In Silicon Valley, asshole yuppie tech dynasty nepo brats trick start-up founders into taking their money and then they help them die. VC’s make their money by skimming “fees” off of your parents pension funds.
WeWork raised more than $11 billion in funding as a private company. Olive AI, a health care start-up, gathered $852 million. Convoy, a freight start-up, raised $900 million. And Veev, a home construction start-up, amassed $647 million.
In the last six weeks, they all filed for bankruptcy or shut down. They are the most recent failures in a tech start-up collapse that investors say is only beginning.
After staving off mass failure by cutting costs over the past two years, many once-promising tech companies are now on the verge of running out of time and money. They face a harsh reality: Investors are no longer interested in promises. Rather, venture capital firms are deciding which young companies are worth saving and urging others to shut down or sell.
It has fueled an astonishing cash bonfire. In August, Hopin, a start-up that raised more than $1.6 billion and was once valued at $7.6 billion, sold its main business for just $15 million. Last month, Zeus Living, a real estate start-up that raised $150 million, said it was shutting down. Plastiq, a financial technology start-up that raised $226 million, went bankrupt in May. In September, Bird, a scooter company that raised $776 million, was delisted from the New York Stock Exchange because of its low stock price. Its $7 million market capitalization is less than the value of the $22 million Miami mansion that its founder, Travis VanderZanden, bought in 2021.
“As an industry we should all be braced to hear about a lot more failures,” said Jenny Lefcourt, an investor at Freestyle Capital. “The more money people got before the party ended, the longer the hangover.”
Getting a full picture of the losses is difficult since private tech companies are not required to disclose when they go out of business or sell. The industry’s gloom has also been masked by a boom in companies focused on artificial intelligence, which has attracted hype and funding over the last year.
But approximately 3,200 private venture-backed U.S. companies have gone out of business this year, according to data compiled for The New York Times by PitchBook, which tracks start-ups. Those companies had raised $27.2 billion in venture funding. PitchBook said the data was not comprehensive and probably undercounts the total because many companies go out of business quietly. It also excluded many of the largest failures that went public, such as WeWork, or that found buyers, like Hopin.
Carta, a company that provides financial services for many Silicon Valley start-ups, said 87 of the start-ups on its platform that raised at least $10 million had shut down this year as of October, twice the number for all of 2022.
This year has been “the most difficult year for start-ups in at least a decade,” Peter Walker, Carta’s head of insights, wrote on LinkedIn.
Venture investors say that failure is normal and that for every company that goes out of business, there is an outsize success like Facebook or Google. But as many companies that have languished for years now show signs of collapse, investors expect the losses to be more drastic because of how much cash was invested over the last decade.
From 2012 to 2022, investment in private U.S. start-ups ballooned eightfold to $344 billion. The flood of money was driven by low interest rates and successes in social media and mobile apps, propelling venture capital from a cottage financial industry that operated largely on one road in a Silicon Valley town to a formidable global asset class akin to hedge funds or private equity.
During that period, venture capital investing became trendy — even 7-Eleven and “Sesame Street” launched venture funds — and the number of private “unicorn” companies worth $1 billion or more exploded from a few dozen to more than 1,000.
But the advertising profits gushing from the likes of Facebook and Google proved elusive for the next wave of start-ups, which have tried untested business models like gig work, the metaverse, micromobility and cryptocurrencies.
Now some companies are choosing to shut down before they run out of cash, returning what remains to investors. Others are stuck in “zombie” mode — surviving but unable to grow. They can muddle along like that for years, investors said, but will most likely struggle to raise more money.
Convoy, the freight start-up that investors valued at $3.8 billion, spent the last 18 months cutting costs, laying off staff and otherwise adapting to the difficult market. It wasn’t enough.
As the company’s money ran low this year, it lined up three potential buyers, all of whom backed out. Coming so close, said Dan Lewis, Convoy’s co-founder and chief executive, “was one of the hardest parts.” The company ceased operations in October. In a memo to employees, Mr. Lewis called the situation “the perfect storm.”
Such port-mortem assessments, where founders announce their company is closing and reflect on lessons learned, have become common.
One entrepreneur, Ishita Arora, wrote this week that she had to “confront reality” that Dayslice, her scheduling software start-up, was not attracting enough customers to satisfy investors. She returned some of the cash she had raised. Gabor Cselle, a founder of Pebble, a social media start-up, wrote last month that despite feeling that he had let the community down, trying and failing was worth it. Pebble is returning to investors a small portion of the money it had raised, Mr. Cselle said. “It felt like the right thing to do.”
Amanda Peyton was surprised by the reaction to her blog post in October about the “dread and loneliness” of shutting down her payments start-up, Braid. More than 100,000 people read it, and she was flooded with messages of encouragement and gratitude from fellow entrepreneurs.
Ms. Peyton said she had once felt that the opportunity and potential for growth in software was infinite. “It’s become clear that that’s not true,” she said. “The market has a ceiling.”
Venture capital investors have taken to gently urging some founders to consider walking away from doomed companies, rather than waste years grinding away.
“It might be better to accept reality and throw in the towel,” Elad Gil, a venture capital investor, wrote in a blog post this year. He did not respond to a request for comment.
Ms. Lefcourt of Freestyle Ventures said that so far, two of her firm’s start-ups had done exactly that, returning 50 cents on the dollar to investors. “We’re trying to point out to founders, ‘Hey, you don’t want to be caught in no man’s land,’” she said.
One area that is thriving? Companies in the business of failure.
SimpleClosure, a start-up that helps other start-ups wind down their operations, has barely been able to keep up with demand since it opened in September, said Dori Yona, the founder. Its offerings include helping prepare legal paperwork and settling obligations to investors, vendors, customers and employees.
It was sad to see so many start-ups shutting down, Mr. Yona said, but it felt special to help founders find closure — both literally and figuratively — in a difficult time. And, he added, it is all part of Silicon Valley’s circle of life.
“A lot of them are already working on their next companies,” he said. Tesla and Splunk are similar Unicorns.
The post From Unicorns to Zombies: Tech Start-Ups Run Out of Time and Money appeared first on New York Times.
Silicon Valley Venture Capitalists Uncovered as Simply One Big Criminal Cartel
Special For ProPublica
Submitted by The Stanford Journalism Group
With research by Audrey W., Tom K., Leung V. and Martin F.
They operate exactly like the Sicilian Mafia. They have carved out turf territories. They take out competitors using illegal “hit jobs”. They bribe regulators, politicians and cops to look the other way. They hold secret back-room tribunals in restaurants, in order to arrange collusions, price-fixing, market rigging and blacklisting. They are the Silicon Valley venture capitalists, known in the local lingo as “VC’s”.
For quite a long time, top politicians have ordered their law enforcement agencies to “stand down” on investigations of people like Eric Schmidt, John Doerr, Steve Jurvetson and the tech posse known as “The Cartel”. That era of avoidance ended when John Doerr’s partner, Ray Lane, came under investigation for epic tax evasion and wise-guy money manipulation machinations. Tips from his case led to a network of others and case numbers, and investigators, were assigned.
VC Ray Lane’s audaciousness was not the only shiny object in the dark pit of Sandhill Road, the street where all of the VC’s huddled together like sheep. John Doerr’s co-founder: Tom Perkins, raised the glare of public scrutiny up to “11” when he loudly, and publicly, proclaimed that any poor people who didn’t respect him, and the rest of his VC buddies, must be “Nazi’s”. Yeah, he said that in the media! That didn’t go over well with the public.
In one of their many recent scandals, known as ANGELGATE, the VC’s met at a restaurant in San Francisco to have one of their secret mobster collusion meetings. Alas, a reporter had “snuck in” and documented the whole thing. This reporter: Micheal Arrington, got a honey-trap “hit-job” put on him by The Cartel for his trouble, as reported in Vanity Fair. San Francisco VC Ron Conway railed at the other VC’s, in social media, about how they had stupidly blown their covers. The scandal became one of technology industry legend.
The VC’s had another terrific scandal called THE NO POACHING SCANDAL. In this one, the VC’s including Steve Jobs and Eric Schmidt, all got caught colluding to blacklist any programmers from India from working at the other companies in their portfolios. They, essentially, made a secret deal to destroy the careers of tens of thousands of workers. It was incredible. Eric Schmidt, the head of Google, was personally caught arranging these collusions and blacklists. The evidence was so compelling that the programmers filed, and won, a class-action law suit.
As of today, VC Joe Lonsdale has had a glut of feature articles published about his rape and psychological manipulation of a young intern. VC Vinohd Khosla, John Doerr’s other partner, seems to be hated and sued by a large part of California for closing public beaches for his own whims. VC Ravi Kumar, of Tesla Investments and Forrest Hayes, of Google, were both killed by their hookers. A permanent undercover officer has been assigned to San Francisco International Airport just to try to catch the epic number of Hookers that the VC’s fly into Silicon Valley every week. The largest concentration of escort services in America is in Silicon Valley for the servicing of the VC’s. Type “Eric Schmidt sex penthouse” into any non-Google search engine and read the amazing number or articles about the moral compass of that VC and Google boss. Google’s other VC/boss: Sergey Brin, has an equal number of articles about a three-way sex romp between him and co-workers. John Doerr’s partner: Ellen Pao, filed a spectacular sexual romp lawsuit against John Doerr’s crew and it threw Silicon Valley into a titter. The list of indiscretions and outright illicit madness of the Silicon Valley venture capitalists is epic and record-breaking. Clearly, these people operate on a moral level two notches below a starving alley cat and Al Capone.
According to San Mateo county public records, the typical Silicon Valley VC has a divorce which has the word “abuse” in the paperwork almost 90% of the time. Almost every VC gets divorced. Most of them marry what is known as a “trophy wife”. These women are always younger than the, almost all-male, VC’s, deeply silicon-ed and surgery modified, fat-free and destined for 2.5 alimony-grabbing children and a divorce 3-6 years after they have served their purpose of providing “proper social optics” for the VC’s. Proper social optics means that the VC’s live lives devoted to appearance and not substance. The VC’s wear khaki pants and pull-over shirts in order to try to say to the world “I am so rich I don’t care”. They drive Tesla’s in order to showcase their douche-baggery on public thoroughfares and they go to TED Talks in order to proclaim their condensed-cream-of-philosphy superficiality to the world.
Hackers, including the notorious Guccifer, have gleefully plowed through all of their emails and the darkest deeds of these delightful VC’s are now traded on the spookier portion of the internet known as ‘The Darknet”. The hackers are not the only ones with the goods. Law enforcement is said to have physically broken into VC offices, most notably Kleiner Perkins, to support investigations. The jig is up! These days, that hot intern with the tight sweater, that just applied to work at the Apex Ventures front desk might be a skilled FBI agent from Arlington, VA. VC’s are nervously looking at each other and wondering who just turned “state’s evidence” in exchange for immunity.
On an average morning you will find the VC’s breakfasting at Buck’s Restaurant in Woodside, California. They meet to have daily deal rigging, black-listing and collusion confabs to make sure that none of the non-fraternity boys, or other outsider entrepreneurs, are sneaking on to their controlled playing field. You won’t find any blacks, few women and almost no Republicans at these meetings.
A few brave reporters covertly sat in on these meetings, or in adjacent booths, with their carefully positioned iPhones sitting on the tabletops, recording all of the dirty deeds. The FBI loves that sort of evidence.
The VC’s big Mafia is called The National Venture Capital Association (The NVCA) but local “families” have “turf” with sub-clubs assigned. Silicon Valley has a few sub-clubs: “The Indians”, “The Rosewood Boys”, “The John’s” “Sigma Kappa FU” and other fun fratty high school-like names permeate the VC culture boys club. At their expense, the TV show: “Silicon Valley” took aim at the infantile games these deeply coddled mommas boys carried forward from their rich elitist dynastic upbringings.
Nobody that isn’t connected to a ‘proper’ family is allowed in. Outsiders and Indian programmers are only given hall passes until the VC’s suck them dry and then they are kicked to the curb with little, or no, stock. Federal investigators discovered that, like the VC’s, their Silicon Valley companies never hire blacks, only hire women as eye-candy or potential sex toys, and manipulate valuations to cut out all but themselves. After years of PR promises of “We will try to do better”, not a single Silicon Valley company has budged on it’s racist, elitist, age-ist hiring practices.
Almost everything they do is illicit. Most of it is illegal. They operate with impunity because they fund the campaigns of current elected officials. It is a crime on every level.
Every single thing that Al Capone, the Gambino Family, Madoff, HSBC, Enron and the Actual Mafia were arrested for, or charged with, these Silicon Valley VC’s do all day long.
Anti-trust. Monopoly, Tax Evasion. Bribery. Prostitution. Product dumping. Conspiracy. Bribery. Collusion. Securities Violations. Commodity Rigging. Flash Boy hacking. Stock Market Manipulation. Possibly even murder…..These VC’s do the crimes without ever doing the time.
Talk about “optics”. How do the federal cops think this looks to the voters? How secure do average American voters feel when they see these guys running a muck without a single repercussion. It is stuff like this that could put a wild outsider like a Donald Trump or Bernie Sanders in the White House. Not prosecuting these bozos could take the entire American economy down by simply destroying American’s faith in the American Dream and The System. (Ahem Mr. Comey…how are those indictments coming along?)
You can see how they get away with it. They simply send cash, girls, revolving door jobs, search results and company stocks to State and Federal elected officials and pay them off.
You can even see the direct financial paths from John Doerr to the Governors office. From Eric Schmidt’s funds to campaign coffers in Washington DC. It doesn’t take an FBI agent to run these facts down. Judicial Watch, Sunlight Foundation, Disclosure Project and hundreds of other public service transparency groups have done the work for you. It is glaringly obvious.
Over one thousand State and Federal law changes, contracts and policy alterations time out, in perfect synchronization, in the following corrupt formula:
1.) The VC’s pay Payola to politician X
2.) Out of the blue, politician X suddenly wants to change a law that happens to only benefit one group
3.) The one group that gets the benefit is the Silicon Valley VC’s.
4.) Politician X, or their family, suddenly receive stock from a company the Silicon Valley VC’s own
That is overt crime!
This is the big crime game that Kleiner Perkins, Google Ventures, Draper Fisher and the rest are playing. By ordering politicians to hire their staff and put their employees in charge of Government offices, they are rigging the game worse than a cheap Vegas card shark. These guys are playing the Super Bowl of corruption.
The Silicon Valley VC’s will cut down any programmer, competitor or outsider who dares to step on their turf. They will cut them down illegally, illicitly and with wrath and maliciousness…just like on Toga Night at the frat house. They use Microsoft VC software, gust.com, Venturewire, Gawker Media, Axciom and a host of covert on-line databases to put secret codes and “kill phrases” next to entrepreneurs, and companies, who have technology that could put one of their companies out of business. It is called “Black-listing”.If you don’t know what Blacklisting means, see the feature film called: “Trumbo” and you will get the picture. It is a covert order to terminate a person or a brand.
Where is the FBI, the SEC or a Special Prosecutor in all of this? Is Obama ordering them to take no action because the crimes will lead right back to The West Wing?
With such crimes now overtly obvious to the main-stream public (Thanks to Mike Judge) a strange phenomenon has emerged: Payback from the public.
Whether or not the FBI gets their man, or men, the arm of justice seems to have many fingers.
Numerous newspaper headlines and pundits are currently screaming about the “Coming 2016 Recession”, “The end of Capitalism”, and showing us bright graphics that invariably include the word NASDAQ with a bold redding line diving towards the lower right corner of a chart. The Silicon Valley tech market is SCREWED! The world seems to have given them the finger, shouted them down for their horrific privacy abuses of the public and said, with great emphasis, that nobody gives a flying toot about Tweeting their daily routines to a bunch of trolls and meat puppets.
It was as if the entire planet cried out in one voice: “TO HELL WITH YOU SILICON VALLEY”