
Startups Face a ‘Fundamental Reset,’ Says VC - otoburb
https://www.theinformation.com/articles/startups-are-undergoing-a-fundamental-reset-says-vc
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code_biologist
[http://archive.is/zxK0b](http://archive.is/zxK0b)

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jedberg
This is my third downturn. So far this one doesn't look much different than
the others.

A lot of businesses that could only survive on VC money have/will collapse,
and the good businesses will stay good, albeit maybe with slower growth or
smaller margins.

The large companies will power through, and maybe even hire up some of the
really great talent that was at now-defunct startups.

Some new businesses will spring up to address our new realities.

The lockdown will end one way or another. Maybe some things will be forever
different, like after 9/11\. Maybe we'll have to wear masks in public forever.
Sounds like a great opportunity for a fashion brand. Maybe we'll have to take
our temperature to enter a public place forever. Sounds like an opportunity to
make rapid temperature scanners that work on crowds.

In the grand scheme of things, this won't make a huge difference to the
business cycle.

Some companies will die, others will be born.

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nostrademons
Also my third downturn. The thing is, during the second downturn, I thought
"We'll probably make it through this one okay, but it'll fatally weaken the
system such that the next one may be the final one." We're at the next one
now.

Most of the issues I identified in 2009-2011 haven't really been addressed,
and if anything have gotten worse. My thesis was that by bailing out the
financial system, the government couple trust in _the government_ with trust
in _the banks_. The banking system was saved, but the price of this was that a
large section of America gave up trust in America.

Nothing has been done to restore that. If anything, it's gotten worse, with
the Snowden disclosures, increasing media polarization, the election of Donald
Trump, the impeachment procedures, and handling of coronavirus. Then add
rising income inequality, inflation in critical need-to-live goods (health
care, housing, and food), political polarization and tribalism, increasing
publicity around the misdeeds of certain sectors (tech) that were considered
the few bright lights in the American economy, skyrocketing national debt
(which will increasingly tempt the federal government to monetize it), and
decreasing economic and physical mobility, and you have a powder keg.

My sense is that this is the start of something bigger, and that we're going
to get a series of cascading failures until eventually we get a collapse of
critical monetary or government infrastructure.

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yumraj
Can we also have a 'fundamental reset' of the VC industry which is overcrowded
by incompetent sheep VCs?

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hpoe
I know everyone wants to talk about all these fancy economic theories about,
market capture, VC funding, exponential growth etc around startups, especially
SV and tech startups.

I don't buy it, I see everything happening as the classic example of a bubble.
Some people made a ton of money in tech through a combination of hard work,
having a really great idea, and luck, Google, Facebook, Amazon, etc. Other
people saw how much money they made and the market and other piled in to try
and get rich, some of them had good ideas, some of them had ideas that sounded
good. This was the rising of the bubble, VCs want to get in on this, dreams of
exorbitant wealth played before their eyes, they started funding tech ideas
even if they didn't think they were good or there was clearly no way for the
idea to actually be that profitable. But it didn't matter, this is when we
started spouting things like "don't invest in a product, invest in a star
team", "pivoting" began to become big, questions about actual revenue were
hand waved with words like "market capture" and "penetration".

Then we hit the height of the bubble, the second stage hadn't actually really
produced any wildly profitable companies but other big tech companies bought
them, for their engineers or platform, or data or something, at obscene
valuations and so the VCs and founders still made a killing. The dream for
founders and engineers went from "have a good idea that you can build
something on" to "how can I get myself bought by Google", VCs meanwhile went
from "will my capital work out here" to "I need to get in fast on the first
rounds and some other sucker will be willing to buy it for more on the next
round of funding." This is when the idea no longer mattered, what you did, how
you were going to do it, none of those things mattered anymore. Move as fast
as you can the faster you move the more likely you were to hit the "next big
thing", in reality you were just playing the lottery, but instead of VCs
buying $5 lottery tickets they were buying $5 million dollars stake in
companies. Engineers rather than paying with their hard earned cash for the
scratch-n-win were suckered into paying with hours of their lives in hopes of
scoring big on the "being bought out jackpot". Things seemed to peak with the
WeWork fiasco, ideas that were stupidly blindingly obvious, and already being
done were suddenly transformed into these hot new golden geese because they
used tech jargon to cover up the fact the emperor was wearing no clothes.

We are now in the bubble popping for tech, corona probably wasn't the way
anyone saw the bubble popping but now the contraction in capital, and the easy
money drying up will show which companies had a solid good business model,
which ones were iffy, and which ones were completely ludicrous.

This ended up being a lot longer than intended but really sometimes you don't
need fancy explanations or complex financial analysis to figure out things,
sometimes plain old common sense can help you better see the forest for the
trees.

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charlesdm
All great, until I got to the end. The easy money drying up? The FED has
injected $3tn into the markets in two weeks. Assets are being propped up
across the board.

People who are not asset holders are getting screwed here, because salaries
are not going up.

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alexbanks
In the post-covid world, you have to actually make money and have ROI to be
worth invested in.

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bob33212
Same thing happened after the 2002 tech crash. The IPO market dried up for
unprofitable company.

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Mizza
Capital faces a 'fundamental reset', says torch-wielding mob.

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sremani
Meanwhile at the US Treasury

Mnuchin shouted "Release the Kraken" and breaking all the red-tape.. the Iron
Clad PRINTER, Kraken started printing Green.... BRRRRRRrrrrr….

There it was $5 Trillion .. ex nihilo!

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jedberg
It's important to note that most of that $5T are loans that will have to be
paid back to the Treasury by the businesses that get the money.

Just like TARP, which ended up _being profitable_ for the US Treasury.

Also it should be noted it is the Fed that prints money and is independent
from the Treasury.

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nathanaldensr
I wish I could read the article as the headline sounds interesting. Alas,
paywall...

