyond what’s happened in the last 24 months,”
Mr. Gurley said in an interview. “To them that’s how this game is played,
money is cheap and everything goes up. That’s why we have cycles.”_

If it takes a dot-com 2.0 crash to weed out all the frothy optimistic-but-
useless startups and drop housing prices back to normal instead of $4,500 per
month in SF/NYC, it's probably worth the economic hit.

~~~
pokstad
I don't think NYC or SF home prices will be changing much anytime soon. As far
as the rest of the country is concerned, there are signs pointing to the US
housing industry being more resilient: [http://www.wsj.com/articles/housing-
stocks-offer-a-ray-of-ho...](http://www.wsj.com/articles/housing-stocks-offer-
a-ray-of-hope-1440370792)

