I was happy to be invited to a small-format dinner for startup founders and a few VCs last week. The ostensible goal was to discuss trends, lessons learned over the past year and challenges currently being faced. It turned out to be less upbeat evening than I had anticipated BUT I learned a lot about the state of startups as we head into 2020.

I’ve been to a variety of these dinners over the years – always fascinating to meet the movers and shakers of the startup world and see the future through their eyes. This dinner, however, felt different. The vibe I picked up was of worry and a sense of opportunities slipping away. WeWork hung over us like a black cloud. There was very little optimism about “exit strategies.” The days of easy unicorning appear to be over. I felt like I was witnessing the end of an era. The WeWork debacle was the tipping point but just the tip of the iceberg of what is yet to come (see Casper, MedMen and Knotel below).

Scroll down for a few of the recurring themes.

These are melancholic times for startups

Exhaustion

Many of the founders seemed exhausted by the scope of the challenges ahead of them. The men in particular were eager for guidance on work/life balance. Many were in their 30’s with young families. Figuring out how to allocate the hours in a day to get sufficient time for family and kids is a major challenge.

The struggle to Hire and retain workers as companies scale

Another major challenge for founders is how to get the right mix of workers- especially as “professionals” are brought in to transform or reposition the startup to meet corporate governance. Invariably, the new hires change the culture. Several mentioned how the team that built the company is most often gone within a year of bringing in these next-level hires.

Scramble for an Exit Strategy

This may be a result of being at a particular stage of their growth trajectory but I was surprised by the lack of enthusiasm for the intrinsic thing their startups were created to deliver. It felt a bit like each startup was created solely with an exit in mind – either to IPO or to sell-to-giants. A business developed primarily to cash out feels different than a business created around passion.

Copycat Ideas

Very few original ideas. We’re at a stage in the game where the majority of concepts are just twists on something already on the market.

CASH CRUNCH: Money is drying up and it’s a major problem

VCs have done an about-face on growth. It felt like the startups were blindsided by this abrupt shift to profitability.

Several of my dinner mates had already gone through one failed startup and most noted how much more difficult it is to get funding these days – particularly since the WeWork fiasco.

What’s Next?

Although many conversations revolved around WeWork, there are many other high flyers about to bite the dust, e.g., Casper Mattress is running into a whole heap of trouble prior to their IPO. All those free mattress returns actually cost the company lots of money – and mostly end up in landfill. It’s been estimated that with online mattress sales, it takes 4 mattresses for a consumer to be satisfied, i.e., 3 mattresses end up in landfills after being tested and returned after x number of days.

MedMen is rumored to be close to bankruptcy.

They spent like drunken sailors in pursuit of market dominance but severely miscalculated.

Grizzle.com

And finally (for today at least), Knotel lays off up to a third of its New York-focused staff

Same concept as WeWork and equally aggressive with their growth strategy.

Per The Real Deal: Similar to the 90% drop in leasing that WeWork faced this past quarter, Knotel faces high vacancy rates and a drop in leasing activity.

Toward the end of last year, Knotel had 800,000 square feet of vacant space in New York. And last week, CNBC revealed that the firm’s leasing activity had dropped 80% in the fourth quarter of 2019.

Bottom Line.

The stock market might be booming but as Hamlet would say “something is rotten in the state of Denmark.”

As things slowly unravel for some of these “pie in the sky” schemes, I expect we’ll see quite a bit more pain before things eventually right themselves.