Startup Decoupling and Reckoning(blog.eladgil.com)
blog.eladgil.com
Startup Decoupling and Reckoning
https://blog.eladgil.com/p/startup-decoupling-and-reckoning
6 comments
I hope startup founders read this and internalize it. Those who raised at 100x multiples and think "this will not happen to me" might be for a rude awakening a year from now.
Does this partially applies to corporations as well? All the moonshot projects or even just new non profitable projects will get cancelled for the same fundamental reasons - no cheap money.
Successfully established businesses have a "real" income stream stemming from market activities, and aren't directly dependent on external "cheap money", except as a second-order derivative.
i.e. If the primary market you cater to is comprised of startups, then your business will also be affected by the crunch inasmuch as you're dependent on revenue from those [now dryer] markets.
Businesses who may not be substantially directly impacted can be expected to become more timid, cautious, and fearful in general. This can easily translate to re-focusing on things the organization has strong core domain expertise in and less on risky exploratory development.
i.e. If the primary market you cater to is comprised of startups, then your business will also be affected by the crunch inasmuch as you're dependent on revenue from those [now dryer] markets.
Businesses who may not be substantially directly impacted can be expected to become more timid, cautious, and fearful in general. This can easily translate to re-focusing on things the organization has strong core domain expertise in and less on risky exploratory development.
Meta is an instructive example of how this might apply to large companies: those which show little income after frivolous expenses may see their valuation tank, impacting total employee compensation which depends on high prices. These companies may want to free up cash flow to spend on buybacks instead of moonshots, causing them to cut down projects.
However, they don't have a $0 in the bank account clock running like many startups may.
However, they don't have a $0 in the bank account clock running like many startups may.
my interpretation of this is that the tech recession will take a long time to enter into and the winding down of tech is going to take several years at least.
There will be no winding down of tech.