
Once-Flush Startups Struggle to Stay Alive as Investors Get Pickier - petethomas
https://www.wsj.com/articles/once-flush-startups-struggle-to-stay-alive-as-investors-get-pickier-1492948802
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hprotagonist
"Bart, it's over."

"What do you mean, "It's over"?"

"We're bankrupt. The stock is at zero."

"But I have 52 million shares. What's 52 million times zero? And don't tell me
it's zero!"

"Bart, it's not about how much stock you have. It's about how much copper wire
you can get out of the building with!"

~~~
seibelj
Video, watch the whole thing, it's gold:
[https://www.youtube.com/watch?v=arENYYkYBts](https://www.youtube.com/watch?v=arENYYkYBts)

And another on Bill Gates acquiring Compu Global Hyper Meganet from Homer:
[https://www.youtube.com/watch?v=H27rfr59RiE](https://www.youtube.com/watch?v=H27rfr59RiE)

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traviswingo
This doesn't come as a surprise to me. Beepi was, quite frankly, idiotic in
it's spending - as are most of these companies. 100 engineers doesn't always
mean you get things done quicker - WhatsApp had something like 15 engineers
with > 500 million users on their platform at the time of the Facebook
acquisition of $19 billion.

Note to startups: Hire quality, not quantity. And ONLY hire if you're
absolutely desperate. If you're technical, do the work yourself instead of
throwing your investors money at it. If you're lucky enough to get an
investment, treat it as your last one, and never assume more money is coming.

~~~
api
If I had a dollar for every time I have heard and ignored the opposite advice
-- hire as much as you can to impress investors -- I'd... well... actually we
do have many dollars for ignoring that advice.

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uiri
Relevant bits from the article:

 _As venture capitalists became more discerning, investment in U.S. tech
startups plummeted by 30% in 2016 from a year earlier._

But: Investment in 2016 is still higher than any year from 2002-2013.

 _“There are companies that everybody wants to invest in and there are a large
set of companies that almost nobody wants to invest in,” said venture
capitalist Keith Rabois of Khosla Ventures._

But: isn't this always the case?

 _“There’s going to be a shakeout” for companies that can’t show a profit,
said James Beriker, the chief executive of meal-delivery service Munchery._

Well, eventually a business needs to show revenue and a path to profit.
Otherwise the music stops and the equity has no value.

 _Beepi guaranteed sellers a price, and if it couldn’t find a buyer in 30
days, it purchased the car. Beepi marked up the price and pocketed the
difference._

 _Beepi was whipsawed by cars that sat unsold for a month, and that Beepi
therefore had to purchase. Losses on those cars could reach more than $5,000
per high-end car, former employees said._

For all the posters admonishing Beepi for spending so much money so fast: this
looks like a legitimately capital intensive business. It also looks like it
has unlimited exposure to high expenses related to immobile inventory.

~~~
Boxbot
The admonishment is deserved; High capital requirements don't necessarily mean
high burn rates, they mean that you'd better be damn sure that you have a
viable business model to make returns on all that capital. The "unlimited
exposure to high expenses" isn't some nit, it's a fatal flaw in their
strategy.

~~~
AndrewKemendo
All that does is ensure that only the largest companies, who can eat losses,
are the ones that innovate on hard technologies.

Some things have no precedent in the market and I sure don't want those
companies with out sized power already to be the only ones that can exploit
it.

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traviswingo
Archive snapshot: [http://archive.is/nSVGF](http://archive.is/nSVGF)

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arcanus
> 'after burning through 120 million dollars of capital'

Wow. Remarkable a start up could be so successful at raising and so bad at
developing anything approaching a product.

~~~
jnsaff2
How about burning 250 million, going bust and then finding another 16 million?

[http://uk.businessinsider.com/renault-acquires-failed-
taxi-s...](http://uk.businessinsider.com/renault-acquires-failed-taxi-startup-
karhoo-2017-1)

EDIT: I hate BI for burying at the very end that their 250 mil number at the
head of the article is actually 50-something.

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jwilliams
Not mentioned - the Fed raised interest rates in December and March. With some
signaling that this could continue. This has impacts across all of Venture
Capital, but particularly late stage... And especially capital-intensive
business, which seem to be the prominent examples here.

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autonews
There's nothing capital intensive about Beepi's business - all car purchased
you can finance with a floor plan line. Beepi wasted money on market (over
$20M last year) when it didn't have product market fit.

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educar
Is it possible to read the article without paywall? Even using the 'web' link
and going via Google does not work.

~~~
tarr11
WSJ seems to allow full access via Twitter.

My strategy: Search for the title on Twitter:

[https://twitter.com/search?q=once+flush+startups](https://twitter.com/search?q=once+flush+startups)

Click from there, you should be able to see it.

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ffumarola
To get past the paywall: [https://t.co/dfxOzeF66S](https://t.co/dfxOzeF66S)

That's a redirect via Twitter.

