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Comment by JCM9 | Hacker News Reader

It’s going to be a painful 2023 for these companies and some likely won’t make it or will be sold off in fire sales.

Not to sound cold but the market needs a good cleansing and some of these companies that had unrealistic valuations need to get flushed out of the system. It’s not pleasant for those that find themselves in the wrong place at the wrong time but there were just some completely baseless valuations set during funding rounds and IPOs in 2020-early 2022 and now that needs to get cleaned up.

Cash and profit are king again. Anyone without both (or a absolute ton of cash to get through the market cleanse without raising) is in for a painful ride.

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It's actually quite common to see "heard thinning" like this. Even as far back as the dotcom bubble, tons of internet companies, many went bust, eBay and Amazon and a few others survived becoming the giants they are today. Or take rideshare companies, there were a number of alternatives to Uber and Lyft back in the day like Sidecar but those shuttered. Heck we just saw it (albiet for a different set of messed up reasons) the thinning of the heard in the crypto space, both on the project and the exchange side....

The cycle always seems to follow:

1. Cash enters the system through low interest rates by the fed and other economic factor (boom times).

2. Tons of new companies emerge, all hyped, all with shiny new products and tons of marketing.

3. Things are good for a while but eventually hard times hit. All the companies propped up by hype and that don't truly have a good business in place will fall the wayside.

4. The few companies that weather the storm tend to last longer and become established players in the space.

Absolutely. For anyone that’s been for a while the last hype period was a case of “I’ve seen this play before and I know what happens in Act III.” It’s been a while since we’ve had a solid down market and thus there are a lot of people that haven’t seen how the play ends yet but are about to find out. The optimistic long term view is that after the storm the cycle begins anew and new companies rise from the ashes.

How do you suggest picking what to invest in for the new cycle? That's always been the hardest part for me.

Diversify.

You could analyze the financials of the companies you're looking at, and gauge their product fit and overall market. But you won't have the visibility as a casual investor to get the kind of information you need to make a genuinely informed decision on a company.

Since you're betting on ponies to some degree, it's wise not to go for broke on just one.

Sooner or later, every investor learns it's so much better to not try to beat the market. Trying to beat the market results in failure for the vast majority of investors: even some of the most informed ones. I would go with the SPY or VTI.

I know nothing and This is NOT financial advice.

I don’t usually comment on spelling, but it’s central to your point. “Herd thinning.”

Crypto (really blockchain) isn't in the same category. 0% of crypto companies have viable business models after removing fraud. Chainalysis will be the last crypto company standing, and then it too will have lost its revenue stream.

It's also worth noting how companies that lost 90%+ of value are close to unable to raise new cash due to dilution. Raising 100M at a 1B valuation is just 10%, but raising 100M for a 200M company is 50%, meaning founders lose control over the company.

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