The Stuck Generation
A generation of startups have real revenue but little cash flow or growth... and a heavy VC pref stack. The party's over; who cleans up the mess?
The company was founded in 2016 to reinvent a lethargic segment of real estate finance. After a few years of rapid growth, the company raised a $75 million Series C led by Tiger in 2019. After a brief pandemic scare, the rocketship continued until hitting a brick wall in 2022 as interest rates rose and real estate transaction volume sagged.
Today, the company is doing a bit north of $50 million in annual revenue. An impressive number, but growth has slowed to a crawl: up 8% in 2024 after a double-digit decline in 2023. And the company is barely “profitable” with a modest 2% EBITDA margin more than eaten away by interest on the company’s $25 million venture debt line—now on its third extension. The company remains cash flow negative.
While there’s no immediate pressure to sell—and no need to wind down—hope is fading that the company will clear its $125 million pref stack, let alone produce a reasonable return and justify the board’s continued time and attention. The management team’s morale is sapped, with zero opportunities for advancement and stock options well out of the money, and the founder/CEO waffles between manic delusion and despair depending on the day.
This is the story of dozens of startups founded in the 2013-18 time horizon. While this state of affairs isn’t exclusive to real estate-related startups, many real estate tech companies find themselves in it.
As 2025 dawns, these companies are increasingly at an inflection point, with venture directors and executives alike eager to move on with their lives—and perhaps even turn some TVPI into DPI.
Today’s letter will explore what happens to these companies. To do this, we conducted a series of interviews with senior executives, VCs, and advisors of companies in the “Stuck Generation.” Specifically, we’ll look at the options available to these companies and what we might see in the coming years, including rollups, sub-scale IPOs, recapitalizations, and more… and where there might be opportunity for savvy investors and strategics.