China Stock Market Drops 8.5%
Fun bedtime story: the systemic shock of this downturn causes investors to do what they are naturally prone to do, which is become fearful. Money dries up for the most speculative investments first, which removes the flow of dumb money from late-stage unicorn rounds.<p>Unable to raise further "growth capital" at attractive valuations, and burning money like there's no tomorrow, we see the first unicorn layoffs within 3 months. This spooks investors further, which dries up whatever funding was left for early stage deals. Within 6 months, the weakest startups are beginning to fail outright, which pulls back the tide a bit, and reveals the ponzi scheme of startup-servicing-startup revenue cycles for what they are. Suddenly, a number of heretofore assumed "safe" investments with "strong" revenues are revealed to be precarious, as 95% of their revenue streams were correlated.<p>Companies go from healthy revenue to practically nothing overnight, as dozens of companies all cut back on burn simultaneously. This only exacerbates the cash flow problems, and startups that were flying high are now flying into the ground at remarkable speed. Market gurus are revealed to be wearing no pants.<p>Within a year, the valley is in full recession, and people are clamoring for U-Hauls out of San Francisco, which are in short supply...<p>(In case you were wondering, this is essentially what happened in 1999, minus a few wild-cards like companies with totally fictional revenue, and companies that had no revenue at all.)