Ariba Shahid, a Pakistan correspondent for Reuters, recently shared a series of tweets discussing the challenges faced by startups and their potential impact on the economy. In her first tweet, she acknowledges that startups often fail, especially considering the current global funding crunch and the less-than-ideal local economy.
Startups fail. We're in a global funding crunch and our local economy isn't too shiny either.
Yes this isn't public money so the accountability to the public isn't the same. VCs are used to the risk so the odds of an audit are low too
But the spillover of a shutdown are bad
1/n— Ariba Shahid (@AribaShahid) July 16, 2023
She points out that since startups are not funded with public money, the level of accountability to the public is not the same. Venture capitalists (VCs), who are accustomed to taking risks, have low odds of being audited. However, the consequences of a startup shutdown can have negative spillover effects.
She highlights the problems associated with startups raising large amounts of money at high valuations and then rapidly depleting those funds. This type of approach is deemed frivolous, as it assumes that the inflow of funds will remain constant.
The funding winter was to come. Raising large amounts at large valuations was frivolous. Running through money thinking that the inflows would always be the same was even more frivolous.
The layoffs, the impact on existing businesses – they're not quantified
2/n— Ariba Shahid (@AribaShahid) July 16, 2023
Ariba emphasizes that the impact of startup failures, including layoffs and their effect on existing businesses, is not adequately quantified. She also mentions the need for corporate governance across the board, emphasizing the importance of accountability in order to address these issues effectively.
She also refers to an article by @SiddiquiZuha, shared in one of her tweets, which discusses the spillover effects and bursting of bubbles in startups. The article specifically focuses on the collapse of Airlift, an e-commerce company, and the lasting impact it had on gig workers in Pakistan.
Ariba calls for a shift away from celebrating arbitrary milestones like the “biggest round” or “largest valuation” in the startup ecosystem. She suggests that these competitions can be counterproductive and encourages focusing on more meaningful indicators of success.
Bonus tweet: we need to get over "biggest round/ largest valuation" and all these arbitrary measuring competitions.
Please. Stop with thr weird milestones.
— Ariba Shahid (@AribaShahid) July 16, 2023
The tweet thread also includes responses from other Twitter users. For instance, adeel adil mentions that startups often depend on monthly VC funding, and once the funding is withdrawn, it becomes optimal to freeze operations.
Khawar Ikhlas adds that many startup failures can be attributed to mismanagement, corruption, and pilferage by influential individuals within the industry.
Overall, Ariba Shahid’s tweets highlight the challenges faced by startups in the current economic climate, the need for better corporate governance, and the potential consequences of startup failures on the broader economy.
