WeWork's Sudden Fall Reveals the Cracks in the Startup Economy

The venture capital firm First Round Capital conducts an annual "State of Startups" survey that gets passed around widely in Silicon Valley. Its 2019 findings, published this week, are grim. From a report: Over two-thirds of startup founders, more than ever before, believe that we are in a tech "bubble." Sixty-five percent of founders believe that it's going to be harder for them to raise money next year, up 20 percent from last year's survey. Across the country on Wall Street, there are those who share these entrepreneurs' new pessimism. In a note, Bank of America's research division suggested that recent shifts in the market could produce a lot of pain and "volatility" in the coming year.

Let's call it the "WeWork effect." For some context, new companies, especially startups from Silicon Valley, were able to raise substantially more money from private investors in the past decade than they were in previous years. This continued to be the case even as these companies, like Uber and WeWork, got bigger and bigger, approaching the size at which they'd traditionally need make a public stock offering in order to raise the necessary cash to keep growing. As Bloomberg columnist Matt Levine frequently says, "private markets are the new public markets," meaning that these companies are able to tap the same kinds of large investors as they would if they were publicly-traded without actually going public.

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