VCs are scared when they should be greedy | Hacker News Reader

VCs are scared when they should be greedy

blog.aaronkharris.com

223 pointsmlchild241 comments

(Context: I'm a VC)

Some great points in the post, but I also see a few additional dynamics at play:

1) The last 10 years have been great for VCs and startups, but now VCs are thinking about how to make their funds last longer. Two reasons for this: first, time diversification matters. If you think markets might go down even more, you don't want to deploy the rest of your fund quickly, you want to spread it out over a few years and get a good average cost basis. Second, there's a healthy fear among VCs that LP capital will be much harder to secure in the next 1-2 years. And you don't want to deploy the rest of your current fund in the next 6 months if you won't have a new fund ready to go for 18 months.

2) Most VCs (and founders) hate down rounds. So a lot of existing companies are stuck because they previously raised at $X valuation, and now the market price is $0.75X, and either the VC doesn't want to push for a down round or a founder won't accept it, or both.

3) Aaron mentions this in the blog post, but everyone is worried about downstream investors. Our fund is big enough to lead a seed round, but it can't put a dent in a Series A, so we depend on Series A investors eventually backing our seed companies. And Series A investors often depend on Series B investors to invest a lot in the next round. And so on. If the entire growth stage market grinds to a halt -- and it seems like it basically has -- then early stage investors start worrying about making new investments because there's way less downstream funding available. So even if a seed VC believes this is an amazing time to build a company and there are lots of great seed opportunities out there, they might still slow down investing a lot if they know their companies will need more funding and that funding doesn't seem to be there right now.

4) I've been a VC for about a decade, and the gap between VC and founder valuation expectations is greater than it's ever been during that time. 3 months ago, a median seed round was at $20m post, and a lot were at $25m-$30m post. Now I still see a lot of seed founders looking for $20m-$30m post, but a lot of VCs believe we should be back to 2020 valuations of $10m-$15m post. The gap between an expectation of, say, $13m post on one side and $25m post on the other side is huge, and lots of conversations never even begin because of that mismatch.

They discussed this phenomenon at length on a recent Odd Lots podcast, and I can’t understand it as anything but a market inefficiency that some smart VC firm will eventually exploit. Values (and thus prices) go up and down. Putting your head in the sand about it can’t be a winning investment strategy.

I agree, I think this is an inefficiency. But it's a tough one to correct because startups are a repeated game, and everyone's worried about upsetting people they'll have to keep playing with.

I think the logic is "I like this company, but if I offer a down round then will I piss off their existing investors? Will those investors stop sharing good investment opportunities with me? ... Ah screw it, I'll just skip this down round and focus on other prospective investments."

I think multi-stage investors are probably best-positioned to address this, since they are both new and existing investors in the companies they back, so they should be able to offer market price down rounds for companies that are still promising but unable to attract external capital.

Down rounds are bad for employee morale too since it puts previously issued options below water. It's probably worth it to re-issue equity, but that's messy and a lot of companies don't do it.

At a previous company all of the employees (there weren't many left) demanded options be repriced. They were. Unfortunately, they still were worthless when the company was "acquired" in a fire sale.

Which is why nobody likes down rounds, as it's indicative of where everything is going (and so the music stops).

Yep. But when your startup is burning through cash and you're not going to make next month's payroll, you're pretty much force to accept whatever terms you're offered. (Assuming you're offered any.)

Isn’t that what venture debt is for?

If you can't show you're going to have the cashflow to pay it back any time soon (or later), you may have trouble with that.

> Values (and thus prices) go up and down.

you might be underestimate the importance of narrative in a startup. a startup takes a tremendous amount of belief to will into existence, and a lot of belief depends on an unbroken narrative. to most outward folks, a startup generally wants to appears to be continuously crushing it - people understand that there are ups and downs, but generally have no patience for a "well we had a slow 3 years where we made a lot of mistakes" nuance.

if you doubt this, consider how you eval a startup when joining as an employee, much less as an investor.

Right, right, but fundamentally that attitude is irrational. If startups with actual long-term value are going under for want of $N million in a down round, that represents a big opportunity for anyone who can successfully combat the “narrative”.

are these US or EU observations?

He works at a US fund (www.susaventures.com/), so most likely US observations.

Your second point is the dynamic that makes the least sense to me. In public markets, if a stock is cheaper relative to future earnings, that makes it a better buy. In our corner of the world, the opposite often holds true.

There should be a tipping point where greed beats ego, but have not yet figured out how to find it.

I agree. The aversion to down rounds feels mostly psychological and overblown to me.

As much as VCs and founders hate down rounds - if the public market has dropped in value by 50% for mostly macroeconomic reasons - isn't it fair to then suggest that properties on the private market should be similarly worth less?

We all hate for our homes to be worth 10% less in 2023 compared to 2022, but it is what it is, no?

The dilution is what makes it so much worse in the venture market than in the public markets.

When you raise funding at a startup, you're usually creating new shares which dilute old shares. If a seed round VC is able to get out with a 20% loss then they might be happy, but what will actually happen is that the seed round VC's 10% share turns into a 8% share AND they look like they've taken a loss because the 8% share is worth less.

In growing markets, the 10% turning into 8% doesn't matter because it was 10% of a $1M company vs 8% of a $10M company. You're still richer (at least on paper) than you used to be.

> We all hate for our homes to be worth 10% less in 2023 compared to 2022

Speak for yourself. If all property drops, I'm ecstatic. I'm not moving or withdrawing money with a HELOC. So lower property values just mean less taxes for me. I mean, sure, it also means I may be underwater, but who cares?

And if I decide to move, that just means the delta between my current place and a new place is smaller in absolute terms.

There is literally no benefit to most homeowners for the real estate market being higher.

Not sure where you live, but where I’m from, an increase/decrease in home value affects your proportion of the overall property taxes but not the absolute amount. If everyone’s home goes down by 20% then everyone gets same tax bill.

On a sufficiently long timeline, the government has to pay more for land/payroll/other services if all the land prices increase because working people will want more pay to be able to afford their own land.

Everyone would get to pay the same tax bill proportionally, but not nominally.

That sounds like a European or maybe Canadian thing. Everywhere in the US I've been, it's been a predetermined rate of your home's value.

> So lower property values just mean less taxes for me.

In my state, your property's assessed value for taxation purposes cannot rise more than 3% per year, creating a pretty long lag time from the value going up to the taxes going up.

My home is worth about $650K, but it's being taxed as if it was only $250K.

On (4), it looks like the median seed valuation is still hovering around $25M based on AngelList statistics: https://stack.angellist.com/valuations

Part of the difficulty in parsing public versus private company valuations is due to the time constant: It takes a while for private companies to get desperate, whereas public companies have a real-time bead on investor sentiment.

Angellists data is flawed here—- you ideally want to look at seeds that are completely new or coming from sub $2 million pre-seeds. They include seed extensions, seed extension extensions, high priced note extension to seed rounds, etc. and when the market slows down you see a lot of extension rounds which pushes that number up but those are not really new seed rounds.

There are a host of other way their data is flawed as well :) but that’s a much longer topic.

I've been trying to understand the medium-term implications of your first point for the market.

My understanding is that if a VC raised a $1B fund, and the fund lasts for 10 years, the investments really need to be made in the first 5 years.

If VCs are sitting on the sidelines now, AND making smaller investments, what happens in year 2 or 3 when they have to deploy those funds?

Do you think deal sizes will get outrageously large because of too much money in the system? Will there be another rush to sign deals to deploy the capital?

Does this get talked about by VCs? Am I completely misunderstanding how this will play out?

Pro rata and follow-on I believe.

As in more $$ will go into follow-on companies rather than letting the bad bets die? Or we'll likely see more money going into follow-on rounds, inflating that end of the market?

You could be right.

Oh, follow-on money goes to good bets, and you’d get more aggressive on terms. The good bets get money anyway. I don’t think there’d be much change. But who knows what ppl will do.

It's perfectly possible for funds to return the capital to investors and just say "Hey, we couldn't find anything to invest in at a good price, so we didn't", and that'll look better for them because their ROI will still be good.

This is also likely to happen because big investors generally have their investments split between lots of asset classes by some ratio, so let's say for the sake of argument that Harvard's endowment is 30% equities, 30% private equity, 10% fixed income, and a mix of other stuff. If the value of their equities in the stock market fall through the floor that means their ratio is suddenly off, so they're going to need to rotate out of private equity and into equities.

If I'm understanding you correctly, a capital call is a commitment to provide the capital if the VC firm requests it. I thought it was also a commitment on the part of the VC firm to find investments.

So VCs will have smaller Capital Calls until the market picks up again.

I suspect some VCs will get greedy as their Carry is tied to the amount invested, but the smart ones will play the long game.

What amazes me is the seed round at 10s of millions. I was amazed to find the YC puts in 150k to each start up. I think it was 6k per founder back in the day.

Apart from companies wanting to build battery storage, what do people do with 20M of seed funding?

I mean surely it is time to pivot to finding dozens of companies wanting to just be profitable and return a dividend. Fund enough (but like YC) and one or two will become unicorns just because?

or am I dreaming

"$10m-$15m post" actually refers to the valuation of the company rather than the investment amount. The investment amount is typically 10-20%. So a valuation of $10-15m would mean an investment of $1-1.5m

I say this as someone who isn’t very familiar with this world, but have also noticed this. I think it’s a perception hack: there are some expectations about how a series A startup operates (demonstrated product/market fit, starts entering the growth stage, etc), and investors/founders still want to invest in companies that show great potential according to them, but just aren’t there yet, and it’s undesirable to oversell the company / raise expectations too high.

Hence the massive seed rounds, with equally massive bridge rounds, etc etc.

I’ve often heard the modern VC route described as a Ponzi scheme with the public market being the greatest of the fools, I don’t totally buy into the idea but your 3rd point really does highlight how close it all is to a Ponzi scheme.

So much value is absorbed in the VC pipe than by the time a company IPOs the chance of retail investors seeing returns is minimal to none.

Think about it in this way: You want to open a wholesale food distribution business for restaurants in a Manhattan You want to make sure that enough restaurants will buy from you They want to make sure that enough costumers will buy from them The customers are going out less because of a downturn in the economy So you do not open our business because the stock market is down

Is any business a ponzi scheme?

P.S Saying that, there is research that buying at IPO is rarely a good idea: https://www.youtube.com/watch?v=2a7qhIpxv60

If early capital thought they would get better risk adjusted returns holding on to companies, they wouldn't exit.

When considering a trade, you have to ask yourself "what do I know about the future prospects of this asset that the other party doesn't?" For IPOs you can see how stacked this transaction is against the public.

I don't think this is right. The reason VCs exit is simple, they're VCs. They exist to invest in start ups. Their job is to invest in high growth, high risk start ups, and the risk premium reflects that, they're a certain type of asset class. That's why people give them money. People don't give money to VCs to buy Walmart stock. If a VC thinks it can get a better risk adjusted return investing in Walmart then they're not a VC. Why would a limited partner want the VC parking their cash in an established business? They already have allocated their capital amongst different investments including VCs to get the mix of investments they want. So the right thing to do is as the company matures and risk drops, they exit their investment. If the company still offers good risk free returns, well then the LPs can buy the stock, or their hedge fund investments will buy the stock. But the fundamental issue is if VCs stay in companies beyond a reasonable point then they're not doing their job.

I think it's more that they have a time expectation of about 10 years to give the money back to LPs with any profits and share results of the fund.

All good points. Those are justifications for VC's existence as a financial instrument. But that's orthogonal to whether retail should buy into IPOs.

Elsewhere in this thread there's discussion of VC concern regarding downstream investment/valuations, reluctance to have down rounds, etc. Clearly VCs can and will delay rounds unless they can earn a premium. It's self evident that this extends to IPOs, the last "downstream investor". Due to self selection, these IPOs will be biased toward times when the VCs judge that hype/expectations are high enough to unload at a premium. Part of their job is ensuring such conditions exist at exit, via marketing, etc.

Apparently the evidence bears this out -- the first two years after IPO, companies tend to underperform after adjusting for equity risk factors: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2929733

> Is any business a ponzi scheme?

The analogy you are stating doesn't sound right.

If the early stage investors' criteria were based on startups' revenue forecasts, then yes, the metaphor would apply.

However, that's not the case. They pour the money expecting for more money to be poured in later, by others. Granted, I'm oversimplifying here, but the simple existence of such criterium is "symptomatic".

Future investors are not analogous to customers.

I'm fairly certain they're mostly laundering schemes at this point -- half of the tech founders I've seen seem to be pitching MVPs that could be readily found in any CS undergrad's Git repo lol.

This is classic engineering thinking.

Sure the core technology, right now, might be "obvious", but a company is so much more than the tech. Without a story, marketing and sales, the company is nothing!

The founders might be bringing connection, validation of the product, LOIs, etc. All of which are much, much* more difficult than the tech.

*usually.

I think a lot of the tech founders are CS undergrads haha, so you'd probably literally see their mvp in their git repo.

Jokes aside, oftentimes, the most disruptive technologies are not actually technologically difficult. If we take a look at the early days of mega corps today, most of them found an edge in an emergent market with off-the-shelf tech stacks.

I don't think VC is at all like a Ponzi scheme, even thought most VCs depend on there being a "next investor in line." That dependency is not because we're looking for a sucker to shift a bad investment onto, but because most companies' capital needs grow dramatically. So you end up having lots of investors of all sizes, and that works more like checks and balances than a Ponzi scheme.

investors.gov defines a Ponzi scheme as "an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money."

A few thoughts here:

- the money is actually invested.

- the founders are the ones that decide how to use the money, not the investors. (And generally no one suggests that founders as a group are complicit in a Ponzi scheme.)

- the next investment round is not required -- some companies get to profitability or have a good exit without further funding.

- the next investment round is far from guaranteed. Most stats I've seen suggest that ~30% of seed stage companies raise a Series A. So if it's a Ponzi scheme, then it's a poorly executed one ;)

- the outcomes generated by founders who get VC funding are high impact. See: https://twitter.com/emollick/status/1546109494228402176 (quote: This paper argues that 20% of the largest three hundred US public firms & 75% of the largest VC-backed ones “would not have existed or achieved their current scale without an active VC industry.")

- the next stage investor is generally unaffiliated with the earlier investor AND evaluates a company on its merits. I.e. if our seed company can't get to a stage where they can convince at least one Series A investor to invest -- and as mentioned above, many cannot -- then it goes out of business and we lose our investment. And fwiw, if the later stage fund does a poor job picking companies, it will itself go out of business.

- 99% of the time, our investors are not paid back when another investor invests, they are paid when a company exits. That means either the public market or an individual company thought the startup was a good enough business to invest their money into.

- returns are not promised to our investors -- if anything, it's well known that VC is especially risky and that most VC funds don't have good returns.

> So much value is absorbed in the VC pipe than by the time a company IPOs the chance of retail investors seeing returns is minimal to none.

My understanding is that this is largely regulation related. Companies used to go public much earlier, but because there's an increasingly high burden and cost to being public, lots of companies choose to wait for as long as possible. And there is now enough funding out there that companies are able to stay private for a long time.

(Context: I'm a successful serial entrepreneur, but never on the fundraising side)

My experience is that the best investment opportunities are counter-cyclical. During a down economy, talent is cheap. Competition is low. It's easy to build a growth business which explodes when the economy enters a growth stage. It's also cheaper, more focused, and more efficient to have 5 people work for 5 years than 100 people for 1 year. 5-20 people is sort of optimal.

That requires (more) patient capital, and longer times to IPOs, but has higher ROI.

I think I could build any of several successful businesses with a smaller investment -- on the order of $5-10M -- sustained over a longer period (optimally, around $1-2M/year over 5 years). I don't think I'd want or need series B or C funding. That can accelerate things, which is helpful if I'm competing aggressively against five companies, and it's first to grab the market, but it makes companies a lot less lean, focused, and aligned as well. It also dilutes equity a lot, for everyone. Stock options have a reputation for being worthless, and when you run the numbers, that's generally true for anyone beyond the founders.

Do you know if there are investors who can handle this type of structure? Or what constraints there are to having these kinds of investments? I understand the current time windows that a VC fund is open, but it's odd to me that there aren't more diverse types of funding available. Do you know why people haven't set up VC funds with other structures? It seems like a major inefficiency and friction....

Have you looked at TinySeed? But they don't operate at a Series A scale in terms of cash deployed per investment. I suspect that the power law of returns in VC model requires really large outsized returns that cannot be achieved Without an all or nothing model.

Outsized returns can be generated, just in due course.

Blowing $500M is great for building an Amazon or an Uber -- if you require a lot of hardware or logistics. It's useful in a 4-way rat race where it's first-past-the-goalpost.

I tend to prefer deep tech, where I build something hard (or relatively hard) that's never been built.

A company like Bose has $3.2B in annual revenues, 58 years after founding, and I believe they've never raised external capital. That's because they have a big pile of unique technology. Contrary to their image, they do a lot of work which is not speakers (and which you've likely never heard of), from architectural acoustics to government.

TinySeed looks to fund small, niche SaaS companies, mostly. Most of the stuff they fund, more or less anyone with SWE background could build.

For developing hard tech, I'd pick $10M and 10 years over $200M and 2 years, any day of the week.

Am I correct to understand that VCs get the same share of the pie, now, that the valuations are lower? So the valuation changes, the amount the VC puts in changed but not the % VCs get from the deal?

This seems that the founders get the short end of the stick, no?

From the linked article: "Critically, the venture market at the time was tiny relative to today’s ecosystem"

This isn't quite true. At least for US VC investment in dollars. It peaked at $66 billion in 2000, and didn't surpass that amount until 2018, according to these charts:

https://pitchbook.infogram.com/6-vm-charts-1h8n6m3klxngj4x

https://www.statista.com/chart/11443/venture-capital-activit...

And if you adjust for inflation, that year 2000 $66B is $103.86B in 2021 dollars, and the 2nd chart shows 2021 getting to $128B.

Now the two different data sources do have somewhat different numbers for each comparable year. I couldn't find a comparison that covered enough years to show the difference. But I think it's pretty clear that the dot com era was a spectacularly fast increase in VC funding. And the more recent years were slower growth, but did end up getting to slightly higher numbers, if you adjust for inflation.

A lot of people became "VC"s during the bull run. They brought nothing to the table like YC did. Instead some previously reputable VCs like a16z became crypto grifters. So it's good the market clears a bunch of them so that the YCs and next generation of VCs who actually bring something new to the table come to the forefront.

i've been betting against btc from the beginning, however i truely believe there's something interesting in this field, that may end up getting some real applications sometimes.

Now what's still unknown is whether the funds that invested heavily on crypto in 2020s will have enough leftovers once this crisis is over to be a player when the crypto 2.0 era is coming.

> i've been betting against btc from the beginning

Not literally, I assume? Or you’ve got a tiny position and have been (relative to the size if your position) haemorrhaging money for ~13 years? Or successfully rode some down waves? (I’m super jelly if you did the latter)

of course not, i would be broke :))

I do have a bet with a friend regarding btc price going under 1k i made in 2019 but it's just for fun..

Bitcoin has seen several 80%+ crashes and bounced back.

It is all in the demand.

A lot of that 80% flucuation is made up of short term speculators.

But some people are hardcore holders, and others use it because their national currency is worse (Venezuela, Sri Lanka).

Couple that with the network effects (BTC is the largest still), and that's all it takes for the price not to go to zero.

What happened with a16z is truly amazing.

what happened?

They've gone in hard on crypto, investing in absolute trash-tier companies that are difficult to distinguish from outright scams.

Instead of our engineer talent pool working on things that matter, such as managing climate change, thanks to (in part) a16z they now work on overheating the planet with lame monkey jpegs. We are in proto-idiocracy.

> Instead of our engineer talent pool working on things that matter, such as managing climate change, thanks to (in part) a16z they now work on overheating the planet with lame monkey jpegs. We are in proto-idiocracy.

This statement assumes the following axioms:

- The engineers that go to work for such startups are capable of devising/deploying solutions towards climate change: Some engineers & researchers may be able to do this, but most are focused in CompSci/SoftEng, with no experience in the field that you want them to be in.

- No roadblocks exist throughout the deployment of said solutions (NIMBYs, politicians, perfectionist "environmental activists"/virtue signalers, bureaucracy, supply chain issues)

Despite the "Sounds good"ness of your statement (which I partially agree with), the practical reality is that the chances of succeeding in something like crypto is still way higher than in building infrastructure, as there are near-0 NIMBYs in crypto that will protest in the next town hall meeting, nor will there be weather issues during the deployment/upgrade of a network/smart contract.

"Software will eat the world" still rings true today, only because the deployment of software is still orders of magnitude easier than deploying something into the real world. In order to make something like infrastructure deployment that much more enticing, the (chance_of_success*windfall - chance_of_failure*investment) must be greater than investing in software, which has significantly lower development costs, does not get bottlenecked by supply chain issues, & can be deployed globally within minutes.

> This statement assumes the following axioms:...

Cross-industry support roles contribute to endeavors: DevOps, infra, ML/data science. The a16z fueled ponzi has stripped and redirected talent from these important areas.

This is something that breaks my brain as a young ambitious software engineer... the problems of the older days, so red tape, lack of infra, access to capital, and all the other problems have still not been resolved after hundreds of years? to the point where you are forced into the digital world to start a business.

there's something wrong with humans, let alone the way we handle policy, economics etc

"In contrast with the scenario in 2000, most of today’s tech companies are real businesses."

I disagree that many startups have viable ideas that will generate black numbers and organic growth.

Bold founders have sold startup ideas which are not sustainable.

Ie investment capital have prefered bold founders that could give vision of high future returns wework for example.

A small number of startups will become awesome but the majority wont.

Zero interest rates was a money rocket that fueled startups going to the sky. But what goes up usually comes down eventually with gravity/interest rates.

A small fraction of startups will become super sucessfull but the majority wont. The number of sucessfull probably follows some kind of statistical distribution of which startups is great vs bad.

Higher interest rates will adjust future return calculations that is brilliant from the article!

>Higher interest rates will adjust future return calculations that is brilliant from the article!

I think discounted future cashflow is unfit for purpose as a valuation metric in an inflationary environment. It is based on the assumption that interest rates and future cash flows are independent variables. They are not.

There's no dispute that the present value of a given amount of future cashflow is lower when interest rates are higher. This part is correct. It's simple arithmetic.

However, when interest rates rise because inflation rises, it means that future cash flows rise as well, because future cash flows are linked to future revenues, and future revenues, by definition, grow with inflation.

Rather than complain about how VCs arent good investors, people should rail on the system that selects VCs. Which is mostly admittance to prestigious MBA programs/colleges. So please write a post about how those schools arent selecting for good investors, because these diatribes about a "flawed" industry are very surface level compared to the underpinning power structures in america

How do we distinguish between: "VCs are are selected because they go to school X", "school X is good at creating VCs", and "school X receives more potential VCs"?

My guess is probably more statements 2 and 3 for the usual suspects eg Stanford

It could be mostly 1)

If you hire a smart kid with an MBA from stanford and he gives you a bad name with a series of mistakes, well, bad apples happen. If you hire a smart kid from a no name university and the same happens people will be quicker to blame you.

Credentialism is a thing for the same reason brand recognition is a thing. When a product with good reputation fails it's bad luck. When a product with bad reputation fails it's to be expected. Power perpetuates.

Central planners 2.0, welcome to the soviet union.

In the USSR, there was democratic control by the public at each given level of the economy. Which is why people who were born to poor rural farmers were able to get education, and then get to the top of the USSR's economy and politics.

In the US, that never has been the case. Even in its golden years.

https://whorulesamerica.ucsc.edu/power/class_domination.html

Even in 1960s, 30,000 people (families, children included) dominated all US economic and political institutions. This group was an exclusive group with class consciousness, thwarting any reduction of their control and keeping outsiders out. This phenomenon continues today. Some freak successes in tech space did not change the pattern.

This post reminded me a little of my real estate agent's newsletter:

2007: There's never been a better time to buy! 2008: There's never been a better time to buy! 2012: There's never been a better time to buy! 2020: There's never been a better time to buy! 2022: There's never been a better time to buy!

The phrase over the years is more like “buy now or be priced out forever.”

Recessions are good times to take risks since people are afraid and while capital isn’t cheap this time around, assets are.

Easy to fuel the fire when you have unlimited wood to burn.

Only superseeded by hearing from friends "house prices never go down, there has never been a better time to buy"

My agents:

All years: There’s never been a better time to sell!

In other countries the agents only make commissions from the seller not the buyer, hence getting the listing is the big thing.

Assuming you are referring to the US, buy side real estate agents get paid by the sell side real estate agent (technically the real estate seller pays commission to the sell side real estate broker, which then pays the sell side real estate agent and the buy side real estate broker which then pay the buy side real estate agent).

Is buyer side real estate agent normal in other countries and what do they do except making it even more expensive to buy a house? It is still the buyer who pays even if it is the seller who pay the commission since the commissions are baked into the sell price

I only know about the US.

>It is still the buyer who pays even if it is the seller who pay the commission since the commissions are baked into the sell price

This is a trivial characterization, just like an individual who buys lettuce at the grocery store pays for the wages of the person that grows and picks and packages it.

A buyer does not have much incentive to not use a real estate agent because a seller using a real estate agent has already agreed to pay x% or $x to the sell side agent, who will give a portion of that to the buy side agent.

The reduction in costs only comes when purchasing from a home being sold without the use of a real estate agent (“for sale by owner”).

What I did mean was that it seems like both the buyers agent and the sellers agent have an initiative to drive the price up

This is countered by the fact that they have limited hours of life to live.

Buyers and sellers are not paying agents to maximize and minimize prices. They are paying real estate agents to increase the odds of having a transaction clear, with the buyer receiving property they want, and the seller receiving a price they want.

For an agent, trying to maximize price is only worth it up to a certain number of hours of work, after which time it is far better for a real estate agent to maximize number of transactions. An additional 2% of say $50k is only $1k of extra pay, whereas an additional 2% of a $500k sale is $10k.

In Germany the agent’s commission — IIRC about 7% — is paid by the buyer, and is in addition to the cost of the property.

In Hungary the amount varies a lot, but it’s paid by the seller so not the buyer’s problem. Because of this, you always try to sell without an agent, and use an agent only if you can’t find a buyer by yourself.

Dunno about other countries.

while I agree with the general premise (majority of VCs are not good investors) it's important to remember the money they raised isn't sitting in a bank account.

It's likely still in the LPs stock portfolio, doing a capital call when everyone is down a lot can be tricky. You need to sell the investment more even though they agreed to give you the money when you asked

Yeah I was super confused by this. VCs generally don’t have all the money ready to invest. They may have raised a $300 mil fund but they don’t get that money until they call it in. If the LP says “no deals for 6 months” that’s how it is.

What if the LP says no deals for 50 years? These “fund raised X” means nothing if they can’t enforce capital calls

That should be actionable as a breach of contract, with a notable exception of sovereign wealth funds, which may or may have immunity: https://www.reedsmith.com/en/perspectives/2013/11/capital-ca...

If the LPs don’t meet the capital calls, they’re in breach of their investor agreement, and the penalties are generally quite harsh, including potentially forfeiting a lot of the value they currently have in the fund.

Exactly. You either have the capital ready to roll or you should not engage in any such commitment.

As an LP in a large fund: that's definitely not how it is.

As an LP you pre-commit to a certain level, and when the capital call comes you perform or you will be found to be in default when a whole pile of clauses kicks in that you really do not want to have to deal with. You will have to have an extremely good reason (such as being already bankrupt) to be able to avoid a capital call that you have committed to.

There are LPs and LPs.

The LPs which the user above refers to are the APGs, the PFZWs type.

Show me a contract where an LP gets to renege penalty free on their obligations to a VC and I'll be happy to believe you.

I have been part of 222 VC/PE deals to date (that's not a typo, just a coincidence) and not once has an LP reneged on their obligation to honor a capital call without penalty. That's not saying it doesn't happen, it may well happen, or it may have happened and it was kept so quiet that nobody picked up on it (which is somewhat believable, because it would reflect very badly on the fund).

Just to give you one example: a VC enters into a deal, signs a non-binding terms sheet conditional on doing DD, goes through a full DD and then has to back out of the deal because a large LP does not honor their commitment. The fall out from that would be massive.

What is far more likely to happen is that a VC can't find a good way to spend the funds committed capital. In that case there might be extensions of the funds run or they might end up simply not calling up the available capital. This I've seen a couple of times. But an LP that refuses a capital call I've yet to see. I've even seen an estate that was held to perform when an LP ended up with the very best reason for non-performance of all.

I understand all the above, but the general rules kinda supercede it all.The general rules are that when you are the best/biggest thing around the block, rules just don't apply to you.

Also in general when government is involved rules don't apply to it. 80% or more of the amount of money that LPs as a whole administer are either Govt. Pension Funds or SWFs.

So in the case of big LPs it's one of the rare cases where both the above rules are at play to give them carte blanche.

LPs in a fund usually - possibly not always - have the same conditions except for the 'anchor' LPs, who are declared up front to the other LPs and who put in a substantially larger chunk of cash and commit before the fund is even officially opened. They are committed to do so and are listed in the rest of the documentation by name. Even the anchor LP agreements that I've seen do not allow those to default on their commitment, though there may be priority assignment in case of returns.

Again, show me. Just. One. Contract. I'll be happy to read the whole thing even if it is 200 pages.

Oh and just to be clear about this: if smaller LPs were on the hook for the full amount but larger LPs could walk at will how big do you think the chances are that those smaller LPs would still want to be part of such a fund?

Because clearly if a large contributor has a reason to back out they may have an even better reason to do the same.

Personally I would not invest in a fund where a larger LP can back out at will.

You are confused because you think the contracts mean anything in such a world. The contracts are worth less than the paper they are printed on when push comes to shove and you are facing a whale.

We're talking about whales facing whales, think Elon Musk vs Twitter and believe me contracts mean everything in that world.

There isn't an alternate reality where contracts are meaningless.

> Just to give you one example: a VC enters into a deal, signs a non-binding terms sheet conditional on doing DD, goes through a full DD and then has to back out of the deal because a large LP does not honor their commitment. The fall out from that would be massive.

Is this in Europe?

You are viewing the problem wrong. If you don't want to pay and you are a big fish, you just tell them not to ask. VC world is based on reputation and politeness. Causing a big stink is not a good look for anyone. If you are a big LP and you say, look buddy, we are taking this quarter off, what do you think is going to happen?

What would happen is a revolt of the other 200+ LPs who all collectively represent a much larger fraction of the fund than any one whale because they will have to cover for the shortfall; not to mention other whales who may see things differently.

On every capital call there is a statement that lists the total amount and the pro-rata and if the ratio there would suddenly change that would be a breach of contract. As an LP you know up front how big a chunk of the total fund your commitment will be with possible upside if the fund is oversubscribed and if it is undersubscribed it either won't launch of you will be made aware of the change and given the option to walk away.

To see the fund effectively shrink post launch and the shortfall pushed onto the smaller LPs is ridiculous, especially if LPs were not previously told that this could be the case.

This is understandable, but wouldn’t it also happen that the LP uses various signals to communicate to the VC that now’s a bad time?

Such as opening the small talk a Zoom call by saying ‘it’s been a very difficult month for us.’

There are very few VCs who won’t be influenced by a signal even as simple as this one.

That could happen, but it would affect all LPs equally. If proof of such a call ever leaked the fund would be open to lawsuits from a whole pack of hyenas (high net worth individuals for whom the LP commitment is roughly equal to a scratch lottery ticket to an ordinary citizen) and who collectively represent the larger part of the funds' total commitment.

The people running these funds are not idiots and would not willingly put themselves into a position like that.

Also, if credibly alleged there won't be a next installment of that particular fund.

No, that's not how it is. If the LP doesn't pay their capital call they go into default and the returns on all the money they've invested so far can be taken away. The only LPs who default on the capital call are individual investors who are flat out broke. They will of course default on their capital call before their mortgage.

What if there are no returns on all the money they have invested so far? This is quite possible in a bubble followed by a downturn.

Then you refer to your contract where on page 1 it states fairly clearly that there are no guarantees of returns and that the management fee is on the amount 'under management', and that a capital call will be inbound.

Obviously all of these scenarios tend to be covered by the contracts and if you can't read a contract of that level of complexity then you should not be playing this game.

Fwiw - my general premise isn't that the "majority of VCs are not good investors." My point is that there's a serious disconnect in the markets right now, and that it is rooted more in fear than a lack of opportunity.

On the second point - you're right that the cash isn't literally sitting around, but VCs (generally) do not have to ask LPs for approval on a deal by deal basis. Capital calls can happen either as tranches or in response to a deal, and it is unusual for an LP to successfully refuse a capital call because of a specific deal.

If you just view VCs as any other business, it involves revenue (exits) and costs (investments). The market turmoil is affecting the volume and size of exits in at least the short term, which means they are cutting costs. It's not clear the number of opportunities have grown/shrank but i guess fewer people trying to invest means the number of available opportunities to you as a player has grown.

The narative here seem disengenious, framing everything as one extreme to another:

Then came the coronavirus-related market shock of 2020...everyone assumed the absolute worst...then everything ... went nuts... around the beginning of this year, when it all ground down to a halt.

I don't doubt you can find (many) examples to support this, and yes, the themes are along these lines, but this is not the absolute reality in many industries, geographies and companies. If companies that have been hit hard are still able to raise, though maybe it's more painful.

My take-aways are:

* This is not the end of the world

* Poor fundamentals will be recognized and punished (finally) but only for a while

* There are some really good deals out there

> Most of that advice focuses on how founders need to adjust to survive the deteriorating conditions—cutting cash burn by firing underperforming employees, slowing hiring…

Makes me wonder what kind of “advice” they were giving before: you should be replacing underperforming employees at any stage of a business cycle.

tell that to fang companies. some fire less than 2% of the work force.

Startups can't afford to be like that. Those huge companies have a lot of fat so can get away with being slack, which is also why a company like Google can drift around in such an indifferent and aimless manner for over a decade.

BTW the "N" has long had a "fire early" philosophy, and so it will be interesting to see how their current troubles play out.

Is Google a kind of Basic Income?

> In contrast with the scenario in 2000, most of today’s tech companies are real businesses.

How many of today's startups are just servicing each other with VC money? This isn't meant to be flippant - I'm genuinely curious (and while I bet it's a lot, I am skeptical it is overwhelming).

I mean if we really look at some of the business models for these companies, they're clearly unsustainable. Uber is a prime example of a company that seems destined to fail. If your unit economics don't work then you're fucked, and even if you raise literally tens of billions of dollars you will eventually run out of money. And yet companies like these are held up as prime examples of unicorn success stories. It's not just Uber - there are serious problems with many of the most acclaimed startups.

Obviously not all startups are terrible, but as someone who isn't a VC (but once considered becoming one), I think tech investors are unable to see their bias for just how awful most tech companies today are.

Uber's a VC success story because the VCs managed to realize their profits before it can collapse when it went IPO.

They were lucky to find a whale like Masayoshi to dump their shares but seems the equivalent of bragging about how you got rich in the early phases of a ponzi scheme with the losers holding bags.

Very good points MegaButts. Crypto is VC funded too. Hence the crazy market caps because most of the VC owned supply is locked up.

I was there in 2000, and we all thought those tech companies were real businesses! Most of today’s tech companies don't really look all that much different.

I read this line and wondered what really has changed in the past 20 years?

"In 2000, the Nasdaq superheated due to the large number of companies that skyrocketed into the public markets fueled by fanciful metrics disengaged from revenue."

Interest rates have been held around zero since almost the dot com crash and certainly since 2008. No wonder VCs were given gobs of cash to try and eek out a better market return. The injection of cash on Wall Street resulted in huge amounts ending up in the stock market, perpetuating those returns once they went public and encouraging more VC activity. Is there any realistic forecasted revenue stream that justifies the valuations of some of these companies?

Some good companies and good prospects are going to get lost when this monetary bubble bursts. It's a shame, but inevitable considering how long the Fed has been holding their finger on the scale.

it's also interesting to see the impact of cheap capital on software development trends. for instance to reproduce the same SEO server-rendered site we had pre-2008, we have increase in complexity and costs.

Applications and websites that should be more than fine to be rendered on MVC frameworks are now sending several megabytes of javascript down the wire, as a result our devices have more memories, more computing power, thereby consuming more energy than ever before contributing to the growing global warming crisis that we are only beginning to witness now.

Coupled with lobbying for not regulating personal data in databases connected to the internet thereby allowing a select few giants to essentially act both as cartels to monopolize the arbitrage of the data of everyone on earth. The labor market are also controlled as a result of this monopoly, it feels like the best version of state sanctioned businesses: self-sufficient on its own while gathering data on everyone as the price of privacy is artifically suppressed.

pets.com, webvan, drkoop, kozmo, garden.com ... ah, the memories.

A lot of them were just early.

pets.com => Chewy. Also PetSmart operates the pets.com domain now apparently.

webvan => Amazon Fresh, Instacart

kozmo => DoorDash, Uber Eats, etc.

Mind => blown. There are very few original ideas, it seems. Just slightly better execution maybe.

Mobile devices, ubiquitous 4G comms, GPS location-based services. Underlying tech is always what enables "too early" products to succeed later on, particularly comms bandwidth. The same fundamental products have been reinvented with every improvement in bandwidth since the beginning of the internet. Once you've seen these cycles happen over and over you just watch for the underlying tech improvements, pick an idea lane and re-execute. Keep an eye on 5G and Starlink, it's already happening.

Not only that, but it wasn't even the largest issue.

People point at pimentoloaf.com or whatever and laugh. But when those companies went under, they took away real dollars from "real" B2B companies. And then when those companies went under, "real" companies who depended on them went under. And so on.

I was there too and I remember a distinct malaise about pointless tech companies that would make up for per customer losses with scale. There were a lot of companies whose only product was eyeballs for advertisers. (Ok, that part is the same.)

The problem is that sustainability was never the goal to begin with. The goal was to generate enough hype around a product in order to go public or get acquired by someone else.

It's the rich people's version of "hodling". Just like crypto-holders that created lots of hype around various coins and whatnot, VCs just bought stakes in lots of different companies hoping that one of them would go to the moon.

> I think tech investors are unable to see their bias for just how awful most tech companies today are

I agree. Ecomm broke first in other markets, and I am seeing profitable ecomm companies still having to raise capital. Uber is one of the worst ones (they took a business that is very profitable, and lost absolutely staggering amounts of money, they probably need to cut 50% of the workforce to start with, and then keep doing 50% until the business finds a level) but there are many others that have no business model or route to profit...and these are the best of the best that managed to actually list.

The public ones have a route to survival, some will raise, a lot of expense will go away with the stock price collapsing (employees getting bailed in). But most private ones won't survive. Too many staff, too little cash generation, and too reliant on the kindness of strangers (who remembers a few years ago, IPOs were so unfashionable, very old money...lol).

It is probably worse than 2000, the sector is much larger, private markets are far larger, there is so much hot money in the hands of brainless investors, it is a recipe for disaster. It is also worth saying, there will be a reprieve for a few months, then a story will break about one of the largest companies filing for bankruptcy overnight, then the private marks will come in. The losses sustained already have been some of the largest in the history of capital markets, it is the first inning.

I agree, crypto and fintech will be the first dominos to fall - they’re in free fall already.

There’s a lot of copycat B2B startups that extremely dependent on crypto and fintech for their revenue. They will be the next domino to fall.

After that, it would be infrastructure, security, and analytics vendors that will face a revenue crunch and will be unable to raise another round of funding. And then, all the startups for startups vendors like Rippling and Brex.

And the final domino would be currently well funded private companies such as Airtable, Notion, Loom, and possibly even Figma. We’ll learn that none of these products had any significant traction outside of VC-land.

This would be even worse for the Bay Area than 2000. Remote work is still the norm here (I’m typing this on my lunch break in my nearly empty SF office). An economic downturn coupled with destigmatized remote work is an environment ripe for outsourcing.

> the final domino would be currently well funded private companies such as Airtable, Notion, Loom, and possibly even Figma

How can you make such claims? These are great products

The world is littered with dead companies that had great products.

That matters in a growth market, only revenue and positive margins matter now.

I don’t deny that they are great products with incredibly talented engineering teams.

All of that doesn’t matter when 90% of your revenue comes from series C startups that will go bust in a year, or switch to cheaper and marginally worse alternatives.

I'd disagree re: Figma and Notion. These are very sticky, best-in-class tools which have a lot of use outside of "VC-land". Figma is becoming the de-facto way to share designs across the internet. Notion has a good shot at becoming the internet's default business wiki, killing Confluence.

Figma's incredibly hard to replace because its tools are highly customized for specific design workflows. Notion, I'm not nearly as sure about.

With Google Workplace having pageless Google Docs now, and other shops having content centralized on Office 365, a lot of cost-cutting companies will ask "we just use Notion for a wiki anyways, can we migrate over to the system we're already paying for?" And sure, Notion is making the right move here, to move rapidly on becoming a hub for project planning and other structured content, which is harder to move into a plain collaborative document. But is enough of Notion's userbase using those table features to such a level that it would cause pain? I'm truly not sure.

This is a 2000s mindset as well. Designers are a few YouTube tutorials away from jumping from Figma to Dingus or whatever will come next. Notion’s moat erodes with every iteration of Google Docs and Office — it’ll be the WordPerfect of 2025.

Maybe, anyway

I won't disagree here. Before Figma it was Sketch, and before Sketch it was Photoshop etc.

Notion is such a "local maximum" it's hard to see not being outcompeted by anything else

Firma has a deeper moat around it

But the problem isn't the product. That is the mistake that people make when they say it is nothing like 2000.

The problem is: way too many staff, not enough revenue, no route to profit. It doesn't matter if you have a "best-in-class" tool...where is the money coming from, how are you making payroll next month with no VCs.

The main problem with tech companies isn't the products, the products are fine. The issue is that they have taken a profitable product and built an economic model around that product that incinerates money.

Notion is already profitable and has been for many years.

What can we do to insulate ourselves from this? As a software engineer at a startup

Hit profitability on a unit cost basis yesterday. Try to hit overall profitability before the VC cash burns out.

Ask management about the numbers, evaluate their answer. If you don't get an answer: run.

If you work in crypto or fintech, run.

Otherwise, I don’t think there’s much you can do to insulate yourself. It’s never obvious how resilient your employer is relative to the rest of the industry.

Just reset your expectations on what working in tech will be like for the next few years. And prioritize learning and building your network - whether at work or outside - over trying to climb the career ladder. It will pay off in the long run and you’ll be happier.

Also, articles like this show that we’re nowhere near capitulation. When we actually get there, stay passionate about tech. There will be another boom.

Or start your own bootstrapped SaaS - the only investment is time and effort. These are some of the most enduring businesses, imho.

Keep your resume up to date and start applying for new positions. Even if none of them are what you are looking for, it's good to sharpen your interview practice.

I will disagree on Figma. It's taken a huge chunk of workflows at some extremely old school businesses. Amidst a sea of shitcorps it is the real deal.

The Bay Area has never really reconciled being a protective property market (the old money NIMBYs) and being a high-growth business hub. One of the two had to give, and another tech market crash plus remote work becoming the norm (despite wailing and gnashing of teeth from some CEOs and VCs) will probably see SF reverting to the former.

When there arent NIMBYs, high rises are quickly built, every place is turned into a overcrowded, concrete jungle and the property prices still remain high. Hong Kong. Tokyo. Many examples.

https://apartments.gaijinpot.com/en/rent

> An economic downturn coupled with destigmatized remote work is an environment ripe for outsourcing.

It isnt. That cheap outsourced software engineer wont be staying for ages with any company. They get promoted or found their own businesses. They dont keep slavering away for dimes for an US company that wants to have them as sweatshop labor.

Designing, engineering and maintaining highly scalable systems is not something that you could outsource to have it done for $15/hour.

> I mean if we really look at some of the business models for these companies, they're clearly unsustainable. Uber is a prime example of a company that seems destined to fail.

Lyft and Uber are both very near profitability and things are looking pretty good for them over the next couple years.

Why do you believe they are destined to fail? Established markets have been profitable for a while.

In a recession they provide a luxury good that might be down prioritized by customers to save money.

In a recession some people suddenly are eager for any job, no matter how bad, driving down Uber's "cost of goods sold" i.e. driver fees..

But in general economic downturns are tricky, as they affect different groups differently - are the people who would suffer in a recession the same people who are currently using Uber?

Driver fees are already so low that between depreciation, gas, and your time, you're barely making ends meet driving. They can't squeeze the drivers any further, unless they only want people to be driving 15-year-old beaters.

Boy, this is an evergreen narrative on HN, but I don't really think it's true. The total all-in cost of a Prius (depreciation, maintenance, gasoline, etc...) is about 30 cents per mile. Uber drivers make about $1-$2 per mile which is a pretty big margin.

Uber has been around for over 10 years now. Sure, not everyone is an accountant, but if Uber drained every driver's wallet, they'd have noticed by now. Interesting that it's usually only people who have never driven for Uber that claim it's completely unprofitable.

How many uber drivers are in Priuses? I haven't ridden in a single one...

How many people do you personally know that make their living as an Uber driver? I don't mean pensioners making beer money, or people doing it as a side job, here.

I know one. He's been doing it for a year and half, or so. He doesn't own his car. he has to lease it on a weekly basis, and he's paying through the nose for the privilege. He's doing it because his credit is shit, and he has no savings to buy a car outright.

He's getting ahead, but if driver rates get cut, he'll be going right back to being a line cook.

Almost every Uber I've ever taken has been a Prius, save for the few occasions I've been in an Uber black.

Still, the math isn't much different for a Corolla or Civic. And the more you drive, the cheaper the cost per mile is.

Personally, I don't know anyone driving full time, but still know several driving 10 or so hours per week and they make about $300 for it.

the first sentence is a terrible take unfortunately, prius one of the most popular taxi and ridehailing cars ever, it's sully arund >50% of car supply in most western cities.

As usual, you are conflsting your singular consumer experience of Uber with the global business giant Uber.

Oh, I don't disagree about taxis. Priuses are everywhere in that space, and for good reason. If you are going to make a living driving, you should probably drive one.

I do disagree on Ubers. I see very few Priuses, but there's a different explanation to that, that I missed. Casual drivers, people doing it as a side thing, or for beer money didn't optimize their car purchase for the purpose of driving a taxi. I suppose full-time drivers are more likely to drive one.

I have literally never once seen a Prius as a taxi in the US.

PSA: Data on these kinds of questions is available. Here's the data for Chicago on Uber/Lyft vehicle type: https://data.cityofchicago.org/d/bc6b-sq4u/visualization

It will vary by year and city, but generally speaking Toyotas tend to dominate ride share with Camry usually #1, then Prius, Corolla, and RAV4. However, the long tail is very long and you're about as likely to get a ride in a less cost effective vehicle.

Back when I used to work for a FAANG in advertising I looked at how much money Uber was spending on driver advertising. At that point, I became convinced that Uber were doomed.

> The total all-in cost of a Prius (depreciation, maintenance, gasoline, etc...) is about 30 cents per mile

One thing to note about Uber drivers is they’re typically putting 50-75k+ miles per year on their cars. I’m curious what that does to those depreciation/etc figures.

If you assume 25k MSRP on a base model Prius, and that the car will sell for $5k after 150k miles (absolute garbage offer - an actual number would be something like $10k-12k in today's market), then you get a worst case depreciation of 13 cents/mile. Let's say a Prius gets 45 mpg, gas costs $5/gal which gives you 11 cents/mile. Factor in tires and oil/brake fluid changes and maybe you get another $2k all in costs over the 150k miles, which is 1.3 cents/mile.

All in costs around 30 cents seems right. That assumes absolute worst case depreciation too. And don't forget, the government lets you deduct 58 cents/mile off your taxes, so you actually make a profit off every mile driven.

You need to do the math on a deduction v credit.

If you are spending .30 and deducting .58, you need to multiply the .58 by your tax rate.

You can’t simply say .58 - .30 is .28 and that is a profit of .28. Deductions don’t work that way.

Okay, that's my bad. But if you assume an effective tax rate of 15% (combined federal + state + SS + Medicare), which sounds about right for an Uber driver making 40k/year, 0.58 * 15% * 75k mi/year is an $6525 tax reduction. A quick look at an income tax calculator says someone in California making 40k pays about 6k in tax, so your credit per mile is 6k / 75k = 8 cents/mile.

Depending on your costs that could put you under 20 cents/mile in cost. And you get paid over $1/mile in practice, even on delivery orders. Really the only party getting screwed by gig apps is the government, because they get 0 tax revenue from these guys.

I made some comments below, the devil is in the details. It is not theoretical, I tried to Uber to challenge my notions about this.

Circa 2021:

The main point I would like to make is that in my market at the time, the mileage was getting paid was .76 a mile, as I look back in the app. At the time additionally was getting .11 per a minute fare. The main issue is that the mileage rate is for time that passengers are in the car.

But about half the time it was driving to a pickup location. So you are looking at an average of .38 per mile + .11 per minute. These were city miles, not quick highway miles.

So to pull one random example from my actual history.

I did a 6 minute and 57 second trip that paid 2.86. The distance was about 2.5 miles. So by your calculations we subtract .75. This leaves 2.11 profit. The issue is it pulled me 2.5 miles from my next fare, so you need to subtract another .75 to get back. So we are at 1.36. We also have another ~7 minutes of driving.

So in 14 minutes I made 1.36... So we are talking $5.80 an hour. This is pretty poor pay for the service provided. I might quibble about your numbers in my case because it was a 2020 traverse, that was about 35k and worse gas mileage. So I was probably doing worse...

HOWEVER, that's only part of the story. Uber has bonuses, so there will be a deal where for a particular weekend, if you do 40 trips (no matter the length of each trip, which was strange to me), they might pay an additional $80 bonus. So that adds an extra $2.00 for that particular trip, if you meet the quota. And is nearly as much as the base rate. So that will push the earnings to ~$10 an hour. Significantly better!

And that is where the VC money criticism comes in claiming the subsidization is what makes it work.

TLDR; If you are very economical about the bonuses and surge rates (which the example was not) you can make better than minimum wage income, it is not a loss. But you have to be very savvy and strategic. But the bottom line is the base rates, at the time were a bit over break even, and very low if you had any down time. But the bonuses and incentives made it reasonable.

> And that is where the VC money criticism comes in claiming the subsidization is what makes it work.

It might seem like that, but +$2/ride still puts Uber in the black here. A ride is minimum $8-9 so they're making at least $5 on that ride.

Also, I think your example is not too great because low fare/short rides disproportionately screw you because Uber takes a flat $3 per ride as a "marketplace fee" in addition to their 25% cut. If that ride was 5 miles instead of 2.5, you'd make a lot more than double 2.86.

From the Uber fare estimator for a trip in East Lansing Michigan. Per-minute $0.17 Per-mile $1.20

----

What is the catch? Drivers do not make any money while driving to pick someone up or after dropping someone off. Often, when I tried out driving, about half the miles driven were without a fare.

Subtract the service fees from those numbers and it gets less lucrative.

Often pickup traffic was very "directional" people going to the bar at one time, people leaving at another, so often you would have to drive back to where you started the last fare for the next one.

Uber drivers don't make anywhere near $1-$2 per mile. More like $0.50-$1 according to some Googling ($1 seems reasonable from conversations with friends who drive for them, here in Austin).

30 cents per mile costs is also extremely low, at least on average.

I don't think that's extremely low at all. Prius forums are full of users who share their mileage costs.

Yeah - Uber both eats and taxi part was extremely cheap during any restrictions. Now it's easily 100-150% more expensive here.

That's not true, really, in this case with inflation.

There will be no point in taking such low paying jobs. We're already seeing massive shortages at the low end of employment - working for that cheap simply doesn't make economic sense.

>> Lyft and Uber are both very near profitability

As they have been for over a decade. Just not actually GAAP profitable, except maybe a one off sale to DiDi.

>> Established markets have been profitable for a while.

So what market is Uber not established in? Are they pouring their oceans of profit from New York, Los Angeles and London into building a business in La Paz? I am sure they are trying to grow in places but they are way past the point where their profitable markets could fund growth. But they don't seem to.

I am sure there is a profitable and enduring business in Uber in some markets and at some prices. I just think they know that the economic realities of that business would not support their public stock valuation. So they work on self driving and buy postmates rather than focus on those profitable established markets.

Uber's net GAAP loss, excluding losses from investments in DiDi and other companies, is around 300m last quarter [1] which is a ~1% loss on their gross bookings. Most of that is stock based comp. Their FCF loss was only 47m last quarter.

I know HN likes to hate on Uber and other gig apps but a 1% margin is something they can easily make up given their stated take rate on mobility and delivery is around 20%.

> So what market is Uber not established in

If you follow their earnings calls (or that of DoorDash as well), advertising is a huge growing market for these companies. My guess is they take on an airline business model: zero to slim margins on the core offerings, but huge money on advertising and ancillary sources of revenue (for airlines, this is credit card points).

[1] https://investor.uber.com/news-events/news/press-release-det...

> (for airlines, this is credit card points)

In the United States, maybe, the only market where credit card points are meaningful?

I think we should split the difference.

Yes, Uber is close to break-even and they aren't going to just disappear. But there's still a big gap for them to close between "breaking even" and "profitable enough to justify a $50B valuation."

There's plenty of room for a moderate view in which Uber survives as a business but their investors are extremely unhappy.

Uber invested most of their money into self driving tech and it was a dead end. If it would have worked out we would be having a very different conversation. Now I think they are essentially break even until someone figures out self driving and buys them to deploy their fleet of self driving taxis.

> How many of today's startups are just servicing each other with VC money?

The B2B SaaS ones.

My bigger uneasy feeling here is the advertising/marketing world where ROI basics like attribution are highly questionable and bohemeths like Apple & Google are using their $T war chests & monopoly positions to cripple the sales/marketing ecosystems of their competitors. So risks a repeat of the dotcom bubble collapse when cpm/cpc collapsed. So much of saas is directly serving these questionable areas, and in turn, more neutral b2b (data, ...) is in turn powering those and thus also fragile.

Variable sales+marketing spend is easy to scale back on during a recession. We've seen preeemptive layoffs due to valuation drops, but not this stuff yet. It's hard to handle. Our team largely focused on helping enterprise/gov/etc customers (think visibility/ai for core fraud, cyber, supply chain operations) and prioritized more self-serve etc for the crypto markets: they came to us with similar questions, but had way more risk, and so luckily we're seeing only a bit of churn right now. But if/when the sales/marketing/etc. collapses hit, that'll be much harder to avoid for many people.

> Apple & Google are using their $T war chests & monopoly positions to cripple the sales/marketing ecosystems of their competitors.

To be fair, they are doing so by forcing competitors to in-house their advertising efforts. Largely, AdTech in large companies is outsourced to 3rd parties and those existing workflows calcify into positive signal. There hasn't been much incentive to change. Recently, the belts are starting to tighten and network (public market) adtech companies, even with big accounts, are always in danger of disappearing overnight.

Many companies rather continue with the few winners in the network adtech space, than engage in the lengthy and risky in-house development. It's slow to see all of the parallel development efforts coming to fruition, when no company wants to make PR announcements that it's no longer sending customer data to a 3rd party, but still collecting it all the same for an internal platform. This migration is happening nonetheless. Amazon built out their platform in under 2 years and the ripple has pushed many others forward toward dogfooding their own adtech stacks.

> If your unit economics don't work then you're fucked...

From the company's perspective that's certainly true.

As a regular person I'm more worried about the companies whose unit economics work too well. Companies like Amazon have so much momentum that it seems like they could go on indefinitely, instead of eventually failing and making room for new entrants.

Companies whose unit economics don't work transfer wealth from investors to customers, then get out of the way. Companies that work too well can become an inescapable force.

eventually, their business becomes politics. see: unionization, windfall tax, the nascent antisurveillance backlash, ftc action...

once your business becomes everyone's business, they'll just go ahead and make decisions about it without you

> Companies whose unit economics don't work transfer wealth from investors to customers, then get out of the way.

Not always. Consider the rash of subsidized “we’ll pick up your dry cleaning and then save by doing the work at a centralized facility elsewhere). These parasites wiped out the network of local dry cleaners, in particular in SF.

You could say, well, they wiped out the buggy whip makers. But actually they wiped out the infrastructure and then went bust, leaving a desert (in dry cleaning terms) behind.

Parasite is too kind a word.

> Consider the rash of subsidized “we’ll pick up your dry cleaning and then save by doing the work at a centralized facility elsewhere).

Is that not the default business model of dry cleaners globally?

Chemicals like PERC are nearly completely banned in residential/commercial zones. Almost all dry cleaning in the developed world is done in centralised depots in industrial areas, for health & safety reasons.

No, most dry cleaners use more friendly chemicals locally, and only send out things like leather goods. Otherwise, how would they be able to do sub 8-hour turn arounds?

This is the pessimistic view of Uber. If Uber was just subsidizing car rides, that would be fine. But since they’re dominating the industry in an unsustainable way, they’re hurting public and private transportation infrastructure. Cities aren’t investing in trains or buses because of Uber, but if Uber goes under, we’re going to be out of luck.

> they’re hurting public and private transportation infrastructure. Cities aren’t investing in trains or buses because of Uber

i dont think you can blame the lack of public transport investment on uber. and there's no hurting private transportation infrastructure - that's just private cars! People who ditched their car because of the availability of uber isn't getting hurt if uber goes away. They can just repurchase a car (after all, they saved money not owning a car previously, so they must be ahead already).

So Uber is the culprit behind the lack of public transportation and infrastructure development? Lol...In 2006 when I came to the US, the train between LA and SF took 13 hours. Today in 2022, 18 years later, it still takes 13 hours.

> These parasites wiped out the network of local dry cleaners, in particular in SF.

Huh? I’ve never had an issue finding a dry cleaning shop in SF and there’s tons that pop on Google maps - hardly seems like a dry cleaning “desert”.

They mean "actual" dry cleaners that clean in the shop - almost all those you find are fronts for some massive cleaning warehouse somewhere else (check to see if they have any machines on-site).

Even if that's the case, how does that make it a dry cleaning "desert"? I only care if I can get my clothes cleaned quickly and I've never had any problem with that.

Not the OP but I assume it has something to do with the loss of same-day or 4 hour turnaround-type services (which if you need try laundromats, some offer fluff and fold services where they'll wash for you).

It's never happened, though. Buffett likes to say something along the lines of, "I like to invest in businesses that could be successfully run by a monkey, because eventually they will be."

My prediction is that every behemoth of today will be tomorrow's Sears Roebuck, GE, West India Trading Company, etc. At some point, they'll become mired in bureaucracy. Enough incompetence will eventually rise to the top to allow competitors to pounce.

I'd bet on that, if I had to.

That said, I may easily be wrong, and I honestly share your concern about Amazon, Google, Facebook, Apple, etc.

In particular, I want a successful OSS phone competitor to Apple and Google. I don't think something as important as our telecommunication devices should be run by a duopoly. There's no freedom in the phone market the way there is in the PC market, and I'd really like to see that change.

I agree with the premise. Success is never immortal. The gap, however, is in societies being intended to be immortal. If you let companies run amok, so the thinking goes, when goes the company so goes the country. Limiting companies’ power let’s them creatively destroy one another without threatening the culture at large.

I have an easier time seeing the fall of the US before I see the fall of Amazon.

Amazon would have to be eaten by a three-prong (or more) attack, but I could see it fall quite quickly.

AWS is probably the biggest moat they have, but not often what people think of by "Amazon".

Amazon has really good diversification, and they aren’t going away anytime. Look at IBM, they still exist after decades of being essential irrelevant.

It takes an awful lot to actually kill a company (often fraud or similar), but a company that is no longer dominant the same way is usually considered to have "died". Myspace still exists, but Facebook is clearly the one to beat in that sector.

If Amazon retreats to being AWS-only, I'll consider them to have "failed", even if AWS continues to be a success.

I think the silver lining is at the time of their peak Sears etc. seemed unstoppable. And it took only a few decades for that to be undone. And that is basically guaranteed to happen to any behemoth simply by their inertia and inability to stay relevant for a long time.

> If your unit economics don't work then you're fucked, and even if you raise literally tens of billions of dollars you will eventually run out of money.

Hum... VCs exist exactly because this is not a general truth.

It's true for Uber, but there are many sectors where unit economics change with scale.

> I think tech investors are unable to see their bias for just how awful most tech companies today are.

I think investors are more greedy than stupid. When money was essentially free, weirder and weirder investments make sense. If the world was crazy and throwing money around, why not fund a bunch of ridiculous companies with the knowledge that you can very likely unload that risk on the public when the company ipos.

And we're seeing that that logic is correct. Just look at the record numbers of IPOs that were happening right before the market started to collapse [0].

Investors know they are playing musical chairs, but they're playing with the public and the know they song quite well and can tell when the music is winding down.

Now IPO'd companies that don't know how to make a profit are the public shareholders problem, not private VCs.

0. https://stockanalysis.com/ipos/statistics/

Uber is the prime example of get out while you're ahead. The founders cashed in and let the the $@#& pile to the rest.

The camel concept is gaining traction since they focus on profitability from the get go, healthy runway and steadily grow.

> Uber is a prime example of a company that seems destined to fail. If your unit economics don't work then you're fucked

Have you actually studied Uber’s recent earnings? I’m pretty sure rideshate contribution margin is positive in all their tenured markets.

> How many of today's startups are just servicing each other with VC money?

IMHO this is mostly the a phenomenon of the SAAS/platform space. Those practices don’t really apply to more traditional businesses (including high tech ones).

But you made me think of something else: this phenomenon was definitely booming in the 2000 crash, when net-related hardware companies were underwriting their own sales, which ended quite poorly. Not only is the subsidization you point out happening elsewhere, but hardly anyone buys much “networking gear” any more. From crucial, enabling tech to boring infrastructure in what, 15 years?

Isn't this what YC does essentially? YC backed SaaS companies buy each others products, write favorable case studies and use that to convince other enterprises to buy in, and to IPO quickly they raise lot of money to have the market share that commands the multi billion valuations with insane revenue multiples?

Seems like this model is beginning to fail, most YC backed IPOs are now trading in deep red. ex) coinbase

edit: lurkervizzle I can't respond to you since im throttled but this is what I wrote in response to add on to what you wrote in the other comment

this is far more serious than I thought I seemingly just made the connection that YC backed SaaS (or any other accelerator schemes) were essentially just writing cheques to each other and playing whack a mole: You direct your cohort members to send cheques to one SaaS, raise series B & C, push for IPO after making splashes on media outlets (also owned and controlled by stakeholders), which in turn generates more fervor from retail investors eager to get in on the "next" Facebook.

Then you would naturally use these beacons to essentially send more cheques, this time across many tiny bets that they can cycle through one after the other. Some make it to IPO, many don't so they get "acquired".

The more I look at the YC business model and silicon valley in general is that very small group of people are actually in it to build sustainable businesses, since the Uber secondary market successes of VCs that successfully dumped their shares on Masayoshi, the SaaS have become the new "social media opex", where losing $2 to make $1 is preferred over slower growing but consistent net profit generating ones.

By next year I anticipate ton of pain and anger. I took a look at some TC figures and they are roughly 30/70 mix of cash and RSUs. Many of those people are also in debt through real estate using HELOCs too.

What I think we are headed for is something unprecedented because there are 3 major bubbles imploding: crypto, real estate, dot com

Even more crazy is that we had the exact setup going into the new millenia: e-gold, real estate, dot com but the difference back then was that monetary supply was nowhere near as low as they have been in the past 3 years (take a look at the M2 supply/velocity chart).

https://www.pennmutualam.com/market-insights-news/blogs/char...

100% this - a good chunk of initial traction for YC companies is other YC companies - which is great in some ways to bootstrap initial growth/credibility, but the uncharitable view is that it's a Ponzi scheme in a way.

One way to look at it is ponzi scheme, but a more charitable interpretation is just eating your own dogfood.

I think Ponzi is an overstatement, though I agree with the general sentiment.

There's in principle nothing wrong with clusters of companies that are inter-dependent on selling stuff to each other. Car parts manufacturers live and die by the big car companies - and to some degree vice versa - but we would hesitate to call that a Ponzi scheme.

The key is whether or not this clustered ecosystem is bringing in money from the outside. Somebody in the ecosystem has to be making money from the "outside" world. It's the sustainability of this outside connection that really matters.

For a lot of SaaS companies I think the rude wakeup is that the "outside" source of money was never an actual business but instead was just endless rounds of VC cash. Likewise (and IMO more offensively) with crypto the "outside" money source was hyped-up retail investors (and hyped-up VCs) and not any actual useful business.

I do agree though - the VC sphere has spent the last 10+ years building up an entire web of companies that inter-depend on each other but where the "outside money" was always highly dubious. This is distinctly unlike the older crop of BigTech companies where the outside money is (relatively) stable: actual advertising, actual hardware in people's hands...

100% and legitimately have nothing but respect for YC. Ponzi is definitely an overstatement which I used to make the point that in-network traction is potentially a risky signal of product-market-fit which was obfuscated when everyone was being rewarded with gobs of money for early 0->$1M traction.

Whether or not it's a Ponzi depends on whether there's any path to get normal profitable businesses to buy the software.

Yes, at least in the startup SaaS space. As lurkervizzle put it, it's a kind of ponzi scheme, though in that case I think the "victims" are investors. And mostly the seed investors, less the LPs and GPs of the VC firms.

> What I think we are headed for is something unprecedented because there are 3 major bubbles imploding: crypto, real estate, dot com

Crypto is an almost invisible blip on the scale of the financial system. Real estate, well, there's a shortage, so I think it will take a very long time to unwind.

Dot com -- yeh, it's a mix of unsustainable Doordash/Uber/Airbnb, SaaS-for-the-SaaS market (both of which are ponzis in the context of this thread) and "AI"/"Data Science" puffery. I still can't tell if the reckoning will be quick, or if the air will simply slowly leak out.

please explain that chart? thanks

Look up the different measures of the money supply (M1, M2, M3) and then perhaps it will be clear

But your examples of bad companies are Coinbase and Uber -- these aren't B2B companies that are caught up in some kind of ouroboros of everyone mutually basing their growth on each other's business. Both are consumer businesses.

What's the example of a company that's actually failing from this hypothesized mode of depending on other startups? I mean, better, what are five examples -- I mean, if this is a group of companies that are mutually dependent, then it can't just be one failing.

Specific anecdote - SaaS companies selling to other SaaS companies is going to cause a mini-winter in that sector. My company (which we thankfully sold last year :praise) had several (though not exclusively) high-growth tech companies as customers.

Now, when I look at layoff announcements, I see a lot of our former customers. Additionally, with budget freezes (driven by VC RIP decks), these same companies aren't buying new software for a while, even if they would benefit from it. And many tools now are priced based on headcount. So it's sort of the perfect storm - valuation resets so you have to go a lot farther with your current funding, reduced retention revenue because your customers are paying for fewer seats and harder sales because of budget freezes. Ick.

> And many tools now are priced based on headcount.

Ah, live by the ARPU, die by the ARPU: you lack of control over the "U" means your company performance is coupled to the broad market!

Thanks for this example. It's obvious in retrospect but apparently not prospectively.

Assuming you have the pricing power to not be affected by the broad market, you would simply increase pricing to maintain ARPU.

If you cannot increase pricing, then your performance is coupled to the broad market regardless of how it is measured.

How many times has Detroit, housing, and finance been bailed out?

They’re all operating on magical money because money is a shared hallucination. They legalize bailouts and complain about the debt but never mention the future can just say, eh, fuck those dead peoples bullshit.

The bias you seem to not realize you’re hung up on is society looks nothing like it did 100 years ago. In another 100 they won’t give a fuck about any of this.

If we take away the money, people still need to do shit if they want to survive. Fuck their money, do weird shit. Let the olds take it to the grave.

It seems to me the VCs probably made quite a bit of money from Uber's IPO, no? Especially before their stock price halved itself (LOL).

100% - when interest rates are over 5% and/or gas is over $5, the delivery startups are toast. The economics just don't work. Especially when people start cutting back on conveniences.

Are you sure people wont just pay 10-15% more for an Uber taxi or SkipTheDishes? Those have become staples of peoples lives. It take a pretty significant change to stop people from using them to the point where it’d be a failure (of course there will a subset of more price sensitive people, especially during recessions).

$5+ gallon gasoline is a significant change for the normies budget. Especially with layoff clouds hovering above.

> Uber is a prime example of a company that seems destined to fail.

I'm not a fan of Uber, both as a company and as an investment thesis, but I think this is far too strong. Uber isn't prioritising profitability at the moment, so obviously the unit economics isn't going to work.

I think the important question to ask here is if people continue to want to pay & hail taxis from their phone? If the answer to that is yes then Uber will be fine so long as they're one of the apps that people continue to use to hail taxis. Personally I don't see taxi hailing apps going anywhere and I don't see Uber losing significant market share to its competition if they price competitively.

Where I think you have a point is in regards to Uber's potential operating margins. Is it reasonable to assign Google / Facebook sized margins to a company like Uber? Probably not imo, and that's where I have problems with it as an investment. I think as an investment it's more likely to end up like a Twitter or Snapchat. They'll make a bit of money and as a company they'll be fine, but I doubt they'll ever reach the levels of profitability that other big tech companies have achieved. The stock seems likely to trade fairly flat as they continue to see decent demand for their product, but continue to struggle to achieve significant profitability.

I'd argue taxi hailing apps (as they currently exist) are basically commodities. There's no real difference in experience between the different apps and if I'm being made to pay then I'll just pick the cheapest. Only if they're all pricing around the same will I use Uber and that's just because I know I can trust them and there's a friction in downloading and signing up for something else. They have a viable business, but very little operating leverage.

100% agreed. It wasn't that long ago that Amazon was starting to catch on in large part due to its (and more broadly the Internet's) reputation for low prices. Nowadays that's no longer the case, and yet here we are.

Where I think you have a point is in regards to Uber's potential operating margins. Is it reasonable to assign Google / Facebook sized margins to a company like Uber? Probably not [...] I'd argue taxi hailing apps (as they currently exist) are basically commodities.

I would also have to agree with this. I've long since used Lyft and Uber interchangeably depending on current local prices; a third-party app could easily go further to consolidate every major ride sharing service and automatically book the cheapest ride at any given time.

I see the trajectory of Uber and Lyft more as consolidating the market share of the taxi industry into a handful of owners than really creating a novel market or economics. The economies of scale and massive VC-backed war chests could make for viable stepping stones to bringing production-ready self-driving tech to market, which would change the economics, but last I heard it seems like Waymo is leading the pack there without the albatross of a massively unprofitable service business.

> I think the important question to ask here is if people continue to want to pay & hail taxis from their phone? If the answer to that is yes then Uber will be fine so long as they're one of the apps that people continue to use to hail taxis [and they figure out how to get their unit economics to work]

If they don’t get their unit economics figured out, not only will they not be Google/FB/etc., they will be nothing at all.

The name, maybe even the company "Uber" can and probably will continue; the question is if it goes through a bankruptcy/restructuring first.

uber's unit economics will easily work out if they stop expanding (which is where the expenses are).

Their backend services have a "fixed cost", if you assume they've designed it to be scalable, such that the marginal cost of a new user doesn't add more cost to hosting and compute. Then fire most engineers, and keep some skeleton crew maintaining the services.

The other cost is obviously the payment to drivers. I believe the unit economics will work here, since uber is not making capital investments into equipment, and is paid per-ride. Competition would drive the margins down, but thin margin is still a positive unit economics. Right now, the cost is subsidized by uber, but only as a marketing tactic to obtain marketshare and drive out competitors (unsuccessfully i might add). Uber can choose to stop the subsidizing, which can then make the unit economics positive.

> Uber can choose to stop the subsidizing, which can then make the unit economics positive.

How much will their market share fall when they do this though? And will uber be able to survive the corresponding reduction in revenue?

> How much will their market share fall when they do this though?

who knows? But if their competitor is going to subsidize, but uber doesn't then they'd lose most of their marketshare. But the same story would be true for their competitors.

So the subsidy would drop slowly for every player in this market, until they reach an equilibrium, where the final margins for every player is as thin as possible but still pay the bills.

I think this is the wrong model to think about companies like Uber. Their business model is not based on unit economics, but on becoming a monopoly. Their goal was to seek rent permanently on the taxi business by putting all other taxi companies out of business. If you look at it that way, losing money to put competitors out of business seems like a viable strategy.

I have a hard time picturing uber failing. I take uber all the time, all my friends do as well, how can it fail?

Because it still isn't profitable and maybe never will be. I would still use it if it cost more -- hell: I'd probably use it more as I'd feel better about it ;P -- but a lot of people wouldn't as it is already a borderline-luxury for a lot of people. They continue to claim they are "drawing closer to profitability" -- as recently as a couple months ago, after reporting their first quarter earnings (which happened to show a $6b loss that isn't actually relevant as it was primarily due to investments instead of operations) -- but I feel like they have been saying that for a long time now? But sure: they might finally succeed in reaching at least "break even".

With the amount of money that went into expanding and growing as fast as possible I can imagine why they have not been profitable

This. Now do government contractors!

VCs as a whole are followers, not leaders (with small exceptions). they all just fly into the latest hype bandwagon hoping to replicate the last big success.

Easy to say when it's not your money you're investing, and when you have a business that depends on the continued flow of VC money.

I'd have preferred "hungry" instead of "greedy".

"Greedy" conjures images of ravenous VCs exploiting startups.

"Hungry" sounds like they have a healthy appetite for investing.

Just MHO.

Thanks. Please write more frequently.

I'll say this, as a YC founder, given the current situation, I've never been more excited.

I'm currently working with a Fortune 100 client in a recession-proof space. We have a team that's knocking it out of the park with them, that they simply cannot find an equivalent replacement for. We are cash-flow positive. And we have a route to securing more clients in the next year. We are delivering technology & innovation to companies that are decisively lacking in this area.

Once we prove out our MVP with future clients, I plan to raise seed funding, and remain cash flow positive. Our path to Series A will involve a lot of sales, and that's an area where VCs and the right networks can definitely help. We know we can solve the technology hurdles and build the product that our users actually want.

Raising funding might be tough given the macro situation. But I know our value, and we have plenty of time to wait out nervous investors. What's more likely is that we'll close our round without them, since we shouldn't need the money. We need the help.

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