The era of startups isn't over. The era of low quality startups certainly is though, which is basically the point this article makes at the end among the general doomery. This in my opinion, is great news.<p>Being a startup can be conceived of as one possible path taken as an early phase in the business cycle, hard to see that changing. What is changing is now you have to be more realistic about justifying to others that you can be quickly scaled for a return. You need to have high natural growth underlined by great unit economics and the right plan to utilize capital to super charge that. Free money just meant wider bounds to take risks, which in a lot of cases turned into mediocre business. This is bad for everyone involved, VC down to consumer.<p>You now need to be more realistic about what is a lifestyle business or something that can be bootstrapped into a solid medium sized business through slow methodical growth instead of taking capital, flailing, reducing the product quality in a bid to survive, harm consumers and then dying anyway.<p>What I think this does harm unfortunately are moonshots, now you'll need to be even closer to some idealized SaaS with easily digestible metrics and plans to get funding. I imagine it's very very hard to separate a true moonshot that will succeed and revolutionize vs bunk and the risk profile has changed a lot, and quickly.<p>As a side note I also hope this reduces startup solely as a vehicle to acquisition and restores some novel public companies being created.
Shallow ahistorical analysis.<p>Apple and Microsoft were born in the oil shocks of the late 70s and survived Volcker’s high rates through the early 80s.<p>Google barely took off before the tech crash wiped out the Valley in 2001.<p>Many companies we use today were young and dicey affairs during the 2008-2009 financial crash.<p>Just because the bloom is off the rose, and both VCs and financial tourists like Tiger are overfunding fewer ideas, doesn’t mean the fundamental engine of innovation leading to huge companies is dead.<p>Quite the contrary. The engine is still ticking, but there is less noise.
That's just an intro. I was expecting to scroll down to graphs of startup rates and VC returns. But no. He just makes the statement with no backup.<p>So, is this a legit claim?
Contrariwise, it's never been easier to bootstrap a solo or <5 person business.<p>Given the profound malinvestment and market distortions groups like SoftBank/WeWork and FTX/Theranos/AirBnB/A16Z have created I frankly say good riddance.
It’s a healthy thing. Getting back to building on bootstraps means building fundamental value again. If that scares you, or makes you think we are doomed, you might think twice about that perspective.<p>Downmarket trends make companies solve real problems that <i>generate real revenues</i> and get rid of the easy money that supports unsustainable business models.<p>They clear out of cruft of technologists who only come to the valley for the high salaries and push common sense technology frameworks that are more focused on productivity than large scale Enterprise-style collaboration to the forefront.<p>They force essential effort to be applied due to scarcer resources, and discourage frivolity by punishing financial schemes and forcing businesses to focus on the bottom line.<p>I’d love to see some fundamental restructuring so new generation players can emerge, and unfortunately, in order for the new to come to market, the existing system needs to be shaken up a bit.<p>Downmarkets are hard, but we need them.
I think you are confusing the era of startups with the era of VC bubble/ponzi economy.<p>Startups are a symptom of technology advancing, the basic human psychology of desired progress and dissatisfaction, and an economic system.<p>Macro policy can warp startup priorities on average but it can't stop them without stopping the whole economy.
I actually don't buy this.<p>Lurking in the background is analogy to e.g. car manufacture. There was an era of fomentation, followed by an era of consolidation. Eventually, we wound up with a handful of automakers.<p>But the market for software is fundamentally different. For one thing, there is not the same reliance on mass labour, nor is there significant material cost; nor is there the need to maintain a sales network.<p>Sure, there are always network effects which replicate some of the momentum/inertia of a physical-goods market, and yes, ZIRP was one heck of an accelerant, and it's not coming back soon.<p><i>But</i> software has not finished eating the world. It might not even be halfway through, as AI has opened up new regions of the (if you will) 'carcass' for software to ingest (much as fire and the cooking of food opened up new nutritional pathways for humans.) And even when software is <i>finished</i> eating the world, opportunities for disruption will remain plentiful, as incumbents will have a hard time maintaining moats.<p>Now, that said, I expect three things to happen in tandem: (1) the average software engineer salary will stagnate or decline; (2) credentialism, long foreign to the industry, will begin to creep back in; you'll see CS and Eng degrees rise in importance, along with more situation-specific certifications; (3) the average market cap of startups (specifically: SaaS startups) will decline, along with growth cadence.<p>This isn't death. It's just middle age. A touch of grey, as Jerry Garcia put it.
I agree with the vibe of this article. The difference between today versus historical periods of high interest rates is that today there are multiple mature billion/trillion-dollar tech companies, and also a huge population of entrepreneurs who have either tried your idea already, or are in a better position to execute your idea than you.
If I had a dollar for every time someone comes out with dire predictions for startups or the greater economy, I'd be proverbally rich. 1987, 1989, 1993, 1998, 2001, 2007, 2012... 202x... All years during which a 'correction' occurred. In 2001, the intertubes imploded during the internet crash. But it was anything but fatal, despite two of every three startups failing.<p>When GDP is so high, it creates a momentum that does help every sector. One thing that would help would be an administration that is pro-business and doesn't pick winners and losers. Maybe leadership that has an idea of what economic theory means.
The headline and article are unnecessarily hyperbolic. It’s not “over” but yes if you’re trying to found a startup with a high burn rate and little prospects to be unit economics positive it’s going to be a rough ride. For new startups the bad ideas will just get filtered out earlier and not get funded. The ones that will have the most pain are later stage startups funded during period of excess that now have little future prospects and with no chance of raising the funds they need to keep going. Thats where we’ll see fire sale acqu-hire M&A activity or just flat out implosions.
> the high interest rates are here to stay, and it will be years before investing in startups becomes profitable again and startups will have money to spare<p>I admit that I don’t want this to be true. I want my own startup. But…how can you possibly know this? Nobody knows how long the interest rates will stay high and nobody knows what new companies will emerge in the future and how profitable their economic model will be. For all we know, investing in startups will be even more profitable than it was in the past. The article was light on details…
What changed? Is it the interest rates? The saturation of the market? The reduction of RoI? The competition that reduces available capital for whomever wants to jump?<p>I'm willing to believe that statement, I'm sure there can be tons of arguments made to back it up, lots of data to be seen, but there's none in this post and we're left to guess with a generic Ray Dalio economics video.<p>The general self-substantiation of that post doesn't blend well with its general snarky "o, sweet summer child" tones.
This reads like someone who think startups are structurally dependent on infinite VC money or loose spending due to low interest rates, perhaps because the writer's business is impacted. Nothing about rising interest rates prevents the formation of new businesses. Many great internet businesses were founded in 2008 (Airbnb, Uber, Whatsapp, etc). Let's not forget that businesses are supposed to make money, and it doesn't require that much capital to start a software business.r
I read is kind of thing in the 90s. It’s just the frothy bullshit is in abeyance (another commenter used the term “tourists”). Solid companies are still starting.
Startups that were propped up by “cheap money” are gonna fail faster now that interest rates are high(er). But there’s nothing to indicate a fundamental shift has occurred. The system, policies, and values that have led to the era of “cheap money” are here to stay. It’s really the era of fiscal responsibility (and non-dramatic titles ) that is over.
I think I missed the part where they support the title of the post with some arguments.<p>> as tough for any Web2 startups outside of AI (and soon for them too)<p>says who?<p>> And it will get worse because new funds are (not) being raised right now,<p>Wait are they or they aren't? And is there some data to support this? I am not saying it's incorrect but it'll be good to support this with some sources.
This seems like a perfect post to engage on solo entrepreneur and indie hackers and bootstrapper that have basically more space to thrive and we love the idea that we don't need to have VC money to launch and build a great product that can turn into an amazing business!
It is not the End of Startups. It is the end of "free Money" from boomers savings, that now are retiring and need the money.<p>Startups will have to be profitable and auto finance themselves, like it has been normal for companies in the past.<p>They will need to find a way to create value and survive sooner. It will make for smaller and slower growth companies but also more stable.
> And I'm not even talking about Web3, where we’re working, the situation is already just as tough for any Web2 startups<p>There is no such thing as "Web2". Into the trash it goes.