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Startups Struggle For Survival As Investors Turn 'Picky' (gerbsmanpartners.com)
An anonymous reader quotes The Wall Street Journal:
Eighteen months ago, Beepi Inc. was rapidly expanding its online used-car business to 16 U.S. cities where people could buy cut-rate vehicles adorned with giant shiny bows. Beepi doesn't exist anymore. After burning through more than $120 million in capital, the startup failed to raise more cash and shut down in February. Its roughly 270 employees cleared out of the cavernous Mountain View, California headquarters, leaving behind the ping-pong table and putting green.
Beepi's rapid demise offers a glimpse into the changing fortunes of Silicon Valley startups, many of which have struggled to adjust since a two-year investment frenzy came to an end. In 2014 and 2015, mutual funds, hedge funds and other investors pumped billions into companies that they now see as overvalued, and unlikely to pull off an initial public offering. As venture capitalists became more discerning, investment in U.S. tech startups plummeted by 30% in dollar terms last year from a year earlier.
The article also points out that "much of the money still being invested is pouring into the upper echelon of highly valued start-ups like Airbnb and WeWork or younger ones with clear paths to profit," leaving "scores" of previously well-funded startups now struggling to survive.
Beepi's rapid demise offers a glimpse into the changing fortunes of Silicon Valley startups, many of which have struggled to adjust since a two-year investment frenzy came to an end. In 2014 and 2015, mutual funds, hedge funds and other investors pumped billions into companies that they now see as overvalued, and unlikely to pull off an initial public offering. As venture capitalists became more discerning, investment in U.S. tech startups plummeted by 30% in dollar terms last year from a year earlier.
The article also points out that "much of the money still being invested is pouring into the upper echelon of highly valued start-ups like Airbnb and WeWork or younger ones with clear paths to profit," leaving "scores" of previously well-funded startups now struggling to survive.
It doesn't take 120 people and $120 million to sell cars online. What were those 120 people doing?
you mean that investors are finally doing due diligence before investing had to happen sooner or later
Your'e all thinking it, I just said it for you
Anyone surprised at this wasn't around for the last Dotcom Bubble, or wasn't paying attention. This is exactly what happened in early 2000, when you started to hear the first few whispers that the peak had finally been hit. Investors are just coming to their senses. I don't entirely blame them this time -- the last bubble was about some people having access to the Internet, and this one is about having absolutely everyone worldwide accessing the Internet over a phone, which is with them 24/7 and can generate tons of marketing data.
I'm just glad that there aren't too many individual investors who are losing out with crappy IPOs of companies that will never make a profit. I remember people losing a ton of money speculating on pets.com or VA Linux or theglobe.com -- all companies with almost no hope of doing well in the long run. What I am seeing this time is the fact that there are just _so many_ startups, and how many copycats there are. The barrier to entry is low, the cloud runs their software, they use social media to advertise, and there seem to be 20 different clothing subscription services, food delivery services, etc. I think the sales pitch for VCs this time is "disruption" more than "eyeballs" but it's still the same result.
Just like the last one, I'm sitting out on the sidelines in a traditional IT/engineering job and watching everything fall in on itself again. When I started reading stories about new edgy web startups popping up in California again, all I could feel was deja vu... There's only so much ping pong, foosball, hipster open office spaces, catered meals, and brogramming that VC money will buy, and I think we're about to see that come to an end. Since these startups can just run in the cloud, they definitely have longer to live, but I don't know how much.
This is survivor bias. It seems to you that the companies founded in the 1950ies and 1960ies were solid ones because you only know the names of the companies that managed to stay afloat for some time and leave an impression. No one remembers the dozens of companies that didn't survive long enough, and all of them failed.
"much of the money still being invested is pouring into the upper echelon of highly valued start-ups like Airbnb and WeWork or younger ones with clear paths to profit," leaving "scores" of previously well-funded startups now struggling to survive."
If they're not a highly-valued (ie speculative) startup, or one with a CLEAR PATH TO PROFIT, why the fuck would/should anyone be investing in them?
-Styopa