Imagine half of your vendors/customers are insolvent. Is this good?

Of course, many startups' customers are not other startups.

In YC it often is. You are almost expected to prop up other YCs companies with your funds. If everyone buys each others services everyone can show their super duper growth and nobody lost anything (except VCs who invest later).

On the other hand, many are.

Exactly. It will be interesting to see who and what gets shutdown in the next 30 days if the issue isn't rectified.

Are they good people? If they aren’t then yes it’s excellent!

Do all start-ups only sell stuff to other start-ups? If yes, that's their problem right there.

Money laundering is a great gig until someone launders too much.

That’s why there’s a vendor word in my reply

So if you're B2C (not B2B) and you only have 1 or 2 non-vital vendors that are likely to be impacted?

If your competitors can't pay their employees you can poach them for very cheap if they are desperate to make rent or mortgage payments. So more sensible competitors might even benefit from the stupider ones.

provided their main customer base is not from the area or the sector then it's pretty fantastic for them, especially if they had significant competition in their business model and many of those competitors are now insolvent

Yes, at least in the very short-term, at least to a limited extent.