Originally Posted By maleante:
NYT article essentially describing that the signs of what’s coming were visible late last year.


https://archive.ph/2022.05.11-100240/https://www.nytimes.com/2022/05/11/technology/tech-start-ups.html


By Erin Griffith
Erin Griffith, who covers start-ups and venture capital, has reported from the San Francisco Bay Area since 2018.
May 11, 2022, 3:00 a.m. ET

Start-up workers came into 2022 expecting another year of cash-gushing initial public offerings. Then the stock market tanked, Russia invaded Ukraine, inflation ballooned, and interest rates rose. Instead of going public, start-ups began cutting costs and laying off employees.
People started dumping their start-up stock, too.
The number of people and groups trying to unload their start-up shares doubled in the first three months of the year from late last year, said Phil Haslett, a founder of EquityZen, which helps private companies and their employees sell their stock. The share prices of some billion-dollar start-ups, known as “unicorns,” have plunged by 22 percent to 44 percent in recent months, he said.
“It’s the first sustained pullback in the market that people have seen in legitimately 10 years,” he said.
That’s a sign of how the start-up world’s easy-money ebullience of the last decade has faded. Each day, warnings of a coming downturn ricochet across social media between headlines about another round of start-up job cuts. And what was once seen as a sure path to immense riches — owning start-up stock — is now viewed as a liability.
The turn has been swift. In the first three months of the year, venture funding in the United States fell 8 percent from a year earlier, to $71 billion, according to PitchBook, which tracks funding. At least 55 tech companies have announced layoffs or shut down since the beginning of the year, compared with  25 this time last year, according to Layoffs.fyi, which monitors layoffs. And I.P.O.s, the main way start-ups cash out, plummeted 80 percent from a year ago as of May 4, according to Renaissance Capital, which follows I.P.O.s.
Image
An Instacart shopper at a grocery store in Manhattan. The company slashed its valuation to $24 billion in March from $40 billion last year.
An Instacart shopper at a grocery store in Manhattan. The company slashed its valuation to $24 billion in March from $40 billion last year.Credit... Brittainy Newman/The New York Times

Last week, Cameo, a celebrity shout-out app; On Deck, a career-services company; and MainStreet, a financial technology start-up, all shed at least 20 percent of their employees. Fast, a payments start-up, and Halcyon Health, an online health care provider, abruptly shut down in the last month. And the grocery delivery company Instacart, one of the most highly valued start-ups of its generation, slashed its valuation to $24 billion in March from $40 billion last year.
“Everything that has been true in the last two years is suddenly not true,” said Mathias Schilling, a venture capitalist at Headline. “Growth at any price is just not enough anymore.”
The start-up market has weathered similar moments of fear and panic over the past decade. Each time, the market came roaring back and set records. And there is plenty of money to keep money-losing companies afloat: Venture capital funds raised a record $131 billion last year, according to PitchBook.
But what’s different now is a collision of troubling economic forces combined with the sense that the start-up world’s frenzied behavior of the last few years is due for a reckoning. A decade-long run of low interest rates that enabled investors to take bigger risks on high-growth start-ups is over. The war in Ukraine is causing unpredictable macroeconomic ripples. Inflation seems unlikely to abate anytime soon. Even the big tech companies are faltering, with shares of Amazon and Netflix falling below their prepandemic levels.
“Of all the times we said it feels like a bubble, I do think this time is a little different,” said Albert Wenger, an investor at Union Square Ventures.
On social media, investors and founders have issued a steady drumbeat of dramatic warnings, comparing negative sentiment to that of the early 2000s dot-com crash and stressing that a pullback is “real.”
Even Bill Gurley, a Silicon Valley venture capital investor who got so tired of warning start-ups about bubbly behavior over the last decade that he gave up, has returned to form. “The ‘unlearning’ process could be painful, surprising and unsettling to many,” he wrote in April.
The uncertainty has caused some venture capital firms to pause deal making. D1 Capital Partners, which participated in roughly 70 start-up deals last year, told founders this year that it had stopped making new investments for six months. The firm said that any deals being announced had been struck before the moratorium, said two people with knowledge of the situation, who declined to be identified because they were not authorized to speak on the record.
Other venture firms have lowered the value of their holdings to match the falling stock market. Sheel Mohnot, an investor at Better Tomorrow Ventures, said his firm had recently reduced the valuations of seven start-ups it invested in out of 88, the most it had ever done in a quarter. The shift was stark compared with just a few months ago, when investors were begging founders to take more money and spend it to grow even faster.
That fact had not yet sunk in with some entrepreneurs, Mr. Mohnot said. “People don’t realize the scale of change that’s happened,” he said.
Image
Sean Black, the founder and chief executive of Knock. “You can’t fight this market momentum,” he said.
Sean Black, the founder and chief executive of Knock. “You can’t fight this market momentum,” he said.Credit...Jeenah Moon for The New York Times

Entrepreneurs are experiencing whiplash. Knock, a home-buying start-up in Austin, Texas, expanded its operations from 14 cities to 75 in 2021. The company planned to go public via a special purpose acquisition company, or SPAC, valuing it at $2 billion. But as the stock market became rocky over the summer, Knock canceled those plans and entertained an offer to sell itself to a larger company, which it declined to disclose.
In December, the acquirer’s stock price dropped by half and killed that deal as well. Knock eventually raised $70 million from its existing investors in March, laid off nearly half its 250 employees and added $150 million in debt in a deal that valued it at just over $1 billion.
Throughout the roller-coaster year, Knock’s business continued to grow, said Sean Black, the founder and chief executive. But many of the investors he pitched didn’t care.
“It’s frustrating as a company to know you’re crushing it, but they’re just reacting to whatever the ticker says today,” he said. “You have this amazing story, this amazing growth, and you can’t fight this market momentum.”
Mr. Black said his experience was not unique. “Everyone is quietly, embarrassingly, shamefully going through this and not willing to talk about it,” he said.
Matt Birnbaum, head of talent at the venture capital firm Pear VC, said companies would have to carefully manage worker expectations around the value of their start-up stock. He predicted a rude awakening for some.
“If you’re 35 or under in tech, you’ve probably never seen a down market,” he said. “What you’re accustomed to is up and to the right your entire career.”
Start-ups that went public amid the highs of the last two years are getting pummeled in the stock market, even more than the overall tech sector. Shares in Coinbase, the cryptocurrency exchange, have fallen 81 percent since its debut in April last year. Robinhood, the stock trading app that had explosive growth during the pandemic, is trading 75 percent below its I.P.O. price. Last month, the company laid off 9 percent of its staff, blaming overzealous “hypergrowth.”
SPACs, which were a trendy way for very young companies to go public in recent years, have performed so poorly that some are now going private again. SOC Telemed, an online health care start-up, went public using such a vehicle in 2020, valuing it at $720 million. In February, Patient Square Capital, an investment firm, bought it for around $225 million, a 70 percent discount.
Others are in danger of running out of cash. Canoo, an electric vehicle company that went public in late 2020, said on Tuesday that it had “substantial doubt” about its ability to stay in business.
Image
Baiju Bhatt, left, and Vlad Tenev, founders of Robinhood, at the New York Stock Exchange last year for the company’s initial public offering. Robinhood recently laid off 9 percent of its workers.
Baiju Bhatt, left, and Vlad Tenev, founders of Robinhood, at the New York Stock Exchange last year for the company’s initial public offering. Robinhood recently laid off 9 percent of its workers.Credit...Sasha Maslov for The New York Times

Blend Labs, a financial technology start-up focused on mortgages, was worth $3 billion in the private market. Since it went public last year, its value has sunk to $1 billion. Last month, it said it would cut 200 workers, or roughly 10 percent of its staff.
Tim Mayopoulos, Blend’s president, blamed the cyclical nature of the mortgage business and the steep drop in refinancings that accompany rising interest rates.
“We’re looking at all of our expenses,” he said. “High-growth cash-burning businesses are, from an investor-sentiment perspective, clearly not in favor.”

Originally Posted By VooDoo3dfx:


Start up companies go first then long term more established start massive layoffs?

Originally Posted By Cataly5t:

Yep, no office supplies, computers, network gear, furniture, advertising and more vacant office space.  All the job losses means much less consumption and more stress trying to pay the mortgage or rent.  Think reduced sales at amazon and fewer buying teslas.

In the dot com implosion people thought they were safe in the "blue chip" tech companies like Cisco, Microsoft and sun.  Turns out the blue chips made a lot of their money off dot frauds like pets.com.  

Another bad idea was that people didn't want to sell and pay capital gains, figuring they would ride things out even though they knew things were overvalued.

Originally Posted By VooDoo3dfx:


Start up companies go first then long term more established start massive layoffs?

Originally Posted By maleante:
Terraluna subreddit full of suicide talk today.

https://i.imgur.com/6jOo9Im.jpg

Does that person not have a day job to cover his expenses should what happened have happened? Sheesh.

Originally Posted By Cobradriver:



At least the RTC absorbed bad banks, sold viable assets, and liquidated the rest.

I have a guy I know through a local car scene that was hired to liquidate an Atlanta area bank during the last ordeal. He has stories that gives you a headache.

Final tally when completed ???  Roughly 20 cents on the dollar. Yep, the bank had managed to have it's total assets decline by 80%.

Another crazy story...guy above had a friend hired to liquidate a midwest bank. When she started going though the books, she found collateral for a loan that was 100K pounds of frozen turkeys. Not only that but the bank was paying storage fees. She ended up donating all the birds to local food banks because of the hassle of trying to get them to market. Yep...that loan was over a 100% loss....

The stupid knows no bounds in society.

Originally Posted By JamiesGotAGun:
I've seen this movie.  I think it was about 14 years ago.

Spoiler alert: It doesn't end well.

Originally Posted By gehrig:
People hang themselves with leverage

30k millionaires all over the place

.gov does the same with printing

Sacrifice and delayed gratification is a lost practice

I hate these mfers with everything inside of me

Originally Posted By Cataly5t:

Yep, it's why I'm short banks among other things.  I have no first or second hand knowledge of what's on their books, I just know dumb companies with retarded business models, real estate, crypto and digital "art" got bid up to the moon.  Stevie wonder could see this train wreck from a mile away.

Originally Posted By Bohr_Adam:


It ended awesome.

Originally Posted By maleante:
Terraluna subreddit full of suicide talk today.

https://i.imgur.com/6jOo9Im.jpg

Does that person not have a day job to cover his expenses should what happened have happened? Sheesh.

Originally Posted By BustinCaps:

How? Anyone leveraged on adjustable rates right now when captain obvious has been drawing pictures of rising rates with crayons all over our economy the last two years deserves the beating.  Fixed interest rate leveraging via mortgage? Perfect. A paid off house is a suckers game.

Originally Posted By _200mph:

2008 didn’t turn into a great depression because banks were bailed out and money was printed.
We didn’t have inflation back then.

1 - Will FJB bail out the ‘evil banks’.
Possibly
2 - Can we print out of it with inflation?
Absolutely not.  Like putting out a fire with jet fuel.

Originally Posted By colt_thompson:


The vacant office space will lead to massive commercial loan defaults similar to the old Resolution Trust days of the late 1980's- early 1990's.