Market Overview

Friday's Market Minute: What Happens to the Startups?

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Unemployment rose by another 2.9 million jobs the week of May 9th, bringing the total loss of jobs to nearly 36.5 million. While some of those layoffs and furloughs may be temporary, that number is likely dwindling the longer the pandemic goes on. Many startups, especially the ones pushing for household name status, are about services--especially personalized and sharing services. The U.S. is a service economy. Lyft(NASDAQ: LYFT), Uber(NYSE: UBER), even WeWork only work if people are willing to pay to share with other people. So do Rent the Runway, AirBNB, or dozens of other, smaller companies. Some, including Lyft and Doordash, managed to classify many workers as contractors, evading some responsibilities, but are also laying off corporate staff. Uber is trying to come to a deal to purchase Grubhub(NYSE: GRUB), betting more heavily on the food delivery side of its business, but neither company is profitable. In fact, all these startups require an influx of investor cash to stay growing and afloat, but with uncertainty in the broad market and the global landscape, how long will investor money stay in? And, how long will it take for people to resume using these services post-lockdown? How long can these "growth" companies afford to wait for them?

 

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