this post was submitted on 02 Jul 2023
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Probably couldnโt make money and the VC funds dried upโฆ.
All the VC money is being dumped into AI right now.
Tech companies of yesteryear are starting to have to prove themselves in order to get funding, instead of relying on the wishy washy promises of old.
We can already see with Lemmy, that this phenomenon is giving breathing room to FOSS services.
I think it's awesome, even if we'll have to deal with growing pains for a while.
What even was their business plan? I never understood how'd they make money. I guess advertising is always the answer but how...
Thatโs why this year everything is going down. VCs demand you start making some money or shut down and nobody bothered figuring out how to make money
I am not a finance guy; this is my kindergarten-level understanding of the situation:
When the interest rates were hovering down around 0%, it was a no-brainer for VC firms to shotgun money out to everyone who walked past their office building. Most VC money doesn't come from some rich dude's pocket; it comes from banks and hedge funds and other deeply-market-tied entities. If any one startup they've invested in can win the profit lottery, the VCers will massively beat the rate of return they'd get for anything else. One big success can cover a dozen small failures, and, anyway, a business isn't a failure until it's a failure.
Now that interest rates are rapidly moving higher, those startup investments are less of a good deal. VC money is more expensive. VC firms are starting to close out their positions on start-ups that aren't beating them market, because they want to stick their money somewhere more reliably profitable.
I like your humility, this was well explained and easy to understand.
I think the Federal Reserve raising interest rates has more to do with it. Now that the VC's that fund everything are getting the money faucet turned off, it's having downstream effects on all these tech companies.
The interest rates are letting the VCs turn the faucet off - it's not forcing them. Higher interest rates mean they can make more money by letting it sit in high interest bank accounts rather than actually exercising the money.
Meaning it's less worth it to get out the old pocket book - still results in the same issues l guess though.
High interest rates makes money and debts go up at the same time. Good for those with money, bad for those with loans.
@n3m4c I like money
@zinklog @nostalgicgamerz @GunnarRunnar
Business plan... That was the problem, the business plan was just a bunch of cat pics in a binder. Cute, but not so profitable.
No idea. It was likely privately funded so weโll never know what advertising was likely the method
No idea. It was likely privately funded so weโll never know what advertising was likely the method