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Comment by CalChris | Hacker News Reader

Why is the era of low quality startups over? Have VC’s suddenly become better judges of talent, market and technology? Have founders suddenly become more serious? Last year A16Z funded Adam Neumann for $350M for a blockchain carbon credit platform.

If things change it won’t be in a Wicked Witch of the West meltdown after which the flying monkeys of Silicon Valley burst out singing Ding Dong the Witch Is Dead.

Things haven’t changed.

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Last year interest rates weren't 5.5%, they were 3% and investments were already starting to tighten up. It now costs even more to deploy capital and looks to remain that way for a while, possibly indefinitely. It's really as simple as that.

Higher scrutiny, tighter purse strings, the dynamic has been shifting for a while.

That's pretty simple but it doesn't explain how or why low quality startups will get weeded out. It explains why there will be fewer startups but it says nothing about their quality.

Maybe help me understand where in my original comment I lost you? I'm not seeing where your lack of clarity stems from. If you have to have significantly more solid economic fundamentals, per what I originally wrote, before you'll get investment, that almost tautologically removes low quality startups.

I think the point being made is that it's easy to tell low quality after the fact, but it's not obvious before investment. The startups that'll get weeded out will be the ones whose business fundamentals aren't obvious. Some of them will be low quality anyway. Some other businesses could have been high quality even if the fundamentals don't look it (Facebook springs to mind).

I think you're defining quality of startup to be "has known good unit economics" and that's certainly one determinant of quality, but part of why investors have been throwing money at Adam Neumann and others is that it's not the only way that a startup can become a huge success.

I hear what you're saying, I think this is a case where there's no perfect total solution. I would amend what I said to be more "on the balance" more bad then good get weeded out.

The thing about Facebook is they were widely profitable and quickly growing quite early on if I recall correctly, so not sure that's a great example, but I get what you're saying anyway.

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