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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
Anybody stupid enough to invest in Beepi deserved to lose their money.
US Capital Reinvestment is a problem in general. Large corporations and investment firms with $2.5 trillion is in off-shore bank accounts citing that 39.6% corporate tax rate as the reason why they refuse to repatriate the money. We're also still on the tail end of the one of the most abysmal job markets since The Great Depression. Companies and investment firms are still squeezing every last whiplash they can get out of the poor labor market conditions to get more value of existing offerings and employees.
TL;DR there is a lack of incentive for anyone to invest in the US job market and policy makers haven't really done anything to address the problem other than offshoring jobs and hiring H-1B visa's that work twice as hard for half the pay but are also twice as incompetent. Great situation we have in the job market. It's pure insanity.
We'll make great pets
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.
I was working at a local ISP and was pretty much burnt out as there was only 3 of use running an ISP with 4000+ customers and me having do to web design, support and sales. When I finally gave my walking papers in the two weeks before my departure where were 80+ resumes sent it with a big part of them being guys who not a year earlier were running "multi millions worth internet companies" in Yale Town Vancouver which were now defunct. My old employer was like this guy was the ceo of this and that and etc.. He never hired any of them as all they wanted was to get their foot into the door with another internet company.
by TheSpoom (715771) Uncaring Linux user here. I have nothing to add to this but please continue. *munches popcorn*
"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