Suddenly startups are having trouble raising money. Why? | Hacker News Reader

Suddenly startups are having trouble raising money. Why?

noahpinion.substack.com

31 pointstosh11 comments

The startup market is the one of the most speculative parts of the economy. The value of a startup is overwhelmingly determined by the level of optimism about the future, as valuations invariably assume massive growth potential.

We have begun the transition from the part of the cycle with mania (where valuations assume virtually impossibly bright futures) to a more depressed view where estimates of the future are worse than the present, rather than absurdly better.

This destroys valuation for startups really, really fast.

The party is ending for the unicorn that has no strategy for ever becoming profitable, and those unicorns will probably roll up and die or get acquired on the cheap by companies that actually have business models.

This happens from time to time, and it's very healthy (though it feels really shitty to live through). You can see all around signs of the lavishness of the unicorn lifestyle, utterly detached from any notion of actual value created.

The party seems to have just ended. We'll see, the music always might start up again. But I wouldn't bet on it, and, apparently neither are VCs.

Exactly, last year's funding craze was laughable. We all knew it in the moment. Fast's rise and fall is exhibit A.

Whenever people worry about startups having trouble raising, I think they forget that most startups are trash. Now, fewer of the bad startups are going to get funding. The worthwhile startups will be fine, maybe even better with less noise in the landscape.

I imagine most of the startups that continue to thrive will be the ones that are well-funded by Tier 1 investors: https://topstartups.io/

My feeling is this correction is overdue. Has tech really done anything notable since smartphones and crypto emerged? Maybe I am just bored though.

I’m big on crypto and yet even crypto hasn’t really solved any big problems yet. Even remittances are better dealt with through Wise (formerly Transferwise). Outside of rampant speculative market that’s 99% a scam of some sort, and a growing indie NFT art market, I don’t see much done yet.

How many unicorns are there that make no profit, have no plans to ever make profit, and are not really working on anything sufficiently revolutionary that they could conceivably break out of that mold?

The answer seems to be "gobs and gobs of them", and those companies have zero actual value.

One concern I noticed when talking to late stage B2B SaaS was how many of them are doing massive scale consultancy work to drive growth. At The extremes, I wouldn't be surprised to see a few unicorns have their valuation chopped up when they try to turn what are ultimately consultancy deals profitable.

Yes, there are lots of service businesses that are currently hanging on to software multiples by making themselves look like SaaS plays when they're really just b2b service businesses.

Those companies might not fold if they're profitable, but their owners are going to get hurt.

I wonder how much of the startup investment market is "crypto" and related stuff. This is basically a ponzi scheme and so super susceptible to sentiment (most investors are just playing the greater fool theory and hoping to pump and offload, and will get our at the first sign of anything shaky). And the dollar values involved are absurd because pretend money.

I'd be more interested to see the numbers with that removed. Though of course maybe it's not as big as I think.

So, we're seeing a contraction of the segment of startups that promise to make you more money, because businesses are getting skittish and hunkering down.

We'll see a concomitant expansion of startups that promise to save businesses time and money, trim waste, do more with less, etc.

Contrasting examples of the two categories: Startup that promises to enable you to respond to more RFPs faster, vs. startup that allows you to undercut competing bids.

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