The bubble of startups started to swell, the technosphere froze in anticipation

Shortening, closing, uncertainty. After a decade of prosperity, many young companies face significant financial difficulties. The industry, which in recent years has been a major job creator in post-industrial countries, has begun to decline. The biggest payers are those companies that once found themselves among the biggest high-tech companies.

“It feels like reckoning”, says venture capitalist from Lux Capital, Josh Wolfe.

The engine of the rapid development of various startups was investor money. In the US alone, they have invested $ 763 billion over the last decade, which allowed startups not to worry about their earnings, they could spend money buying assets, destroying competitors without investing infusions.

Today, over the past four months, about 30 startups globally have cut more than 8,000 employees. Investments in young companies decreased to 2016 levels. Startups that are already running reduce the availability of their services and services. For example, the Lime electric scooter rental service has left some cities. Companies such as Brandless, HQ Trivia, Essential Products, are closing.

“There are easy moments of panic when one thing happens after another”, says Bloomberg investor Roy Bahat. – At some point, one stone after another will fall from the cliff, and we will realize in many companies that we are not standing for something”.

Problems began to be felt as early as 2019, when many unicorns (so-called $ 1 billion companies) failed to show growth on Wall Street. For example, Uber and Lyft, which lose billions of dollars each year, have shown poor results from initial stock placement. The WeWork startup has withdrawn its shares altogether and reduced its cash valuation by 80%.

A major Japanese investor, SoftBank, has reported that its Vision Fund and other investments have collectively led to $ 2 billion in operating losses in the last quarter of 2019.

Experts predict that the bubble of startups will not explode, as happened with the dotcom bubble in the 2000s. Then dozens of nonprofit Internet companies closed and investors lost significant amounts of money.

Today, investors still have a lot of free money to invest somewhere. However, there will no longer be irrational optimism. Startups will have to show that they can be profitable today.

Source: techtoday.in.ua