Current Affairs Stocks and shares and stuff
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DuuuncanHadaPigeon
Player Valuation: £10m
banks going bust because of things the government sold them lol
The signs have been here for a while and the alarm bells have been going off almost a year and the VCs stopped funding.
The lay-offs have been enormous - worse than '08 (apparently) and worse than during COVID. Some of these startups won't see a profit/or expect to for years and so with the set backs in scaling that already exist due to these layoffs, when the VC cash is all used up and there's no chance of another funding round, you potentially have another dot com doomsday scenario because most tech start ups follow the VC-funding route.
lol Oh yes, I remember those all white male boards that did such a fantastic job in 2008!
Just spitballing but SVB not having an official risk officer for 8 months, lobbying to deregulate from the post GFC rules as it supposedly wasn’t a “systemically important“ bank, not hedging their large inflation bets in any way shape or form plus having a bunch of “move fast and break things” tech bros as their primary deposit base might have been a smidge more impactful.
Having lived here in Bay Area for over 20 years including the dotcom boom/bust period I’m slightly hopeful it isn’t going to be quite as bad as post 2000 but that might be misplaced optimism- it is unlikely to be pleasant for a while.
But kinda goes with the economic territory dating back to the gold rush years and the earthquake/wildfire risk adds just another layer - there is a lot of reward to living here but there sure are risks too.
Rook
Player Valuation: £80m
You'd think the industry that tells people they should have money saved up for an unforseen event should listen to their advise
The rapid scaling is problematic too imo. I get it if you're running a platform business as it's only really valuable if it achieves scale as quickly as possible, but the majority of startups aren't platform businesses, yet it feels like they're being forced into rapid growth by VCs desperate for a return on their investment rather than taking a more gradual, profit-based path towards growth. If I can remember the study I'll dig it out, but it basically showed that when startups stayed in (I want to say Pittsburgh, but my memory...), they pursued a more profit-driven growth strategy and were not only more likely to survive but were also more likely to employ locals and generally be beneficial to the local community than those startups who were persuaded to head west to the Valley and pursue a debt/equity fuelled growth strategy that aimed for scale as quickly as possible.
It would be interesting to read that, actually.
You're right about rapid scaling being an issue and as a wider point, it's created the need for mass redundancies in order for companies to survive more so than economic conditions. That's so wrong and I also fear it's creating a culture of redundancies becoming normalised in the industry and by senior leadership teams as either profits don't materialise (fine) or they burn through their funding too quickly.
Organic growth seems obvious, but you're never going to be the next big thing without early investment.
Turns out it was Detroit. I got my rustbelt cities mixed up
There's also this https://journals.sagepub.com/doi/abs/10.1177/10422587211059991
Thanks, Bruce. I've a quiet week - hiring freeze
so I will look at this.
It feels like the same patterns play out again and again. Bubbles through history are nearly always based in "tech" (albeit what is the newest tech tends to change).
The reality is, the world doesnt change that much, doesnt change that quickly, and even where it does the number of companies who survive to benefit is very small.
We have had 10+ years of low interest rates, huge over valuation which has allowed managements of companies to keep companies going on the back of share dilution and cheap credit.
The worry is, the current valuations for these stocks is unsustainably high, using different metrics. In most they are in and around the dot.com level of over valuation. The US government bailing out these debts seem to be standing in the way of what needs to happen.
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