It’s Supposed to Be Hard: Life in Startup Land in 2024

It’s ugly out there. Looking at the layoffs and Carta data on startup shutdowns it does seem grim. Yet many founders remain naively optimistic, thinking “We just need to hang in there a little bit longer, and then things will get back to normal.”

Unfortunately for those tech workers and startup founders of the 2019–2021 vintage and of the Gen AI category in 2022–2023, what they went through is actually abnormal. The brutality of the market, this is what is normal and always has been in early stage startups.

We see a decline of growth stage rounds as tourist money from hedge funds disappear. We see a lower graduation rate of seed to series A from 25% of deals to 10% of deals. We now see the focus on metrics and capital efficiency. We see a regular stream of layoffs from bloated big tech and startups.

Like rich kids who develop expensive drug habits, they are now having to learn about reality the hard way now that the money is gone. Startups have always been hard. This has been lost in the ZIRP bubble environment. So many of my 2021 vintage investments have obscene burn rates.

There is no reason for a seed stage startup to have $150k usd or even $300k usd monthly cost structures. I should have caught some of these earlier and warned the portfolio back in Q1, 2022 and through most of last year as I learned from my own experiences in 1999–2000. Sadly very few paid heed to this and they are paying for it. We all lost some discipline.

And to sound even more like an angry old man, What added to this cost structure issue was the crappy work ethic that took hold in tech overall. The entitlement, bad habits, unrealistic expectations and pure laziness and unwillingness to put in the hours required. Endemic at the FAANGs but even in many startups. No surprise as we see founders waking up and gutting their staff to improve fitness.

The best companies always have an amazing work ethic. Even when I was at Yahoo! In the early 2000s we worked crazy hours, like 100+ a week because that was what was needed. I recall the parking lot being full at 730 am.

Thank goodness we are seeing companies like Traba (not a portfolio co sadly) and others demanding this high commitment. They even have 996 as a value, copied from the Chinese tech world of working 9 to 9, 6 days a week. In fact they started as 997.

Startups are damn hard and require this intensity to survive and thrive. If you are not willing to take that pay cut and work those hours then don’t work in startups. There are other companies and industries to work at. This is the reality like it or not and always has been.

We are seeing a back to the future moment in tech and I think this is a good thing. A focus on frugality, dedication and on grinding exceptionally hard to solve really hard problems using technology. Grit and endurance is everything. Hard things require intense hard work to bring them to life. Modern day alchemy.

This is why I am still bullish on Silicon Valley and tech. The tourists leave and the purists stay as the cycles turn. Thank goodness for this.