
Ask HN: Which $1B startups will fail if the bubble bursts? - webmasterraj
Tech stocks are crashing. Bill Gurley says we&#x27;re at an inflection point, and investors are going to start looking at profitability instead of growth. Most of the unicorns in the $1B+ club have gotten their valuations by rapid growth, though not necessarily the profitable kind.<p>If things take a turn for the worse, and funding becomes hard to come by, which unicorns will have the hardest time getting to profitability?
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sushid
Square. It's a bloated mess of a company still trying to "pivot" after its
idea of being the credit card middle man never really took off (or took too
long and allowed others to catch up, depending on how you see it). They're
doing a bunch of different things but nothing that really seems to stand out.
Have you seen anyone use Square Cash? Squareup? Didn't think so.

Quora. I'm surprised YC even took them in. It has an overwhelmingly
unmonetizeable userbase (primarily in India). It's growing and growing but
there's nothing really that can justify the $900mm+ valuation if there's
nothing to monetize. I also personally hate their pesky model that_forces_ you
to sign in to view more than a single answer. Maybe Yahoo will buy them and
quietly kill them at a lower valuation in a few years.

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siquick
Loved Quora about 2/3 years ago and could spend hours reading it but the
questions and answers have become incredibly low quality to the point where I
barely check it anymore.

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siquick
They really need to sort out their notification system - I logged in and had
~200 notifications, it just instantly caused me stress and I closed the tab.

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nodesocket
Take your pick at one of the dozen on-demand food delivery startups: [
Postmates, SpoonRocket, Eat24, GrubHub, Caviar, Munchery, ZeroCater, Eat Club
]

I've used Eat Club and actually think they are the best of the group. The
startups that are focused on business/corporate catering will most likely fare
better than individual focused startups.

~~~
panorama
Strange, I actually disliked Eat Club when my former employer used them. Also,
Caviar has a huge business catering component and has Square money, they're
not going anywhere for a long, long time and are actually my favorite in your
list (as an individual and as a gluttonous tech worker)

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bobosha
Handy.com is a likely candidate, a flawed business model, one only needs to
look at Homejoy's failure at the best of times.

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eminkel
I'm on their email list and 2 hour cleaning offers at $29 can't be sustainable
for long.

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AnimalMuppet
Seems to me that the bubble bursting has nothing to do with it. No matter what
your valuation, sooner or later you have to show profitability. Those that
aren't going to make it if the bubble bursts probably aren't going to make it
anyway. The bubble bursting may make it faster, but it won't change the final
outcome.

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akhilgupta82
I believe that over-invested categories like food delivery, Uber for X and
social media will face challenges. These businesses also require significant
upfront capital to build out their infrastructure.

That said, I don't believe we are necessarily in a bubble. Investment
decisions made today are much much more fundamentally sound than they were
perhaps in 2000. In my experience, markets work up and down in cycles. If you
are a good company, you will survive any market condition. This does not
necessarily mean you need to be profitable during that period. Investors are
just more cautious in these periods and want to know that you have a PATH to
profitability; you don't need to have it today. Note that while valuations are
dependent in a way to how public comparable companies are trading, that
specific point is only one of many inputs in thinking about how to make an
investment. Investors look at many more things than just that.

With the exception of extremely few unicorns, most of the valuation practice
undertaken today by VCs and angels reflects three good things:

1\. Investing in a great team and product vision: Most of the unicorns didn't
become an overnight success. It took time, years. The investors did not reward
them with their unicorn valuation in their first year as a company. However,
the team and the product proved they can get traction, they can get customers,
they address a need in the market. This is what attracted investors, and the
startup's ability to beat its competition / creation of a new market is why
they are being granted this unicorn valuation.

2\. Market Opportunity: A common theme with the unicorns is that they are
genuinely targeting very large markets. In some cases, they are even expanding
the addressable market. Most of these companies are first of their kind in
either establishing a unique product experience/service or business model or
both. Valuations of these companies reflects not only their current growth but
the potential they can achieve if they can get to be pseudo-monopoly in the
future.

3\. Supply and demand: While not every investment VCs make is a home run, the
approach they have to investments is something akin to a baseball player's
batting average. This means that when a hot startup or category comes along,
VCs tend to double down. This creates competition amongst them and can lead to
higher valuations for the startup. Even so, the valuations usually have root
in either the startup's product, team, market opportunity and/or business
model. Not everything is evident to us from the outside until later (case in
point being Snapchat).

At the end of the day, the investors are not gunning to give the unicorn
valuations. A wise founder also does not want a run-up valuation; it increases
their risk of having a down round if they don't deliver on oversized
expectations.

