a movement of startups seeking to exit by selling to shell companies known as SPACs, which are sometimes called blank-check companies.
The VC ecosystem depends on exits to achieve liquidity, and with fewer companies filing to go public or successfully seeking out acquisitions, the pool of available capital could start to dry up if the economic decline becomes extended. Venture capital firms need to demonstrate that they can provide a good rate of return for their limited partners, who are the investors in VC funds. their runway, which is how much cash a startup has in the bank to fund its operations, for up to 3 years.
If the gloomy forecast for 2020 startup exits comes true, then VCs, who have poured billions into unprofitable startups like Uber and Airbnb in their pursuit of growth, may have to switch gears and focus on profitability. And if unprofitable startups start to run out of runway and fail to raise additional funds, they might become some of the first causalities of the worst recession in the US since the 1930s Great Depression, which lasted a decade. LoadingBy clicking ‘Sign up’, you agree to receive marketing emails from Business Insider as well as other partner offers and accept our
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