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Silicon Valley & # 39; s Mantra of Spend Big, Grow Fast? It is changing



SAN FRANCISCO – Fred Wilson, a venture capitalist at Union Square Ventures, recently published a blog post titled "The Great Public Market Reckoning." In it, he argued that the narrative that had driven the startup hype and value judgments for the past decade has now fallen from each other.

His post was quickly wiped out over Silicon Valley. Other venture capitalists, including Benchmark's Bill Gurley and the Foundry Group's Brad Feld, soon weighed in on their own fiscal responsibility warnings.

At some startups, entrepreneurs began to behave more cautiously. Travis VanderZanden, CEO of scooter startup Bird, stated at a San Francisco tech conference last week that his company was now focused on profits and not growth. "The challenge is trying to be disciplined," he said.

The movements point to a new gospel that is beginning to spread in the country of origin. Over the past decade, young technology companies were driven by a wave of risk-averse capital-financed profits, which encouraged rapid growth above all else. But now, some investors and start-ups are starting to rethink this mantra, calling for profits instead and generating "positive unit economics" as their new priorities.

She added that she expected a "ripple effect" on private startup assessments that would start with the largest, most valuable companies and trickle down to the smaller, younger ones.

For startups and investors who were used to tough times and big expenses, that means it may be time for a reset.

Aileen Lee, an investor in Cowboy Ventures, a venture capital firm in Palo Alto, California, said she was considering dusting off a four-year-old "winter is coming" email she had sent to start-ups in 2015 asking they are preparing for a downturn. She has not resurrected the warning yet, she said, because "I worry about being the boy who cried wolf."

The event was intended as a way of shocking newcomers to reining in costs to survive the decline. Sequoia's presentation quickly became talk of Silicon Valley, which did not fall into as deep economic funk as other parts of the United States.

Yet other alarms about the state of the startup economy fell on deaf ears. [19659002] In 2015, as newly established unicorns sucked in billions of dollars in funding and rose to stratospheric valuations, Mr. Gurley of Benchmark lamented "the complete absence of fear" in Silicon Valley, saying that "dead unicorns" would soon emerge. In 2016, Jim Breyer, a venture capitalist who was an early Facebook investor, also predicted "blood in the water" for the unicorns.

However, the money continued to flow into tech start-ups from foreign investors, private equity companies, companies and SoftBank's Wisdom Fund. This allowed the entrepreneurs to order higher valuations and delay publication. By the end of 2018, start-ups in the United States had raised $ 131 billion in record funding, surpassing the amount raised during the late 1990s dot-com boom, according to Pitchbook and the National Venture Capital Association.

Mr. Gurley gave up his warnings of excess. "You have to adapt to reality and play the game on the field," he said in an interview last year.

(Complaining about high valuations is a long-standing pastime among venture capitalists, of course, since most people prefer to invest their money in low-cost start-ups rather than expensive ones.)

This year, the warnings are revived. In his recent blog post, Mr. Wilson wrote that many of today's startups are focused on traditional physical industries such as real estate, exercise or transportation. They should not command high valuations that pure software companies – which tend to have less overhead – have written, he wrote.

In several exchanges of messages, Wilson said that he has already seen that since the start of criticism of WeWork over the past month, some start-up funds for lower valuations and with more stringent terms than the companies had hoped.

"What I want to see is a little more rationality, and I hope I get it," he said.

Late last week, his words seemed to sink elsewhere.

At a startup conference held by the tech publication TechCrunch at a convention center in San Francisco, around 10,000 founders, investors and "innovators" interviewed some more well-known founders, investors and "innovators" from a dark, cavity. On the scene, entrepreneurs lamented the unforgiving stock market and the challenging investment environment.

Postmates, a food delivery startup that confidentially submitted to go public in February, participated in the confab. The company has not yet gone public because the markets have been "choppy when it comes to growth companies," Bastian Lehmann, PostCamera's CEO, said at the event.


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