Team-BHP (https://www.team-bhp.com/forum/)

-   Shifting gears (https://www.team-bhp.com/forum/shifting-gears/)

-   -   Startup shenanigans (https://www.team-bhp.com/forum/shifting-gears/169994-startup-shenanigans-8.html)

Hope the reduced staff strength results in lesser number of pestering marketing calls - promising the moon and what not for your children- delivered directly to home, through the benign agency of BYJU’S.

Despite appreciating the innovation it brought into the ed-tech space, the company gets on my nerves because of the tactics it uses to capture the target groups.

For Tech Startups, the Party Is Over

Funding is suddenly scarce as venture capital firms grow stingy, forcing young companies to get frugal and focus on breaking even

https://www.wsj.com/articles/for-tec...er-11652710330

VC money is finally drying. Time for correction to start.

Paytm Mall’s Valuation Has Fallen From Rs. 21,000 Crore To Rs. 100 Crore In 3 Years

https://officechai.com/startups/payt...re-in-3-years/

There should be a law against claiming insane valuation without hard numbers.

Replace the word "valuation" with "speculation" and it'll sound about all right.

I wonder what PayTM's eccentric Founder/CEO has to say though.

As an insider in the startup ecosystem, all I can say is the next 18-24 months will be the worst.

Few top VCs have clearly said, no more cheques, reduce burn, conserve cash or perish. No more crazy valuation, no more free money flowing.

Startups who have raised their funding in the past few months have a chance to survive the downturn. The ones who are in the market to raise funds are getting a big "NO" from all avenues.
Some of them are in such bad shape, that I feel for their employees. We will be seeing multiple startups shutting down in the next few months and layoffs will reach thousands.

The era of ridiculous hikes and shopping for multiple offers is over, candidates are already feeling the effects and most of them want to stay put than take chances with a new job offer.

US market is already dead and we are just beginning to see the impact in India.
It's not all doom and gloom, India has a strong consumer base. Startups with good fundamentals and the right product will still raise good money, but they will not be able command good valuation.

Quoting myself.

Healthtech startup MFine lays off over 500 employees amid funding crunch

Just another startup laying off bulk of their employees. The number is close to 75% of their employee base.

This is a 5 year old Series C funded startup which had raised more than $80M with last round of $48M coming in July 2021. They have blown through INR 350cr in less than a year. What will happen to those employees who had such high hopes when they joined, the job market is already dead and losing a job in this downturn is brutal.

Most startups are just opportunistic copies of some successful ideas from the west. Founders mostly dilute their ownership and get as much cash as possible out of the system at the expense of investors. Employees also join startups for high salaries. I am yet to see an Indian employee who will accept equity/options in lieu of part of the salary. This is a clear indication of nobody believing in the company. Investors don't care either - they just want to hit one jackpot out of ten investments - the remaining nine can be dud. They just don't know and don't care which one is which.

I am exaggerating and generalising a lot but this is more or less how startup ecosystem works here. Hard to feel sorry for anyone. Hope these employees who are being laid off haven't taken fancy loans based on their fat pay cheques.

Didnt these employees know they are joining a startup? They had a choice to stay at a stable job with lower salary or get into the startup with 100 or 200% hikes. They were blinded by the crazy salaries but they need to understand that these companies are always in "go big or go bust" mode.

Honestly, with the kind of attitude shown my some during(or after) interviews the last few months, I have little empathy for them. I am waiting for a T-bhp thread where these same guys who ghosted employers ( with 3-5 offers) 1 day before joining will now be wailing about layoffs and how unfair employers are.

There are a few who are exceptionally talented and can command huge salaries and get another job easily, but the last wave was just lifting anyone and everyone.

Absolutely, a quick back of the envelope calculation will give anyone the state of the startup they will be joining. Most of these data is available on the net. But how many of them do that little diligence to have a secure future?

Personally, I was offered ridiculous numbers in the past year and even early this year. I had to say NO as I have had close relationship with the startup ecosystem since 2012. I know what works what doesn't.

I am particularly careful with high burn consumer startups, they add little value to the society and at the same time introduce long lasting behavioural change in consumers.

Case in point: the quick commerce startups. Consumers were perfectly happy to get their essentials delivered on same day or next day. The cash rich quick commerce startups started offering 10mins delivery with the lure of discounts. I know of many of my neighbors who are so enamored by these delivery timelines that they don't bother to shop for their groceries the way they used to. These are the ones who mostly crib about climate change and pollution, while being grossly negligent of their acts.
I can guarantee most of these will falter as quickly as their promised delivery times.

There are good startups all around with strong fundamentals and they deserve all the help they can get. But with the blind sided FOMO that enveloped all VCs in the past year, these good ones did not get their due as they focused on profitability than growth.

My 2 cents based on my enthusiastic ex-start up and now working in one.

The primary aim for a start up is to acquire as much of a larger customer base as possible and for this they over resource each department till they get the numbers. If a certain feature requires to be updated and it would normally take 1 month, it is done in 15 days due to additional resources. If there is a certain prospect/lead for a product, a start up aims to be the first one to reach the customer (For which a high number sales team is required)

The start up climbs the ladder of growth at a rapid scale to a point that it's investors now need to be shown a breakeven point let alone any profits.

That's when lay offs happen.

This scenario comes into picture because the final leg of the growth chapter of the start up is getting customer loyalty. Meaning, almost every consumer has both the competitors app. You will have swiggy as well as Zomato, Ola and Uber, Amazon and Flipkart and so on...
So whichever start up gets to hang on to more customers, leads, while the other falls.

As far as the VC's are concerned, they have their fingers in multiple jars and hence won't hesitate to pull out to invest in a more promising venture.
At times it is also seen that giants like Sequoia Capital and Tiger Global investing in the same company.

Researched Resources - https://yourstory.com/2021/06/15-ind...nvestments/amp

Its not like funds have dried up but valuations will get a reality check in next 1-2 years. Era where an early / mid stage VC picks up shares at high valuation and passes on the the late stage VCs / PEs has come to halt,

All biggies have not been able to provide returns, be it on the profitability path, acquisition path or IPO path, and when late stagers are not getting value for their $$ they will not accept deals at share prices which they were ok with few years ago,

Players like Tiger which used to enter late in majority of cases is looking to enter companies at valuations of 100-200M $

Funding basis of growth on cost of burn and fancy stories will cease to happen and fundamentally strong models will survive

Tiger Global is down 44% and has already lost 16 Billion Dollars of client money.

https://markets.businessinsider.com/...oldings-2022-5

So would it be a good idea to join a startup in current environment, for someone who has a stable job in a large MNC? Understand current employees are being laid off, but will that impact new joinees as well? Why would a startup hire to fire in a few months?


What kind of fundamental analysis would you suggest? Revenue generating model? Operating income?

So true. I work with one of the start up eco systems in Hyderabad.

We see lot of companies struggling to pay salaries to employees. Some of the companies haven’t paid office rents for more than 6 months.

Funding for start ups has become very tight. Investors are now focusing more on business models than just start up ideas.

Most investors/ VC’s just pumped in so much money into start ups expecting them to become big, huge packages for employees and financial mis management is the main reason for this situation.

It so scary if we look at the amount of money pumped into start ups in the last four years. Now if we compare the outcome it is less than 2 % of what was invested.

Since this is a public forum, we can’t disclose more details. Most of the advertising budget of new crypto companies came from investors and the end result is a huge disaster.

Very tough 2-3 years ahead for all budding start ups.

Depends on your appetite, role offered, your interest, founding team & industry, it is not a unidimensional thing. Sector, founder, investors on board behave differently and their interactions are subjective, so I would not be able to suggest over this medium,

But in general startups are for someone with risk appetite, extreme passion to his/her field and hunger to succeed, and not just numbers,

People interest in startups following paychecks are destined to fail, in-fact the most successful people I know are the ones who were passionate about creating things and worked at anywhere between 40%-70% of their market value (which they would have got in Flipkart/ Amazon /ITC / HUL etc.)