Farhad and Mike’s Week in Tech: Start-Ups and the Circle of Life


Photo

Nick Woodman, the chief executive of GoPro, said this week that calling GoPro just a camera company did not do it justice.

Credit
Andrew Burton/Getty Images

Each Saturday, Farhad Manjoo and Mike Isaac, technology reporters at The New York Times, review the week’s news, offering analysis and maybe a joke or two about the most important developments in the tech industry.

Farhad: Good morning, Mike. This week I visited Toronto and got fleeced by a cabby. Also, the Super Bowl is coming to my town, so traffic’s a mess. Plus, I hate football. How are you?

Mike: Well, all the snow is melting on my block, which means I’m constantly sidestepping dog doo land mines that people neglected to pick up during the blizzard. It’s really awful, and I hope figuring out how to fix this is Google’s next moonshot project.

Farhad: On to tech news! Marissa Mayer, Yahoo’s C.E.O., announced that she would lay off 15 percent of staff, shut down several aging and poorly performing parts of its business and also welcome offers to purchase the company’s core assets. As usual with Yahoo, this could be the start of a turnaround that finally works, or just another in a series of torturous and ultimately useless howls in the face of slow, certain death.

Mike: I should trademark the phrase “with Yahoo, this could be the turnaround that finally works.” I’d become a multi-thousandaire practically overnight!

Farhad: Speaking of torturous death wails, GoPro disclosed that it lost money over the holidays thanks to poor sales of its sports cameras — surprising investors, who had been expecting a small profit from the ailing action-camera company. Oh, wait, I guess I’m not supposed to call it that: During his call with investors, Nick Woodman, the chief executive, said that people shouldn’t call GoPro a mere camera company. He said he preferred his company to be called “the world’s leading activity capture company.” I already made a great joke about this sad attempt at spin on Twitter, so I’ll let you take a swing at it here.

Mike: I have no jokes, just a history lesson: Go read up on the death of the Flip camera.

Farhad: O.K., one more thing. Sandeep Mathrani, the chief executive of the mall company General Growth Properties, took a break from prepping some hot dogs on a stick to tell investors that he’d heard that Amazon — perhaps the most secretive company in the tech industry — would soon be opening 300 to 400 retail bookstores. The news was so absurd — both that Amazon would suddenly open up so many stores and that it would disclose those plans to others in the industry — that it seemed like a joke, which it kind of turned out to be: Subsequent reports suggested that Amazon does have some retail plans, but they seem to be rolling slowly. And the mall exec later backed off his statement, I assume because someone threatened to cut off his Prime membership.

Continue reading the main story

Subscribe to the Bits Newsletter

Mike: The one good thing that came out of this fiasco is that I now know I’m going as “confused mall C.E.O.” for Halloween this year.

Farhad: Anyway, but let’s turn to our favorite subject — start-up funding!

Mike: Ugh.

Farhad: In the course of reporting a column about Dropbox this week, I got to talking to some venture capitalists about how the tech-funding scene is changing in 2016. Bryan Schreier, a partner at the firm Sequoia Capital, said something that stuck with me.

“Because the fund-raising environment has changed so dramatically, 2016 for private companies is going to be the year of the haves and have-nots,” he said. “The haves either raised money before the downturn or they have a sustainable business model. The have-nots, which are the companies that are trying to raise now, are going to have to dramatically restructure their companies. The haves will thrive while the have-nots sadly may find themselves put out of business because they found themselves on the wrong side of the fund-raising cycle.”

Do you think Schreier is right?

Mike: It’s funny. I was just talking to a very smart entrepreneur about this stuff. And this person was speaking similarly.

Here’s what I think, informed by talking to people much smarter than myself: After the recession, we had a wealth of money flowing in from sources that weren’t there just a few years before: sovereign wealth funds from Indonesia, Saudi Arabia, Russia. You have hedge funds and other money managers whose clients want to diversify their investments. For that, they look to tech.

On the other side, you have a preponderance of entrepreneurs who, for the last few years, have been able to toss out any stupid idea they wish and get at least a few million dollars thrown at them to pursue it. That behavior, according to the folks I talk to, is abnormal. There are too many start-ups on the market and too many bad ideas still limping along because the money hasn’t dried up yet.

So fast-forward to now. Public markets are insane. Investors are getting nervous, and the money faucets are closing off. The window for going through an initial public offering, at least in the next 12 to 18 months, seems to be much narrower than it has been over the last two years. So what does that mean?

Farhad: Fewer Teslas in Palo Alto?

Mike: Yeah, especially for this guy. But also, like your V.C. friend said, the start-ups who can’t raise, won’t raise. They will die. Many Medium posts on “why I’m closing my company” will be written. And, like the nasty, brutish and incredibly short spans of most wildlife, it will all play out in clear view of all the other animals on the plain, those who hope they won’t be the next to die.

I like to think of it as “The Lion King” meets “The Texas Chainsaw Massacre.” Circle of life, and all that.

Obviously, this won’t be welcomed with open arms by all investors or start-ups. But the people I’ve spoken with generally think this is a positive progression for the start-up environment as a whole, and a necessary cycle that will only happen over and over again. It’s like nature. Death begets rebirth, ad infinitum.

Farhad: Right, but, you’re forgetting the other side of this. There are all the companies that did raise a lot, that have a ton sitting in the bank, and can now operate effectively and indefinitely as private companies, despite the stock market’s freeze on I.P.O.s or difficulty raising more cash. From my reporting, Dropbox seems to be in such a position; it’s no longer worth the $10 billion its investors once pegged it at, but it doesn’t have to risk raising a down round — it can just continue to function as a business. There are very likely several other large start-ups in the same boat, and even many of the recent tech I.P.O.s that are now doing terribly have a lot of money to keep trying out new stuff. GoPro, for instance, has nearly $500 million — that’s a lot of room to figure out a new business.

So things will be bad, but maybe not for everyone. That’s good, right?

Mike: Yeah, I guess. I wonder how many companies outside of the giant unicorns have that cash to ride this wave out. And regardless, they’ll have to bring their spending down to do so.

Anyway, it started snowing again, so I guess my dog doo problem is temporarily fixed. How do people live in this city?

See you soon!



Source link

About admin

Check Also

Moving Your Number and Going Mobile

Q. Can I transfer my landline telephone number — one I’ve had for years — ...

Leave a Reply

Your email address will not be published. Required fields are marked *