Articles

NYC is Bankrupt and the World has Moved On

Vijar Kohli
August 21, 2020
5
 MIN
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New York City is Dead

Earlier this week, James Altucher wrote an opinion piece about the state of NYC. James is an exceptional writer and has lived in the city since the 90s. This post has gone viral for several reasons.

NYC is in a tough spot. Most of its tax revenue comes from commercial real estate and wealthy individuals. But the city is a ghost town and billionaires have no plans to return anytime soon. Many residents have traveled to Miami, Los Angeles, and Atlanta. This temporary shift is enough to put the city's financials in a dire position.

James believes businesses wont return to NYC after experiencing remote work. Restaurants will close down and entire blocks will be shuttered. The loss of some tax revenue will be permanent. This problem is not unique to NYC but is magnified because of its structure.

Famed NYC venture capitalist, Fred Wilson, wrote a rebuttal post on the future of NYC. The city will need a turnaround. I think it will take five years. Tourism may come back next summer but commuters will be less anxious. I polled my followers this week and found 59% will not go back to the office until 2021 and 28% will work from home forever. The markets have changed and businesses need to adapt or die.

Startups are Buzzworthy at Best

Startups are a buzzword. Launching a business is not a new concept but venture capitalists control the media. Each new funding round results in massive media coverage. And small, boring, profitable businesses receive almost zero attention.

In 2019, the Venture Capitalist industry only deployed $136 billion. This is a fraction of the entire investment industry. Apple just hit a $2 trillion market cap and has more than $200 billion in cash. Bridgewater Associates, the world's largest hedge fund, has $138 billion assets under management. Other alternative managers in private equity and debt investing tower over venture capital. But VCs do a better job with press releases and social media.

Startups are a bad investment and perform poorly. Most startups raise capital to lose money. They are more akin to research & development centers. R&D facilities are loss leaders in business and not designed to be profitable. This is an important distinction.

Startups are glamorous because of the large valuations and large exits, but many are not profitable businesses. Some tech startups only build products or features, never a self-sustaining business model.

Nothing is wrong with building a R&D cost center. In fact, I would argue we need more of them. But don't use startups as your North Star when looking at the health of the markets.

Deal or Bust

Working from home doesn't mean we can't network and attend events. For the past few months, I've tried to attend one new virtual event every week if it makes sense. This week I was invited to a new 'Shark Tank' style event to bid on a popular podcast newsletter business.

Media content businesses can be very profitable in the right niche. The podcast business for sale was Software Engineering Daily. In 2019, the company was able to produce $1.1 million in revenue and $950k in profit. Great brand and strong following by fellow tech enthusiasts.

Nathan Latka does a fantastic job moderating these events. This is his tenth episode of 'Deal or Bust' for live SaaS deals. He hosts multiple buyers, engages the audience, and brings in industry experts to discuss growth strategies in real-time.

You can watch the recorded live show below on YouTube.

Travel the World from Home

This is a last-minute find I want subscribers to experience. You need to check out this Drive & Listen site. The site provides a recorded video of someone driving through every major city in the world. It's an unbelievable experience and quite soothing.

Scroll through different cities and it will play the local radio station as well. This was recorded before the pandemic emptied our streets so it is nice to see crowded streets with cars and people. This is also a great reminder that you need to travel the world!

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Episode Transcript

Vijar Kohli
Tech Investor

Vijar Kohli is the founder of the TechFinancier. He discusses the latest industry changes and interviews all podcast guests.