By Erin Griffith
Layoffs. Shutdowns. Uncertainty. After a decade of prosperity, many hot young companies are facing a reckoning.

SAN FRANCISCO — Over the past decade, technology start-ups grew so quickly that they couldn’t hire people fast enough.
Now the layoffs have started coming in droves. Last month, the robot pizza start-up Zume and the car-sharing company Getaround slashed more than 500 jobs. Then the DNA testing company 23andMe, the logistics start-up Flexport, the Firefox maker Mozilla and the question-and-answer website Quora did their own cuts.
“It feels like a reckoning is here,” said Josh Wolfe, a venture capitalist at Lux Capital in New York.
It’s a humbling shift for an industry that long saw itself as an engine of job creation and innovation, producing the ride-hailing giant Uber, the hospitality company Airbnb and other now well-known brands that often disrupted entrenched industries.
Now the layoffs have started coming in droves. Last month, the robot pizza start-up Zume and the car-sharing company Getaround slashed more than 500 jobs. Then the DNA testing company 23andMe, the logistics start-up Flexport, the Firefox maker Mozilla and the question-and-answer website Quora did their own cuts.
“It feels like a reckoning is here,” said Josh Wolfe, a venture capitalist at Lux Capital in New York.
It’s a humbling shift for an industry that long saw itself as an engine of job creation and innovation, producing the ride-hailing giant Uber, the hospitality company Airbnb and other now well-known brands that often disrupted entrenched industries.
Their rise was propelled by a wave of investor money
— about $763 billion washed into start-ups in the United States over
the last decade — that also fueled the growth of young companies in
delivery , cannabis, real estate and direct-to-consumer goods. Unlike
low-cost software start-ups , these private companies frequently took on
old-line competitors by spending heavily on physical assets and workers
while losing money.
Now a pullback is unfolding in precisely the areas that drew the most hype.
Around the world, more than 30start-ups have slashed more than 8,000 jobs
over the last four months, according to a tally by The New York Times.
Investments in young companies have fallen, with 2,215 start-ups raising
money in the United States in the last three months of 2019, the fewest
since late 2016, according to the National Venture Capital Association
and PitchBook, which track start-ups .
Now a pullback is unfolding in precisely the areas that drew the most hype.
Around the world, more than 30
And those are not the only signs of change. Casper Sleep, which billed itself as the “Nike of sleep” by selling mattresses online, flopped when it went public this month.
Once-hot companies like Lime, the electric scooter provider, have
pulled out of some cities. Others, like the e-commerce start-up
Brandless, the game app HQ Trivia and the electronics maker Essential Products, are on the verge of shutting down.
There are now “frantic mini-moments of panic, as one thing after another happens,” said Roy Bahat, an investor at Bloomberg’s venture arm in San Francisco. “At some point, one rock after another will fall away from the cliff and we’ll realize we’re not standing on anything in many, many companies.”
There are now “frantic mini-moments of panic, as one thing after another happens,” said Roy Bahat, an investor at Bloomberg’s venture arm in San Francisco. “At some point, one rock after another will fall away from the cliff and we’ll realize we’re not standing on anything in many, many companies.”
The retreats are being led by companies that were backed by SoftBank,
the Japanese conglomerate with a $100 billion Vision Fund for investing
in start-ups . SoftBank bet big on companies like Uber and WeWork , as
well as the Colombian delivery start-up Rappi and the Indian hospitality
start-up Oyo. All have undergone layoffs in recent months.
“You can’t build on top of something that’s not strong,” said Seth Besmertnik, chief executive of Conductor, a marketing business thatWeWork acquired in 2018, which he and others recently bought back.
This month, SoftBank reported that its Vision Fund and other investments led to a $2 billion operating loss in the last quarter of 2019. In a statement, it said some of itsstart-ups had acted “quickly and responsibly to make some difficult
decisions to better position themselves for long-term success.”
The pullback will probably not be as severe as the dot-com bust in the early 2000s, when dozens of unprofitable internet firms failed. Today, venture capitalists and other investors still have large pools of money to invest. And certain types ofstart-ups — like those that make tech for
businesses and that typically have steady sales — continue raising large
sums of money.
“You can’t build on top of something that’s not strong,” said Seth Besmertnik, chief executive of Conductor, a marketing business that
This month, SoftBank reported that its Vision Fund and other investments led to a $2 billion operating loss in the last quarter of 2019. In a statement, it said some of its
The pullback will probably not be as severe as the dot-com bust in the early 2000s, when dozens of unprofitable internet firms failed. Today, venture capitalists and other investors still have large pools of money to invest. And certain types of
But in an industry known for
irrational optimism, skepticism now abounds. In San Francisco,
entrepreneurs are quietly sharing tales of skittish investors and a
struggle to adapt to a new reality. Spreadsheets of freshly unemployed
workers are circulating on social media.
“Firms that were spending money in
More workers are questioning the promises from
“People are becoming more critical and skeptical before just joining the party,” said Ms.
Some
A bounce back does not appear likely soon. When Casper — which raised more than $300 million in venture capital — went public this month, its stock promptly plummeted. That served as a warning to other high-profile
Perhaps
the most drastic turn has happened among cannabis start-ups , which rode
a wave of exuberance in recent years as countries like Canada and
Uruguay and several U.S. states loosened laws that criminalized the
drug. Last year, more than 300 cannabis companies raised $2.6 billion in
venture capital, according to PitchBook.
Then in mid-2019, investors started doubting whether the industry could deliver on its lofty promises when some publicly traded cannabis companies were tarred by illegal growing scandals and regulatory crackdowns.Start-ups like
Caliva , a cannabis producer; Eaze, a delivery service; and NorCal
Cannabis Company, another producer, have together cut hundreds of
members of their staffs in recent months.
“A lot of companies are not going to make it through this year,” said Brendan Kenney, chief executive of Tilray, a cannabis producer that went public in 2018. Mr. Kenney said he was stopping spending on new projects to survive the shakeout.
Then in mid-2019, investors started doubting whether the industry could deliver on its lofty promises when some publicly traded cannabis companies were tarred by illegal growing scandals and regulatory crackdowns.
“A lot of companies are not going to make it through this year,” said Brendan Kenney, chief executive of Tilray, a cannabis producer that went public in 2018. Mr. Kenney said he was stopping spending on new projects to survive the shakeout.
Even
a start-up named Unicorn hasn’t been spared. The company, which sold
personal electric scooters, raised just over $150,000 last year from
investors. But it quickly spent the cash on online ads and got just 350
orders, said Nick Evans, its founder.
In December, Unicorn said it could not afford to deliver any scooters and shut down. Mr. Evans ended up giving somecustomers refunds with his own money, he said.
In December, Unicorn said it could not afford to deliver any scooters and shut down. Mr. Evans ended up giving some
He
added that he was building a new company. While he declined to specify
what it would focus on, he allowed that there would be a major
difference this time: The start-up, he said, had to be profitable from
the beginning.
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