[dopeboy]

It's a worrying trend, especially for those of us in startup land. With the Figma deal following through and less companies going public, the assembly line funding model is showing some serious cracks.

Hope it's just temporary.

[paxys]

The entire model of startups taking on lots of VC funding, burning it over a few years to acquire customers and then having a big exit, all without bothering with a business plan or making a single dollar in profit, is basically over.

The reason VC funding is drying up, big unicorns aren't going public and acquisitions are halted is that investors are actually starting to drill into the numbers now, and finding nothing but hot air.

[dylan604]

I'm okay with this. Very little good has come from this. How many of the social platforms would be where they are now if they had to fund themselves differently?

[throwaway2037]

Real question: When will Stripe go public? That has to be the biggest unicorn in years. And barrier to entry is quite high, so they have built a nice moat. I wonder if the VCs push them to go public.

[no_wizard]

its only worrying if you can't make a sustainable standalone business at the end of the day.

Which should be the goal. A major acquisition should have always been seen as a last resort, only preferable to going out of business.

Startups hoping to cash out by selling to a competitor is its own kind of silliness in the first place and was largely fueled by lax regulation environments and 0% interest cash.

What ever happened to building durable businesses as an explicit goal

[dopeboy]

A lot of big businesses don't start off as sustainable ones. So they buy time, through venture capital, to become sustainable ones. This kind of news hurts the chances of that category of companies from being created.

[no_wizard]

I didn't posit that a business should start off as a sustainable one.

I asked what happened to building a durable business as a goal?

I understand the VC model enough to know that sometimes for years you run red because you need economies of scale or some other engine to finally turn over and then at scale the business will start to generate bigger cash flow once it reaches that tipping point. Even if a bit simplified as an explanation, this isn't what I'm talking about.

What I'm asking directly is why exiting to a big company became a goal in and of itself. Lots of VCs poured money into companies with the distinct hope that those businesses would at the very least be acquired. I think this is the silly part. Every investment should be from the perspective of can this be durable if standing on its own two feet? and a big acquisition is not something that should be taken into consideration as part of the investment and business building strategy of either the VC firms or the founders.

That all got lost. Building a durable business should be the ultimate goal, and selling the business to a big company should be seen as lower status than it currently is.

Its not that I'm saying acquisitions don't make sense sometimes, I'm not. However as far as goal setting and running a business is concerned, it shouldn't really be thought about as a viable fallback or exit strategy until its readily apparent and available, but that hasn't been true for some time now. VCs and founders often explicitly look at acquisition as one of their "success targets" and hopes for a business. Lots of people on HN have admitted that they started businesses with some hopes that they could possibly be acquired. That is the drift away from sanity I'm talking about.

[dopeboy]

Understood and apologies for misunderstanding.

Every single founder I know (and I know a lot of them) doesn't build a business for the specific reason to be acquired. Is it a thought that crosses their mind? Definitely. Is it something investors think about? Absolutely.

But the day-to-day, 12 hour+ grind for them is all about product-market fit and drawing revenue - the things that make a durable business.

[izacus]

Which big businesses are that? And how many categories of sustainable mid-sized companies creating a healthy competing market were hurt with VC cash flood, where VC fed companies dumped prices, killed healthy competition and then died themselves (together with whole product categories) when the VCs lost interest because they weren't a unicorn?

[dopeboy]

AirBnB, Uber, Cloudflare to name some.

Those mid sized companies you refer to did fine for three reasons:

* If they were competing against venture backed companies, they were likely playing in big markets. My bet is they are still alive today.

* They got acquired by the bigger companies and ended up capturing even more short term economic value than they would have otherwise.

* These venture backed companies expanded the market, actually helping smaller players. I would bet money that VRBO's business increased as AirBnB got bigger.

I agree that there's something sleazy about injecting a ton of capital in a niche space; at the very least, it's distorts all the dynamics in it. But you can't deny that this short term chaos creates long term economic value for everyone else.

Uber demonstrated you could add a tech layer to the taxi business and make it more efficient for riders + introduce a whole new set of people to the driver business. Did this harm existing taxi drivers? Unquestionably.

I know it's hard to look at that business model as innovation but it is because now there's extreme price pressure on these companies (esp Lyft) to remove the costliest part of the equation - the driver. So as a result, you have a ton of very motivated energy towards solving that, via autonomous driving.

It took mediocre business innovation[0] (uber) to drive meaningful tech innovation (autonomous driving).

[0] - Purposely differentiating the tech innovation (which Uber deserves a lot of credit for) vs the biz innovation (which last I read is getting better, though still shaky).

[x0x0]

> With the Figma deal [falling] through

There's just no world in which the market leader ought to be able to buy their #1 competitor, particularly in a deal where the economics ($10b on $300m rev) only make sense from an anticompetitive standpoint. I have no idea what these folks were thinking.

[adventured]

The longer interest rates remain high, the more the pool gets drained of speculation.

The next up cycle in speculative behavior won't follow until after interest rates hit the floor again (inevitable).

[baq]

If you work at figma this… shouldn’t be a problem?

If you work at a temporarily-not-an-unicorn, no antimonopoly institutions care about you.

[eric-hu]

For the employees at Figma, their shot at cashing out evaporated when the Adobe deal was called off. I know people who were ready to leave Github in the past, but their manager told them to wait a bit, there’s a big acquisition coming and their equity would be worth sizeably more.

So here’s one of those scenarios: you’re working at Figma. Perhaps you’re burned out or just want to try out something different. This acquisition deal with Adobe has been signed and you’re grinding through the days waiting for your chance to cash in on the years of work with Figma that have nearly paid off. Then this happens.

This affects startups similarly. The non IPO exit path got that much less attractive.

[datavirtue]

If your grants at Figma aren't paying yet, they didn't give you anything.

My ETFs are paying me every six months.

[throwaway2037]

> My ETFs are paying me every six months.

Equity ETFs or bond ETFs? If equity, I guess the max you can get is 4% yield, which is still worse that money market, plus you take equity risk. If bond ETFs, they will tank when rates fall. I never understand the appeal of bond ETFs; money market funds are enough for my fixed income needs. They are basic, easy to understand, liquid, etc.

[baq]

> they will tank when rates fall

you mean yields?

the etfs themselves will rocket up.

[dopeboy]

Temporarily-not-an-unicorn companies will need to raise more money to become a unicorn. If those investors don't see light at the end of the tunnel, these companies get squeezed.

[itdoesnotmatter]

I hope not. I'd like to see people start building sustainable businesses intended to last and stop the whole cycle of accumulating users and hoping to get acquired before the funding runs out.

I think the ecosystem is healthier for Figma and Adobe remaining separate.