[HN Gopher] OpenAI CEO Sam Altman sent startup six-figure loan a... ___________________________________________________________________ OpenAI CEO Sam Altman sent startup six-figure loan after SVB collapse Author : CharlesW Score : 115 points Date : 2023-03-12 20:03 UTC (2 hours ago) (HTM) web link (www.businessinsider.com) (TXT) w3m dump (www.businessinsider.com) | milofeynman wrote: | Shopify is doing something similar for their merchants | | https://twitter.com/tobi/status/1635038686466441216 | phatang wrote: | I need 6 thousands | ShamelessC wrote: | Quick someone get this person 6 thousands!!! | Balgair wrote: | Related: Unfortunately, this tends to be a common fallback in | many business when times are tough. My folks had to do this with | their employees a few times when I was a kid. Other people in | that industry had to too, from time to time. | | As other commenters state, if you know that a boss does this for | you, then you now know a good boss to have. Though, most bosses | won't tell you they did it, obviously. | vagabund wrote: | Commendable of course but also feels like a no brainer. | Depositors will almost certainly be made whole. Word will spread | of the deed and the goodwill generated will more than repay the | low-risk short term loan. | exhaze wrote: | Based on my interactions with Sam, he doesn't seem like the | kind of guy who would ever do this for PR. I think he just | somehow became aware of this company and, in classic sama | fashion, decided it should not fail due to SVB, reached out to | the founders, promptly wired them money. | resource0x wrote: | What is six-figure loan? Is it like $100,000? Is it really a | heroic act worthy of posting on the front page? | kfrzcode wrote: | Anywhere between $100,000 and $999,999, ostensibly. | ignoramous wrote: | > _Altman did not confirm the amount he gave to Rad AI, or | any other startups, but Gurson told Reuters he would guess | Altman has given at least $1 million to his startup and | others._ | | > _Sam has been sending stuck startups money today with no | docs, just saying 'send me back whatever you can whenever you | can'_ | | May or may not be front-page worthy (and regardless of the PR | potential / optics), this is Sam walking the talk, as it | were. | roboy wrote: | Q from outside the US: why is capital needed for payroll mid | month? Are there some automatic insolvency processes if it is | missed by a day? Why do the companies fall apart if there is just | a few days of payment delay? (I mean it is obviously a shit | situation, and having to tell the team payment might take a few | days more than usual is bad, I am just surprised how 2 days of | no-cash seem to wreak havoc...) | icelancer wrote: | Wage payment delays in the state of California are severely | punishable under law: | | https://www.ottingerlaw.com/blog/wages-hours/employer-not-pa... | phphphphp wrote: | "If you receive a late paycheck, California Labor Code 210 | requires employers to pay a penalty of $100 for an initial | violation." | | Severely is overselling it. | icelancer wrote: | That's for "not willful." | dragonwriter wrote: | Its $100 if it is _both_ a first offense _and_ not willful. | For any willful or intentional delay, _or a second or | subsequent late paycheck_ regardless of willfulness, the | penalty is $200 _plus_ 25% of the payment that was due. | | (And if any terminal paychecks are late, there are greater | penalties - waiting time penalties equal to an average days | pay for each day of delay up to 30 days - though I don't | recall if there is a wilfullness condition or modification | to that.) | icelancer wrote: | The link I found undersells it, too. In some cases, the | corporate veil can be pierced and executives can be made | personally liable. | choppaface wrote: | Except Musk has established precedent at Twitter that you can | just fire employees for cause. | icelancer wrote: | This is somewhat disputable, but regardless, it has nothing | to do with delayed payments. | forgottenlogin9 wrote: | 1) California employment is at-will, employees can always | be fired. | | 2) What on earth does this have to do with running payroll | late? | rdl wrote: | On 1), you actually have even higher obligations to pay | IMMEDIATELY if you fire someone, including for all other | money owed (accumulated vacation/sick days, etc.) | dragonwriter wrote: | > Except Musk has established precedent at Twitter that you | can just fire employees for cause. | | "Established precedent" is...not a fair description of | action which is being challenged in the courts, where no | precedential legal decision has been made. | | Also, firing employees would just make the California rule | requiring _immediate_ payment of final paychecks, with | waiting penalties of 1 days pay for day of delay up to 30 | days, applicable, as well as triggering other time- | sensitive legal obligations that a company without access | to cash might not want. | | Plus, it means that once you get access to your cash again, | you don't have the employees (and might have a lot less | positive image in the community you would want to hire from | to replace them.) | rdl wrote: | Most companies in the US do payroll on either a 2 week cycle | (which sucks because some months you do 3 and some times you do | 2), or 1st and 15th (or otherwise twice a month). March 15 is a | very common payroll date. | | They're batch processes, done by dedicated payroll firms, since | there are lots of tax/other obligations as well. | | Missing payroll by even one day causes 1) lots of drama with | employees 2) starts some legal problems 3) potentially screws | up people's healthcare/other benefits 4) potentially causes tax | problems. Some of this is with the state, some federal. | | Payroll is basically the second to last thing you want to miss | (certain government obligations above it, since they have | liability for the officers directly). | | (This is mostly because employers are presumed to have a lot of | power vs. employees, and generally do, and there have been a | lot of historical abuses of companies paying people slowly, | withholding wages, etc., which puts the employees in a position | of "do I quit and guarantee I don't get paid, or do I work a | little bit more and maybe collect what I'm owed" and then | companies continuing to abuse it...) | ghaff wrote: | Some people like the "extra" checks of a 2 week cycle. Others | prefer twice monthly cycles because it better aligns with | expenses like mortgages and utilities. | rdl wrote: | Lots of people like the extra checks, but very few | companies like paying that way; it makes modeling so much | harder. If you were doing weekly financials maybe but most | companies do monthly. | ghaff wrote: | I'm not sure. I've been with a company that's switched to | a bi-weekly. But not sure of the reasoning. But probably | something to do with payroll predictability. | physicsguy wrote: | Quite interesting, here in the U.K. it's generally monthly | payroll, usually towards the end of the month, something like | closest working day after the 25th is common | rdl wrote: | In Puerto Rico (where I live) there's an even weirder | system -- people usually get/expect (and certain classes of | employment obligate) a "13th month" check. Pretty common in | LaLtAm; exists in some of Southern Europe too. | manuelmoreale wrote: | Some contracts are even getting a 14th one. 13th is | fairly common in Italy and it's usually bundled together | with your December one. | roboy wrote: | Yep, in Germany too, hence my surprise. | netdur wrote: | I don't know but... some companies used to pay me biweekly, | every odd monday, then there is company used to paid me once | end of month and another paid once per month but in middle of | month, with limited accounting resources they pay bills twice, | first of month for outside and middle of month for salaries and | stuff | loeg wrote: | > Q from outside the US: why is capital needed for payroll mid | month? | | The US largely does payroll biweekly (every two weeks). | Sometimes weekly, although usually not in tech. It isn't like | Germany or whatever where payroll is only once a month. | dragonwriter wrote: | > The US largely does payroll biweekly (every two weeks). | | Weekly, biweekly, monthly, and semimonthly are all common; In | most states, there are rules setting minimum frequency (and | sometimes regulating on what days as well as frequency), and | they may vary by industry and job type. E.g., for California: | https://www.dir.ca.gov/dlse/faq_paydays.htm | loeg wrote: | I believe biweekly (or semimonthly, which is very similar) | are more common than the others, at least in tech. | dboreham wrote: | a) most employees are paid every 2 weeks and b) there are laws | that say an employer is committing a crime if wages are not | paid on time. So any properly run business takes great care to | ensure that adequate cash is on hand to cover wage commitments | (not just the money due to employees but also taxes due to | state and federal governments). When thar cash goes up in SVB | smoke, that's a big and immediate problem. You could in theory | be sued or even go to jail. | dragonwriter wrote: | > there are laws that say an employer is committing a crime | if wages are not paid on time. | | Unless it is at least willful, its probably not a crime. It | is, however, generally _illegal_ and carries a civil cost | even when not criminal. | gfsdgsfgfds wrote: | Just one anecdote of many. I'm a founder of a bootstrapped | startup. We are/were with SVB. On Thursday I tried to get a Brex | cash account setup to move some operational cash there but it | didn't happen in time. I thought of wiring money out of SVB to my | personal account but decided it felt too dodgy. Payroll for 2 | weeks ending March 15th had to be funded through Gusto by | tomorrow (March 13th). So I did all I could do without delaying | payroll, dropped my salary to near zero and wired the payroll | money to Gusto from my personal checking account. Being | bootstrapped and low headcount this was possible. I'll have to | retrospectively do some loan paperwork I guess. It would have | been a tougher comms to staff if I didn't happen to have enough | liquidity personally. | leetrout wrote: | How much cash do you have available? | | Other threads over the past few days scoffed at having 100-200k | in cash available. | inconceivable wrote: | after being here for over 10 years (not on this account), | i've observed that hn is basically split into two groups: | people with money, and people who don't have much of it. | | the people with less money are much more vocal about it, for | obvious reasons. | jll29 wrote: | What you state is perhaps obvious, I would not even bother | to open a new account to conceal my identity just to say | that... | | It is a bimodal distribution of (1) the lucky ones and (2) | the ones either "not yet lucky" ones (1/10) or the "never | lucky"ones (9/10). | | I find it refreshing to hear stories about how things did | _not_ work out (from the sources). It is much harder to get | the real stories behind the successes because people tend | not to ascribe things to luck but create some story after | the fact in the same way, as they say, "the winner writes | the history". | inconceivable wrote: | if you believe in good luck, do you believe in bad luck? | you frame it as "not lucky" instead of "bad luck". | | in other words, if you ascribe success to nothing in | particular other than luck, why do you put more stock in | the negative case? couldn't failure be caused by nothing | other than bad luck? | | reading failure stories to look for what to avoid might | not be the right strategy if you believe in a world where | luck dominates. | inconceivable wrote: | i had to do this once during a clerical fuckup with our payroll | provider. | | the accountants just classified it as a reimbursed expense. you | just comp yourself the exact same amount as the payroll and it | isn't taxed as income. | | in general accountants have ways of dealing with all sorts of | edge cases, but you need to keep REALLY good documentation and | notes about what/why/how, etc. "i thought the bank was going to | collapse, and then it did" is a pretty good reason. | | wiring yourself the money and moving it to a new business bank | account would have been perfectly fine too - you're simply | moving the cash to another location. in fact i'm pretty sure | that's what most people who got their money out of svb did - | very few small businesses have multiple checking accounts. | rdl wrote: | Not a lawyer, but I would be pretty comfortable with SVB -> | personal account if you documented why and communicated about | it in advance with board/counsel. (Obviously the next step | would be opening a Chase/etc. account and sending the funds on | to that, not using your personal account for company business | on an ongoing basis, but a limited number of emergency | transactions should be fine.) | kkielhofner wrote: | Given the disaster and nearly unprecedented nature of these | events I doubt anyone would bat an eye at a CEO taking the | decisive action to do what needs to be done to survive (and | fix it later). For many the past few days have been the | startup equivalent of "fog of war". | | As others have noted it's not embezzlement/commingling and | given the scenario "Wire out from SVB corp account to | personal, document exact amount, and wire back to corp | $NEWBANK a week/days later, document again" would hardly | cause any heartburn now or down the road. Many would see it | as responsible, proactive, and heroic. | | Depending on the amount the only issue would likely come from | your personal bank - I know of people with ~$10m at SVB and I | have to imagine all of sudden wiring those kinds of funds to | a personal account with an average daily balance that's a | fraction of that would raise some alarms on the personal | account - or maybe not as I can imagine the big big banks | (BoA, etc) probably saw a lot of this on Thursday... | ttsgeysygd wrote: | FWIW, on Thursday it wasn't clear to me I had so little | time to get money out and part of me felt like contributing | to a bank run, before it was clear there was a bank run, | was not being a good citizen. Still not sure how I feel | about it all. SVB staff were great over the 10+ years we | banked there. Tech was always crap but I liked the people. | Very sad all around. | kkielhofner wrote: | That's where I was. | | My startup has about $25k in SVB - but we don't have | payroll and I have personal access to that without | impacting me if push came to shove (paying contractors, | etc). I was aware of the situation and probably could | have gotten the funds out but I knew we were well below | the FDIC threshold and just didn't want to bother with it | (frankly). I would have had more anxiety executing the | wire and waiting for it to show up on the other side... | | Speaking personally I'm actually kind of curious to see | what the FDIC process looks like - in the grand scheme of | things it makes you part of a relatively small club! | While I know people are suffering and the situation is a | lot worse for many I'm actually looking forward to | telling the story when appropriate. | | The general population is already fascinated by startups | and I've had more than a few "civilian" friends reach out | to me asking about the SVB situation. When I tell them | we're kind of impacted but not really they just kind of | chalk it up to another "Wow, startup life is so wild even | THE BANK failed". | | Additionally I'd say the same - through various startups | I've worked with SVB for over 15 years and the people | have always been great (systems not so much). | rdl wrote: | I totally agree re "contributing to a bank run" feeling | shitty, but you have more obligation to your employees | (especially), investors, and customers IMO than to your | vendor (the bank). Congrats for being able to cover the | payroll regardless, though. | | (I am pretty confident there will be at least 250k + 50% | advance-dividend early this week, and still optimistic | but far from certain that a buyer will take the whole | thing and it will be 100%. Last time people actually took | losses of 50% above the FDIC amount (100k at the time) | was 2008 (IndyMac).) | kfrzcode wrote: | If you're not a lawyer, in this case, it's not really | relevant what your comfort level is with business dealings. | If you're a professional with appropriately relevant skills | and expertise, I'd rescind my comment. | 0xEFF wrote: | I'm a business owner with payroll married to a attorney. | | I'm comfortable doing exactly as GP described to make | payroll. | kfrzcode wrote: | Thank you; contextually I must rescind my previous | comment. | Waterluvian wrote: | Isn't it generally a cardinal sin of business finance though? | danielfoster wrote: | Not if it's documented, short-term and for a very | extraordinary reason. | davidkuennen wrote: | Interesting that its viewed so critically in the US. | | If documented its no problem and not uncommon at all in | Germany. | | In fact many business owners pay something like credit card | bills personally and reimburse through the company later. | Ekaros wrote: | Wouldn't this be other way around. First pay yourself and | then spend that money on company bills? Which sounds very | iffy to me as European. | [deleted] | rdl wrote: | _That_ is far more common in the US (basically paying | expenses on your personal cards, expensing to the company | after the fact). You can also advance on some expenses | sometimes (this can be abused so there are some | accounting restrictions on how you 'd do it, etc.). | | What is weird/scary (especially when not documented | clearly and in advance) is moving your entire bank | balance into a personal account. Aside from | government/tax/legal, you'd have your investors (in a | venture/angel backed company) to justify it to. It's | justifiable in this truly exceptional case of SVB | imploding and no other bank account being available. (It | gets harder to justify in a larger company with lots of | investors and more money involved; moving a $100mm | balance in a company where you were down to 10% ownership | to a personal account even in this situation would be | weird AF and depending on the banks involved might cause | you problems. I probably still would have emailed counsel | and investors/etc. on thursday morning to ask what to do; | likely would have sent it to lawyers to handle actually | in the huge-account situation.) | davidkuennen wrote: | I see. That makes sense. Thank you for clarifying. | xyzzy123 wrote: | It's an "antipattern" (and usually a strong sign that | something is badly wrong) but it's not illegal... "sinful" | is a useful hint that something is "norm" related. | [deleted] | Waterluvian wrote: | Yeah, I didn't say illegal. Often "cardinal sin" is just | a playful way of saying "something thou shalt never do." | dboreham wrote: | Also nal and naa but no: it's "comingling" that's bad. If | you explicitly document the transactions, don't do it all | the time, and ideally use matching amounts in and out, it's | not comingling. | rdl wrote: | Comingling is. In this case there is a clearly articulable | reason why ("our bank is going out of business"), and it's | temporary, documented, etc. The twin risks to avoid are | appearance of embezzlement, and appearance that you're | treating the business account and personal account as one | (which potentially allows piercing corporate veil/attaching | personal assets), but if your building is on fire, you're | allowed to break the window to rescue the kitten. | breck wrote: | Your 2 week payroll is more than $250,000 and you are | bootstrapped? | | I call B.S. | | Something doesn't add up. Coming from an anon account no less. | powera wrote: | Hacker News is full of people who believe anything they read | on this site if it fits the narrative, even if it is from a | throw-away account that clearly doesn't understand the | banking system. | gfsdgsfgfds wrote: | It is not. SVB account is frozen. Nothing in or out. Wire had | to land March 13th so had to be sent Friday. | breck wrote: | A wire on the 13th lands on the 13th. | dboreham wrote: | An actual "wire" transfer yes, but op may have meant ACH. | gfsdgsfgfds wrote: | My personal bank is Bank of America. I paid the $30 to do | "1 business day" I read that as if I did it on Monday it | would land Tuesday. Gusto was saying it had to be funded | by Monday. Perhaps it would have worked out fine that | funds would be unlocked on Monday and Gusto would have | been fine with wire initiated on Monday, but this was | Friday and everything seemed on fire. | | FWIW, Just looked at the screenshot of the wire | completion and it does say "Same day". But I did it at | after 8pm. Anyway, I felt I did the safest thing to keep | the staff from freaking out and for me not to be too | stressed through the weekend. I'll have enough headaches | moving banks the next two weeks to also be worried about | payroll. | kfrzcode wrote: | A wire can commonly take up to two days; just FYSA. | | https://www.investopedia.com/terms/w/wiretransfer.asp | breck wrote: | Got it. So you are unfamiliar with the wire system. Most | people are. I actually don't have anything good to say | about it. (Sidenote: 24/7 crypto is far better, but | crypto is still a bit of a wild west so I don't recommend | for people who aren't comfortable being early adopters) | | You are learning a lot and sounds like you figured out a | way to not have your employees see any hiccup. Well done. | | Thank you for replying and providing more info. | | Nowadays one must assume ChatGPT bot/shill when talking | to a new account. | xiphias2 wrote: | People don't have access to that $250k right now, it takes | time. | breck wrote: | Everyone will have $250K tomorrow. | swatcoder wrote: | As an owner who feels responsible to your staff, and who | feels bewildered by the sudden closure of your bank, you | may not trust what you think you know. | | Securing alternative funding for your payroll makes sense | and is commendable. | fisherjeff wrote: | Uh yeah, in the very unlikely event that you find | yourself explaining to your staff why payroll hasn't been | run, about the last thing you want to lead with is "Well, | see, after our our bank failed, I _assumed_ ..." | nostrebored wrote: | FDIC insured funds haven't been disbursed yet right? | dragonwriter wrote: | > FDIC insured funds haven't been disbursed yet right? | | The bank was closed on Friday, and at the time an | announcement was made that the Deposit Insurance National | Bank of Santa Clara would open with all insured deposits on | Monday (this will not happen if between now and Monday a | buyer is found and that bank _instead_ takes over | operations on Monday.) There's not really a "disbursement" | of insured funds, just a transfer to a new bank, which may | or may not be run by the Federal government. | | For _uninsured_ funds, the announced plan (which also might | be cancelled if a bank takeover provides better terms for | them) is to provide an initial _dividend_ during the week, | and a "receivership certificate" for any remaining | uninsured balances. Most likely (given history) a bank | takeover would _also_ preserve uninsured balances as normal | deposits at the new bank; but that's not guaranteed. | dgacmu wrote: | For others who might be in the same position, it might be worth | contacting your payroll processor. Ours, justworks, indicated | that we could wire them the money on the invoice processing day | and still make payroll. (That will be either Monday or Tuesday, | I forget which - we somehow got really lucky; our payroll ACH | got pulled right before the shutdown) | [deleted] | tiffanyh wrote: | It seems weird to hear about this generosity from Altman's | family, as opposed to from one of those companies helped. | | Not trying to knock the good deed. Clearly many companies need | help, since VCs caused a run on the bank. | alexashka wrote: | Just so we're clear - this is the equivalent of me giving a co- | worker I like who lost his wallet and his phone 100$ so that he | can have lunch, dinner, get home safely, etc. | brunooo wrote: | One of those rare opportunities to clearly assess VCs from the | outside, and surprisingly good steady reaction by him and Khosla. | | Who else? | phphphphp wrote: | Maybe it's not fair to compare Garry Tan to sama in this | situation because Garry is the current president and sama is | the former, but, it's nice to see sama's measured response | compared to Garry's. | | Garry is shouting from the rooftops that more than a million | jobs are going to be lost if the fed doesn't immediately do | something (that we all know it isn't going to do). I wouldn't | want to be a YC startup right now, listening to Garry stoke | panic. | | Kudos to sama for being pragmatic and calm. | brunooo wrote: | Being in an active leadership position makes his decision to | spend time on live-streaming panicky half-baked takes ... | worse? | grey-area wrote: | The fdic and fed probably will do exactly what Gary Tan and | many others recommended - no bailout of the company or | shareholders but organise a facility so that the depositors | get 100%. | | They're trying to sell it first but if that doesn't work they | don't really have other options if they don't want to be | dealing with massive job losses and multiple bank runs next | week. | baq wrote: | Getting 90 cents on the dollar is not 'massive job losses' | and most people outside of tech (SV VC tech precisely) | think that the bank run risk is massively overblown. | | Anyway we'll see what FDIC does. They're good at what they | do. | grey-area wrote: | Isn't this quite unusual (a bank run at a large US bank)? | | I agree the fdic has done this before and if they can | find a buyer or communicate well it should turn out fine | next week. | | There is a risk of contagion though and a risk of job | losses if money is delayed for say 6-12 months. I don't | think it's unreasonable to be worried about it if you're | impacted. | phphphphp wrote: | That's not necessary though unless we are to believe that a | meaningful amount of money has disappeared. The FDIC offers | insurance with a limit for a reason, it's a fantasy to | believe that the FDIC are going to invent a brand new | standard of deposit protection because some companies might | be forced to take a small haircut on their money. | | The bank will re-open, companies will get most of their | money, and life will carry on. The FDIC aren't going to | guarantee 100% of deposits, and shouting from the rooftops | that a million jobs will be lost if the FDIC don't do it | (which they won't) is panic-inducing for no discernible | reason. | | Edit: I intentionally took one for the team by embarrassing | myself with a claim disproven less than an hour later. | You're welcome. | grey-area wrote: | I'm not sure it's as simple as that if the fed don't | guarantee deposits, but we'll see tomorrow I guess. The | impression I had was these assets can't just be sold | right now, today, without booking substantial losses. | ralph84 wrote: | Khosla's legacy is trying to privatize public beaches. Nothing | he does will make people forget that. | brunooo wrote: | Not necessarily disagreeing but still worth pointing out that | he did the right thing here. | benatkin wrote: | Also don't forget about openwashing and potentially helping | Microsoft dominate again* on sama's side. | https://en.wikipedia.org/wiki/Openwashing | | * one of the last things I want | paxys wrote: | Is there the opposite list? VCs like Ackman, Sacks, Calcanis, | Cuban all firmly belong on it. Nothing from them but blame | directed at others (biden, yellen, zelinsky, the fed, fdic, | regulations - everyone but themselves), dangerous | misinformation (including fake photos and videos of bank runs), | and _demands_ for an immediate government bailout. I wish | someone would compile a video of how quickly these "rugged | libertarians" have done a 180 on their views on regulation and | "socialism" now that their own money is on the line. | brunooo wrote: | There ... is? | | Right below that there's another bracket of "trying to tweet | through it", a lot of the folks behind the We Support An SVB | Successor thing, which then, as Paul Graham did, lectured | people that they can't really do anything because their LP | agreements forbid it. | | Didn't know YC was a non-profit and Paul's involvement was a | $85k salary and no carry/returns... | | Push came to shove, some people stepped or are stepping up, | some didn't. | samgtx wrote: | If someone created a twitter bot right now that was able to | pull old hard libertarian tweets from these people and post | them as replies that would be...entertaining. Hypocrite-bot? | sethbannon wrote: | All VCs should be doing this. Sadly, many aren't. | | https://twitter.com/sethbannon/status/1634934773377294336 | sql-spy wrote: | Startups that are worth saving will be saved. | | Cashflow won't be what kills some of these startups. | swatcoder wrote: | By design, venture-backed startups are about sticking a plate | of spaghetti to a wall to look for the sticky bits. There are | few sure tells of what startups are "worth saving" until | they're already quite successful. | | Assuming that the SVB unwinding is more than a hiccup in cash | _availability_ , what will determine who gets saved will mostly | come down to affinity and luck. Promise and value are a sort of | first pass filter, but startups are just plain noisy and | chaotic field. | rat9988 wrote: | Does someone have a name for this fallacy? | mhb wrote: | Tautology | wongarsu wrote: | "Startups that are worth saving will be saved" feels like | the same category of statement as "It's always in the last | place I look". They both describe common sense behavior | (save things worth saving, or stop searching once you found | what you're looking for). But they are not tautologies in | the strict sense, you can make them false; and quite | frequently they are false in practice, mostly due to | imperfect information. | the-dude wrote: | https://en.wikipedia.org/wiki/Just-world_hypothesis | warent wrote: | I don't really know much about venture capital but this sounds | like a gross oversimplification. | | More like, the startups that are saved will be a mixed bag of | worthwhile startups and dead-end startups. Meanwhile some | worthwhile ones will sadly be left behind with the dead-end | ones. | wpietri wrote: | Depends on your perspective. One of the articles of faith in | this industry is that good startups get investment and | succeed, while bad ones fail. To whatever extent that's true, | it won't be particularly worse here. Startups who made | treasury management errors and are experiencing cash crunches | can make very good cases for bridge loans and extra | investment from their existing investors. If their investors | are like, "nah, pass" then that's a pretty good reason to | question their potential generally. | giraffe_lady wrote: | I'm normally very against the HN norm of just naming a | fallacy and considering an entire argument dismissed but in | this case I think it does apply. This is not a Just World, | some unworkable companies will get bridge funding because | of their connections and no other reason. | | Aside from that timing is always a thing. There's certainly | a company out there that is 8 months away from proving the | soundness of their idea that now only has six months of | funding, or whatever. | | The idea that in _every_ case, "the market" or whatever | will arrive at the most perfectly correct conclusion is | silly at any time, but particularly in one of uncertainty | and upheaval. | wpietri wrote: | Yeah, I'm not arguing that "whatever will arrive at the | most perfectly correct conclusion". (And I don't think | that sql-spy was arguing that either.) What I'm saying is | that I don't think this particular circumstance is going | to be any less just than usual. | | Indeed, I think there's good reason to expect it to be | more just given that what we're talking about is mostly a | short-term cash crunch that's easily explained. E.g., one | company is raising $1 bn for bridge loans: | https://techcrunch.com/2023/03/11/brex-ceo-is-trying-to- | rais... | | That kind of support is not something marginal startups | have access to in normal times. | sql-spy wrote: | Circumstances changed. | | Running a startup means time is never on your side. If | you are still 8 months away from proving "soundness" of | your idea then you are already too late. | giraffe_lady wrote: | ok but I mean that means that whatever outcome arrived at | is necessarily the correct outcome. you're establishing | correctness post hoc and so you will always find it. have | fun tho. | swatcoder wrote: | > One of the articles of faith in this industry is that | good startups get investment and succeed, while bad ones | fail. | | Is it? I thought it was that startups with exciting books | and good networks get a chance to ratchet into the next | round of funding. | | Great startups drown all the time for not being a VC | rocketship, when they they could have grow into a perfectly | successful cruiseliner under traditional fundraising or | bootstrapping. | | If investors are "nah pass", it's more about making a quick | decision about near-term finance opportunities than the | mid-term or long-term strength of the underlying business. | VC investors inherently care more about 10x exits than | sound business practices. | wpietri wrote: | I'm not saying it's true. I'm saying it's an article of | faith. | sql-spy wrote: | Ofcourse it is an oversimplification but it really is that | simple. | | If the business is profitable, it will survive. | | If its still relying on free money to pay the bills, its time | to make it profitable. | PeterisP wrote: | The fact whether a startup has positive cashflow or not | isn't really reflective of whether that is a worthwhile | startup or a bad one, but rather whether it's at an early | stage or a relatively mature one. | | The most bestest startup in the world would still be | relying on investor's money to pay the bills if it's just | starting to build its product and the time to make it | profitable will come in a year or two or more (e.g. a | biotech startup can take many, many years until the product | gets approved for patients and earns its first cent). | | Yes, if a business has "grown up" from being a startup and | is fully self-funding not only its operations but also its | growth, then it will survive, but the definition of a | startup is something that's still trying to reach that | stage and isn't there yet. | illiarian wrote: | > The fact whether a startup has positive cashflow or not | isn't really reflective of whether that is a worthwhile | startup or a bad one, but rather whether it's at an early | stage or a relatively mature one. | | For the past 10 years or so none of the "successful | wrothwhile startups" have positive cash flows, and those | that seemingly do still manage to post hundreds of | millions of dollars in losses yera after year after year. | | The whole modern startup business is either "work at a | loss until a successful exit for the founders" or "work | at a loss forever with no expectation of profitability | for some reason". | | None of them are worthy. | JumpCrisscross wrote: | > _whether a startup has positive cashflow or not isn 't | really reflective of whether that is a worthwhile startup | or a bad one_ | | A start-up that fails because of this mismanaged their | treasury, didn't pull money in time, couldn't borrow | against their claims and couldn't convince anyone to | advance payroll. That's reflective on leadership. It's a | teachable moment. But it points to deeper naivety. | [deleted] | youngtaff wrote: | Startups that can be sold will be saved... | | From a pure financial point of view Uber would never be viewed | as a startup that was worth saving... for it's investors the | whole point of the IPO was to cash out and leave someone else | holding the loss making baby ___________________________________________________________________ (page generated 2023-03-12 23:02 UTC)