Tech faces hour of reckoning as fundraising drops, layoffs rise

Re:Tech faces hour of reckoning as fundraising drops, layoff... by JonFish85 on Monday January 18, 2016 @09:09AM (#10924427)

That's the trick of it though: it doesn't take long for the bottom to fall out. Sure, it'd be great if everyone could be patient and wait 4-6 quarters, to take a broader picture and react accordingly. Unfortunately, startups are built on the idea of extremely fast growth, which means that quick changes that affect several companies could very well be the harbinger or something bad. All it takes is a couple of bad months, and the dominoes could really start to fall.

So yes, patience is surely a virtue. But it's probably worthwhile to be vigilant because it doesn't take long to fall hard from the peak.

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Re:Tech faces hour of reckoning as fundraising drops, layoff... by woah on Monday January 18, 2016 @10:24AM (#10924854)

Well, really, these startups should be able to show this quick growth without constant infusions of cash. I thought that the point of all the money was to keep ahead of the competitors who are also raising a lot, not as a baseline of operations.

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Re:Tech faces hour of reckoning as fundraising drops, layoff... by api on Monday January 18, 2016 @11:45AM (#10925357)

That's the trap many have gotten into. They raised to keep up with the Joneses, but if you raise it now you have to spend it. Now your baseline is higher and if your growth is not utterly insane or if you can't monetize it quickly enough and have to raise again, you are now potentially toast.

It's infinitely easier to raise spending than cut it. The latter involves morale crushing things like layoffs and telegraphs an outward appearance of failure that drives off customers and future hires.

Startups that have avoided this trap or who have a model that converts into revenue more easily than "get users and pray" might be fine, but I think a lot of unicorns and want to be unicorns with bricks strapped to the accelerator are about to be turned into glue.

But unicorn glue is great. It's sparkly and can bond any surface. :)

Edit: of course the wildcard here is the question of how economically incestuous the startup world is this time. That's what made the landing so hard in 2001. We know there are some startups that mostly serve startups, but nobody knows the percentages.

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