
74% of Startups Have Trimmed Staff, 65% Have Less Than 6 Months of Cash - alephnan
https://www.forbes.com/sites/johnkoetsier/2020/04/30/74-of-startups-have-trimmed-staff-65-have-less-than-6-months-of-cash/
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caseysoftware
"Startups are laying people off!"

Examples: Publicly traded companies Uber and Lyft.

Sorry, they're not startups.

And yes, most will have less than 6 months in the bank. Most rounds of funding
are planned to last 18-24 months. If they raised at the tail end of 2019,
they're already 4+ months into that.

More likely, the bulk of the 65% are companies who raised late 2018 through
mid 2019. They're in the middle of figuring out their new round and who
will/won't be involved. The good news is that the VC funds have to put their
money _somewhere_ so investment can't stop. LPs don't invest for good luck.
The bad news is that VCs are likely going to slow down for a quarter or two
and valuations will grow more slowly than before.

Companies that have good metrics _may_ be in good shape as VCs become more
available and their pipeline dries up. Companies with mediocre to bad metrics
may be gone by the end of the year.

~~~
kevindong
> "Startups are laying people off!"

> Examples: Publicly traded companies Uber and Lyft.

> Sorry, they're not startups.

As an aside, I don't like how the tech industry/news sites call any non-
behemoth tech company a "startup".

For example, these companies are not startups; they are large (and in some
cases, deeply unprofitable) enterprises: SpaceX, Stripe, Airbnb, JUUL,
Palantir, Epic Games, Wish, Coinbase, Robinhood, Instacart, DoorDash, WeWork,
etc. [0]

Furthermore, 89% of American businesses have fewer than 20 employees [1].

[0]: These are the largest US-based "unicorn startups" per Wikipedia:
[https://en.wikipedia.org/wiki/List_of_unicorn_startup_compan...](https://en.wikipedia.org/wiki/List_of_unicorn_startup_companies)

[1]: [https://www2.census.gov/programs-
surveys/susb/tables/2016/us...](https://www2.census.gov/programs-
surveys/susb/tables/2016/us_state_totals_2016.xlsx?#)

~~~
seisvelas
Startup has been consumed by its use as a marketing buzzword and as far as I
can tell just means 'company' at this point. People just say they 'founded a
startup' instead of 'started a company'.

I suspect most air conditioning contractors and electricians would be called
'startups' if they worked in software.

~~~
trophycase
Startup implies tech and/or "nontraditional" business and also tends to imply
VC money. A restaurant isn't a "startup" because it's a restaurant, a hardware
store is a hardware store. But what is a VC backed meal kit company: a
startup. There's no actual word for it so startup is the catchall term

~~~
brutus1213
Extremely insightful comment! I've been in the industry for a while and this
is an excellent definition. It pertains to whether or not a business model is
well-established or not.

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gen220
Our company is in a counter cyclical industry, one of the ones referenced in
the article. We were looking to raise money this quarter, regardless of this
pandemic, because we had maybe a year and a half of safe runway left.

The interesting thing is that this downturn has simultaneously raised our
revenue (since we’re counter cyclical), but dramatically decreased the
likelihood of us getting another round with reasonable terms this
quarter/year, because cash is no longer cheap for our would-be investors.

As such, even though our quarterly financials are going to be abnormally high,
they decided to cut some perks and let go of 5% of employees (among other
things) to reduce our burn rate.

It’s an interesting outcome: it doesn’t matter how counter cyclical your
business is, if you have a runway and it’s less than two years, you’re
impacted.

In the aftermath of all this, I wonder if more entrepreneurs of wannabe hyper
growth companies will seek out positive cash flow more sincerely than they do
today, after going through this trauma.

~~~
Justsignedup
Personal prediction. Look at 2008.

Right now "the blood is on the streets". The perfect time to use your capital
to grab up whatever you can. In a couple of years we gonna have a total
economic collapse or a major bounce back. So get started with shit now. It is
the perfect time.

Buying yourself time until the bounceback is the right move.

~~~
easytiger
One thing 2008 taught me was that people learned to constantly predict that
doom is imminent, for fear they get caught not being retrospectively right.

~~~
varjag
That's no specific to 2008. It's an attitude that every new generation re-
learns in their own formational crisis.

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exceptione
"Will a society that has grown accustomed to hearing about startups employees’
big salaries and cushy perks — dog-walking services while working, anyone? —
and that are mainly based in the big coastal cities, be willing to bail out
what many might see as privileged and coddled millennials?"

Curious what people think about this question.

~~~
Ididntdothis
I really hope they won’t get bailed out. I think it would be healthier for
tech if there was less investor money floating around so people can focus in
tech and not on hyper growth. Maybe there will be a trend towards more
bootstrapped companies that run real businesses as in making profits.

~~~
drusepth
I really hope so too. I've been running a decently-profitable bootstrapped
company for a few years now and it's been weird having potential
investors/acquirers looking more at things like activity/growth metrics than
dollar amounts and profitability. (Obviously, both are very important and I
understand why an investor would look at what a cash infusion could do; but I
generally lean toward dollar amounts, runway, margins, and traction being more
important when valuing a company than how quickly I could theoretically scale
up and pivot/expand into new markets).

I think there's a big disconnect in the world of "startups" (hyper growth) and
"small businesses" (profitability and scaling), and bridging the gap between
the two might have a net-positive impact on the market at large.

~~~
hef19898
That makes two. German start-ups managed to convince the government to set-up
a 2 Bn € fund to bail out start-ups (that are defined how again?). The
reasoning is that these companies are not eligible for other programs by
virtue of not being financially stable enough to get bank loans. It's
basically a VC / investor bail out. It would be rediculous if it wasn't so
sad.

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rdlecler1
We invest in foodtech and agtech startups. Most of them have seen spikes in
demand, but operationally there are challenges and almost everyone has slowed
their burn and cut staff because no matter how fantastic their numbers are
they can’t rely on venture capital being there on the other side.

Companies that were looking at a a $10-$12m Series A are now dialing back to
$2-3M seed II rounds with insiders. Companies that were looking at large
$40m-$60m funding rounds, within 8 months of their last round have mostly
stopped fundraising altogether.

Still it seems like the big firms are willing to do some seed deals to stay
active without blowing out their fund.

Tough times.

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brenden2
I think there's a big reckoning coming. Big companies will do fine, in fact
they'll probably just get bigger and richer. Anyone who's already poor, close
to broke, or otherwise in a bad position is going to get hit hard by this.

I know it's a really unpopular opinion right now, but I do think the worst
damage from the virus is the economic impact which is going to set millions
(maybe even billions) of people back another 10-20 years. Simultaneously, rich
people will just build an even bigger moat between themselves and the poor.

I think the biggest risk to rich people (and they know this) at the moment is
that poor people finally decide to fight back against feudalism and we go
through a new cycle of political upheaval ("new world order" type thing[0]).
This is something Ray Dalio talks about a lot if you follow his
writings/talks.

[0]:
[https://en.wikipedia.org/wiki/New_world_order_(politics)](https://en.wikipedia.org/wiki/New_world_order_\(politics\))

~~~
scarface74
I’ve never wanted to work for $BigTech. But the market and salary for senior
software engineers collapsed locally and I don’t see it coming back. I still
have a job. But, we did have an across the board pay cut.

I have an interview this week with one of the major tech companies. It’s not a
software engineering position. But it is tech adjacent. They are the only
companies that have the cash to afford to pay the wages I want.

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notyourday
The really funny part to me is that the same startups that laid people off are
posting in "Who is hiring". I mean, come on!

~~~
itake
I think a lot of companies used covid as an excuse for cutting under-
performers without needing to go through the complicated PIP process.

~~~
ImaCake
This kind of practice is illegal in most developed countries. Hiring for the
same position after giving someone a redundancy is considered intent for
unreasonable dismissal. Does the USA not have these kind of protections?

~~~
soulofmischief
I've had pay withheld for months, sudden massive pay cuts, rent spikes
(residential jobs), in fact well over half of my previous bosses still owe me
salary that I will never see. One job I had to quit because my boss refused to
give me time to heal from work-inflicted RSI and I ended up getting carpal
tunnel. I still deal with it today. The BBB has never followed up and lawyers
are expensive for a young adult living on their own. This is America!

~~~
brendoelfrendo
The BBB will be useless in this case. If your state has a department of labor,
you can file a complaint with them; often, just going reporting your
employer's practices doesn't require a lawyer. You can also try to go to small
claims court yourself to recover back pay, if the amount doesn't exceed the
small claims limit; small claims is usually pretty DIY friendly (as far as
legal processes go).

~~~
soulofmischief
I've considered small claims but it's just never been worth it. And that's the
margin in which these kind of people operate. As far as the BBB, that was
really only one specific incident where it made sense to involve them. I was
trying to disparage a boss for holding pay for the entire staff for a month
and tried involving numerous organizations but he ended up getting away with
it scot-free. I think not paying taxes eventually caught up with him though
because that place was recently leveled. Looking back there was surely
something I could have done to better escalate the situation but I was a dumb
kid.

~~~
brendoelfrendo
Yeah, I don't blame you. That is, unfortunately, how the system fails us;
young people who don't know their rights or people of any age who are
desperate to keep their jobs are really vulnerable to exploitation by shitty
bosses who know that the balance of power is skewed in their favor. But that's
a conversation for another thread, probably...

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notimetorelax
The original link gives 400 for me. This one seems to work:
[https://www.forbes.com/sites/johnkoetsier/2020/04/30/74-of-s...](https://www.forbes.com/sites/johnkoetsier/2020/04/30/74-of-
startups-have-trimmed-staff-65-have-less-than-6-months-of-cash/)

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fab1an
I'd guess that most startups have less than 6 months of cash regardless of a
pandemic happening or not.

Of course, blaming the pandemic for layoffs is an opportune thing to do.

For most (actual) startups (Lyft is not a startup) this should be an excellent
time to execute or to pivot, but most certainly to thrive.

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turowicz
Business as usual then

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greatgib
Wrong link, the correct one is:
[https://www.forbes.com/sites/johnkoetsier/2020/04/30/74-of-s...](https://www.forbes.com/sites/johnkoetsier/2020/04/30/74-of-
startups-have-trimmed-staff-65-have-less-than-6-months-of-cash)

~~~
alephnan
How do we reach out to a mod to fix the link?

~~~
dang
Le mod has fixed le link.

(hn@ycombinator.com is the way)

