This is a Linkedin post by Jesse Pujji. Jessi a serial entrepreneur that lives in the US. He has:
- Bootstrapped to an 8-figure exist with his previous startup, Ampush
- Is currently building GatewayX, a venture studio that he plans to bootstrap to $1B+
- Executive Chairman & Founder of GrowthAssistant.com
- ex-McKinsey Consultant
Guest Author: Jesse Pujji
$100+ BILLION of value was VAPORIZED in 2023…the worst since 2008’s GFC.
Here are 5 of the most painful VC bankruptcies of 2023 (& why they should’ve bootstrapped instead):
1. WeWork: BK in Oct 2023
Total funding: ~$22 billion in debt and equity
Value vaporized: $46.98 BILLION
Where did it go wrong?
They branded themselves a tech company to command tech multiples, but at the end of the day, WeWork was a real estate play.
2. Bird: BK in Oct 2023
Total funding: ~$900 million in debt and equity
Value vaporized: $3.32 BILLION
Where did it go wrong?
Price wars with other scooter companies like Lime squeezed margins and made unit economics unsustainable.
3. Hopin: BK in Oct 2023
Total funding: ~$800 million in debt and equity from investors like IVP and Coatue Management
Value vaporized: $7.73 BILLION
Where did it go wrong?
Zoom and Microsoft dominated the virtual event space while smaller, specialized platforms like ON24 and Webex Events carved out other lucrative niches.
4. Sonder Inc. BK in Nov 2023
Total funding: ~$1 billion in debt and equity from investors like SoftBank, General Atlantic, and CVC Capital Partners
Value vaporized: $2.2 BILLION
Where did it go wrong?
They expanded aggressively before getting their core business right. When the market stopped funding unprofitable businesses, this was the final blow.
5. SmileDirectClub: BK in Sept 2023
Total funding: ~$695 million in debt and equity
Value vaporized: $8.9 BILLION
Where did it go wrong?
Revenue was consistently growing, but their cash losses were staggering: $335M cash loss in 2021 and $278M in 2022.
***
Reading about these VC blowups reinforces my belief that growing unprofitable businesses with venture capital is a dangerous game.
The tide went out, and we now know who was swimming naked.
I couldn’t sleep at night if I was Adam Neumann; taking > $1 BILLION of value out of a company that ended up worthless.
Here’s why I think they should’ve bootstrapped instead:
1) Increased runway: all of these businesses never really made a profit at any level but could raise money to solve that issue. It creates very bad habits and makes long term success nearly impossible. Learn to make money early.
2) Secondary is like fire: it can be a helpful tool or cause a forest fire. At small amounts, secondary is helpful (I took some) to take the stress out of an entrepreneurs life (with a few million $) so they can focus on building. But for many of these stories the founders took out BILLIONS. I think that’s just wrong.
3) Increased focus: the most scarce resource is always leadership bandwidth – I remind all my CEOs of this. Every GX company could hire and spend more and STILL be profitable. But we don’t because most people can’t drive more than 3 things well at a time. If you stick to this orientation, you will build a BG.
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