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Comment by gringoDan | Hacker News Reader

I agree with this to a certain extent. But it seems like this economic downturn is more a result of pumping the economy full of (near) zero-interest rate money and that cash inflating a growth stock bubble, as opposed to a tech bubble being inflated by VCs directly.

In an economic downturn, VCs are going to have more power and preach more financial prudence. But VCs are awash in capital right now.[1] Their money needs to flow somewhere in order to provide a return to their LPs. How does that factor into this analysis?

My hypothesis is that the negative unit-economic businesses that the article refers to will falter, but there are plenty of early-stage startups (the ones that didn't need a multi-billion dollar round from Softbank to win their category) that will be fine.

[1] https://pitchbook.com/news/articles/vc-fundraising-venture-c...

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Looking at startup hiring in the last couple of years, its kinda clear that most of these startups have just way too many employees. Their operations are not capital efficient at all.

Why does a D2C brand like Casper, for instance, not make a profit? Their physical counterparts are able to turn profits despite the cost of running physical stores.

Or why does a crypto exchange like Coinbase need 5,000 employees?

> Or why does a crypto exchange like Coinbase need 5,000 employees?

Because in many tech software companies there are also 5,000 employees, who are bored and over-engineered current tooling and best practices. It’s self perpetuating.

Can LPs claw back money? If the market doesn’t look good this year and all of the LPs need to reallocate cash to public markets.. then why would the VCs hang onto it?

It depends on the terms. I know of at least one 2000s banking startup that was on track to make cash flow positive but had their cash clawed back by desperate investors that needed to cover other things. I used to own their CVS server (sparcserver 10) that I used as a random openbsd box for years. Bought it for $100 at their fire sale. Still had all their code on the HDD.

I bought a bunch of equipment at a failed dotcom auction in 2001 (and still use the desks).

None of the computers were wiped, so we had a look around. My friend’s prediction was spot-on: “I bet you’ll find more porn than business plans on them…”

Still have my nice office chair from when dot com imploded (company was literally named Software.com), and the facilities guy just said "take whatever you want". Remember devs wheeling everything out into the parking lot

From what I understand, the way it usually works is that LPs don't give the VC funds all of the money upfront. They pay in a portion, and then the VCs have the ability to subsequently make "capital calls" up to the total commitment value.

If the market is really bad, you could see LPs start to default on these capital calls. There are consequences to doing this, so this isn't a likely scenario, but it could happen in a worst-case scenario.

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