Marketplace - A rough time for startups 

Episode Date: April 3, 2024

Venture investments fell in the first quarter of 2024 to a near five-year low, PitchBook says. Funds started falling when the Federal Reserve first raised interest rates, and large exits have slowed in the past couple of years. Plus, “another test for the community”: Where Baltimore port workers and nearby businesses stand. Also, how campaign ads shape voters’ economic views and what the Realtors settlement means for buyers and sellers.

The jobs of today are still plentiful, but what about the jobs of the future? From American Public Media, this is Marketplace. In Baltimore, I'm Amy Scott, in for Kai Risdahl. It's Wednesday, April 3rd. Good to have you with us. The job market is still going strong. The latest hiring data from ADP shows private employers added 184,000 jobs last month, the biggest gain since July. Median wages grew by just over 5 percent, and by 10 percent for those who changed jobs. We'll get the official jobs numbers from the Labor Department this Friday.

One of the many economic engines behind a healthy job market is entrepreneurship and the startups that bring new ideas into the world and put people to work. But right now is not a great time for that whole ecosystem. PitchBook says venture capital investment fell in the first quarter of this year. And that's after the worst year for startup funding since 2019. Marketplace's Sabree Beneshour has more on why and what's to come. Vivas Kumar is CEO of a startup called MitraChem. We're working on the chemicals that go inside the batteries that power electric vehicles. Now, a startup that hopes to supply America's electric car fleet

has a lot of scaling up to do, and that takes a lot of money. So last year, Kumar needed to raise $60 million. When we went out and pitched the venture capital firms, it became very clear to us very quickly that they were not going to be in a position to support our current round. Kumar's company was not alone. It's been really hard. Kaidi Gao is a VC analyst at PitchBook.

The number of new venture capital funds fell by 60% between 2022 and 2023. The amount of money they invested in startups fell by a third. That was about the same time the Fed started raising interest rates. And that is not a coincidence. When the interest rate was held so high, from an investor perspective, you can allocate your capital and put it into something that's really safe, say treasury bonds. When the safe bet looks so good, betting on a startup doesn't. Venture funds themselves have had a hard time raising money, Gao says, for another reason. They haven't been able to cash out

previous investments as much. Large exits have not been happening. Exits, that's the dazzling IPO or the getting bought by Google. It's often the pot of gold at the end of the startup rainbow. Those have slowed down the past couple years, and so a lot of investor money has been locked up in companies waiting for their big moment. I wouldn't say a vicious cycle, but that's where the cycle of the whole difficulty is coming from. Luckily for Vivas Kumar at MitraCam, he found a way around the venture capital slowdown. He went to his future customers, including General Motors, and he raised his $60 million. Many other startups haven't been as lucky. So much of what dictates business success is just timing. There are plenty of great ideas out there that just haven't seen their time yet because of the funding slowdown.

When the market recovers, he says, you can bet those ideas will reemerge. In New York, I'm Sabri Beneshour for Marketplace. On Wall Street today, basically a wash. We'll have the details when we do the numbers. We reported earlier this week about a bill before the Maryland legislature that would help people whose jobs were affected by the collapse of the Francis Scott Key Bridge here in Baltimore. There's a hearing on that proposal scheduled for tomorrow. But in the meantime, work has slowed or even stopped for the tens of thousands of people who work in and around the port. This includes longshoremen who unload the container ships coming into the port, the warehouse workers who store those containers, and the servers at nearby restaurants who feed all of the above. Marketplace's Stephanie Hughes has been talking to some of those workers about

how they're faring. At Trans-American Trucking and Warehouse near the Port of Baltimore, warehouse manager Mill Cooper guides a team using an overhead crane to move an 8,600-pound reel of telecommunications wire. There's also some wooden freight containers lining the sides of the giant warehouse. But Cooper says with no new ships coming into the port right now, there's not as much to store or transport. And that makes him nervous. It's like I said, when the warehouse starts looking empty,

I know they ain't going to need nobody to babysit no freight for so long. Trans-American still has domestic shipments coming in here by truck. The company isn't planning to lay anyone off, and instead will encourage their Baltimore employees to use vacation time now. But a few miles south of here at the Longshoremen's union office, it's a different story. Local President Scott Cowan's bagpipe ringtone is going off pretty much all the time. Cowan says he's hearing a lot from members who are worried about how long this will last. Right now, the vast majority of them are out of work.

Some are collecting unemployment, some are working other jobs, and some are still working, but not many. Cowan is advocating for financial relief for the longshoremen now. But he's also worried that the longer the waterway is closed, the more likely it is that Baltimore will lose business to other East Coast cities that it's essentially competing with. If we lose cargo to other ports, it will take time to gain that cargo or different cargo back to take its place. It could turn a short-term problem into a long-term problem. And that could affect a lot of the businesses in the area where longshoremen are regulars. At Vinny's Cafe, okay? It's $3.45, please.

At Vinny's Cafe, there would usually be a line out the door at 12 o'clock, with port workers buying subs and slices of the giant 30-inch pizza they sell here. Fabrizio Scotto's family owns the restaurant. His dad is Vinny. He says it's been a lot quieter this past week. Definitely see the impact port-wise. But, you know, they can't go to work, so that's why we don't see them. At one table, Mark McCleskey, a retired tugboat captain who used to work in the port, is finishing up lunch with a couple of friends. He says the port being

cut off feels like just another blow to a community that's already lost a bunch of industrial jobs. Yeah, they'll get through it. I mean, you know, yeah, they're kind of tough. They'll get through it. But it just feels like a lot of times it's like, why? Another test. Exactly. One thing that gives this group hope, they say the people clearing the channel are the best around.

Essentially, they have faith in the workers doing their jobs so that all the port workers will eventually be able to return to theirs. In Baltimore, I'm Stephanie Hughes for Marketplace. Lately, we've been talking on the program about economic belief versus reality and why the gap between what voters believe about the economy and what's actually happening in the economy matters in an election year. Today, Marketplace's Kimberly Adams brings us another story on this theme, looking at the money and effort going into shaping those economic beliefs to try to influence Election Day reality. Here's Kimberly. to try to influence Election Day reality.

Here's Kimberly. When you tally up the spending on TV, social media, radio, billboards, gas pumps, just about everywhere, political campaigns and advocacy groups are expected to spend anywhere from $10 to $17 billion on ads this election cycle. And you can expect lots of them to be about the economy. My economic plan is about investing in places and people that have been forgotten. But how to talk about the economy in a campaign ad depends on whether you are an incumbent or not and how the economy is doing at the moment. Mark Hetherington is a political science professor at the University of North Carolina at Chapel Hill. And that's where the campaign matters.

Can you, as a campaign, affect the perceptions that people have of conditions, especially if those conditions are not on your side? One strategy can be to adjust the timeline you're talking about. Heath Garrett is with Strategic Partners and Media, a Republican-leaning firm. is with Strategic Partners and Media, a Republican-leaning firm. He says even if the macroeconomic data, GDP, inflation, and jobs numbers are improving, if you're an average American comparing this economy to, say, the pre-COVID economy... Then no matter what the academic economic numbers are telling you, you're not feeling better because it's an emotive experience when you go to the

grocery store and all of a sudden you feel like your bill is up by 50 percent. It just has a feeling about it. And those feelings resonate with voters. If you're a candidate running against an incumbent, that's what you latch on to. But Joe Biden's America. Wages down, prices soaring, families struggling. Only Trump's ready to get our economy, our country, back on track. But say you are an incumbent, trying to get a little love for good economic news. Over 12 million jobs have been created. And Joe Biden's building an economy that leaves no city, no town, no American behind. You can't just sit on a soapbox and scream out the accomplishments you've had in the two, four or six years of your term.

Tess McRae is with the consulting firm The Parkside Group, which works with local and national campaigns. with local and national campaigns. You need to be able to hold space for the real feelings of frustration, feelings of cynicism, and acknowledge that you're going to continue to do that work. And lifting up specific examples of what that work in the future is going to look like

is very key. McRae says coaching candidates on how to talk about the economy is often one of the earliest conversations her team has with campaigns. She expects to see candidates this cycle, especially incumbents, focus less on the big picture economy and instead focus on. What were we paying at the pump a year and a half ago? What are we paying now? year and a half ago. What are we paying now? What legislative initiatives have you prioritized as a candidate that are going to hopefully reduce those costs that voters are feeling? The Biden administration lowered the cost of prescription drugs and passed laws to make health care more

affordable. And, says Heath Garrett of Strategic Partners and Media, the key is to keep the message focused on local and individual issues, especially in down-ballot races. That's why Monica secured record funding for our schools and passed a permanent property tax cap. But the best strategy, says Garrett, is to have real voters tell the story for you, the candidate, from their perspective, rather than it always be about you, the candidate. Because what voters believe about the economy, says Garrett, depends not only on what they're experiencing themselves, but also what others are experiencing as well. In Washington, I'm Kimberly Adams for Marketplace. Coming up.

I tell everybody, how can you have a bad day when you're walking a dog? And it can be lucrative, too. But first, let's do the numbers. The Dow Jones Industrial Average dipped 43 points, one-tenth percent, to close at 39,127. The Nasdaq increased 37 points, two-tenths percent, to finish at 16,277. And the S&P 500 ticked up five points, one-tenth of a percent, to end at 52.11. After a high-profile vote, Disney shareholders re-elected the company's entire board. Billionaire Nelson Peltz and other activist investors had tried for seats.

They've been agitating for change at Disney over its investment strategy and CEO succession plan. Disney shares dropped 3.1%. Disney, by the way, is a marketplace underwriter. Office vacancy rates have hit another record. 19.8 percent of U.S. offices were vacant last quarter. That's according to Moody's, which points to slowing demand for warehouse and distribution spaces and also mounting commercial debt. Eighty percent of the 15.2 billion dollars of office debt maturing this year faces higher delinquency risk. Bonds rose. The yield on the 10-year T-note fell a hair to 4.35 percent.

You're listening to Marketplace. This is Marketplace. I'm Amy Scott. This is Marketplace. I'm Amy Scott. The real estate industry is still digesting the implications of that big settlement a few weeks ago. The National Association of Realtors agreed to pay $418 million and change its rules to settle lawsuits accusing the group and some big brokerages of conspiring to artificially inflate sales commissions. While the settlement is still pending court approval, it could dramatically change the way that agents, as well as buyers and sellers, operate in the housing market. So with these changes afoot, we decided to check in with Amanda Pullman.

She's a realtor and broker at Keller Williams Living in the greater Cleveland, Ohio area. Welcome back to the program. Thank you. I'm pleased to be back here in this seat. Tell me how you reacted when you first heard about this settlement. I think same reaction as a lot of us that are professionals in this industry, both realtors and brokers. I think there was a lot of shock and then kind of business as usual. And, you know, overall, we have a lot of changes in our industry. And, you know, here's another one. How is this going to affect if the settlement is approved by the court? How is it going to affect how you operate? So I think one thing that is going to change and probably has already for a lot of us is making sure that we are using written agreements for buyer agency. So all along when we listed a home with a seller, there was a listing agreement and that was signed by the seller.

And the commission, which is always and always has been negotiable, was also signed by the seller. And the commission, which is always and always has been negotiable, was also signed by the seller. The use of buyer agency agreements, which are specific to working with a buyer, I wouldn't say that all agents were using them. And so this is now going to be mandated. And I think it's a great opportunity for us to have more clarity and transparency for the things that we do for our clients when we represent them as buyers agents. So traditionally, the seller has paid the commission to both their own agent and whoever buys the house, their agent, right? They've advertised a commission on the MLS, the multiple listing service, and that commission has been split. If the buyer now has to pay their own agent's commission, I mean, do you think they will? Or do you think we'll see a lot of people trying to buy a house on their own, unrepresented?

I think this is one of the big kind of concerns in the industry is what's going to happen for buyers that simply cannot afford to pay their buyer's agent. And it's already competitive enough for the first time home buyers, the VA buyers, when they are bidding against other buyers who might have cash or have gobs of resources, because it's already a very challenging market with very low inventory and a lot of buyers wanting the same house. Well, let's talk about the market, because when we last spoke a couple years ago, Cleveland was seeing a bit of a slowdown because just of affordability, high prices, high mortgage rates. Have things picked up a bit? Yes. So Cleveland, since COVID, has had a seller's market, which has steadily got stronger and stronger. Obviously, higher interest rates made it not as appealing

for so many buyers because when we had the lower interest rates, of course, there were lots of buyers. Now there's low inventory and the interest rates might be a little bit higher, but there are certainly buyers out there and they want homes and they are competing. And there's so few homes, probably less than I've ever seen. So we are seeing multiple offers, prices going way over asking. And then at the end of the day, a lot of sellers are choosing, you know, cash offers. And it doesn't look like it's going to let up. How do you think this settlement and the market really with low inventory, fewer transactions recently is going to affect your business. Do you see some real estate agents leaving the industry? masterminds and lots of discussions around it. I think there's some fear, especially around agents that work with a lot of buyers, because working with buyers is probably typically what a lot of agents at least start their business doing. I think strong listing agents or agents that typically

have a lot of listing inventory are not feeling anything but probably excited. So it's going to be mixed, but I think there will be quite a few people that do decide this change is much too difficult because there's a lot of things ahead that are kind of unknown because obviously the settlement hasn't actually been accepted. So we're still a little bit in limbo here. Amanda Pullman is a realtor and broker at Keller Williams Living in Solon, Ohio, in the Cleveland area. Great to talk with you. Thanks so much. Thank you, Amy. We are out. We, speaking very generally here, as a country, spend an enormous amount of money on our pets. $147 billion last year, according to the American Pet Products Association.

That's on everything from vet visits to treats to doggy daycare. And that spells opportunity for small business owners, like the subject of this installment of our series, My Economy. My name is Judy Nunez, and I'm the founder of Tales on Trails in Jersey City, New Jersey. We provide pet care services, dog walking and cat sitting. So we range between $25, $26 per visit. I first opened this company right before Hurricane Sandy in 2012. I'm a differently abled American. I was working in corporate and I had several, and I was not able to sit.

I couldn't sit, and I couldn't stand, but I could walk. So one day I Googled walking. It's the only thing I can do, and I was surprised to see dog walking. I'd never heard of it. Well, I've always been a pet lover. So I opened this company because I needed to do something. The dogs, the families, it was exactly what I needed. Before the pandemic, it was exceptional.

We had over 125 daily dog walking clients. And then we opened a doggy day camp. The doggy day camp opened February 2020. We were open officially five weeks and we were successful before we closed and never opened again. Once that happened, I threw myself into the PPP. I spent the next three or four weeks teaching myself how to apply for that. I had nothing really to work with. And once that was settled, about three weeks after that, I put my phone down.

I put everything down. And I mourned the loss like everybody else. It was really staggering. It was a huge loss. For us, and like many businesses, we were closed for about two and a half years. We just didn't have work. Everybody was home. So the PPP helped to keep us afloat, thank goodness. Pre-pandemic, we had 26 people in-house working for Tales on Trails. And now the seasons change a bit, so they fluctuate between four to six. See, we're about 30 to 35% of what we used to be. And honestly, it's fine keeping it small. It's a little bit easier to manage everything as we grow, and especially where I don't think I want to get that big again.

For me, walking brought me peace. It made me feel like a functioning person, especially with my body. I tell everybody, how can you have a bad day when you're walking a dog? It's really helped me with my healing and with my metamorphosis as a disabled American. It's been really specific, and I'm grateful, 100%. It's been really specific and I'm grateful, 100%. Judy Nunez, owner of Tales on Trails in Jersey City, New Jersey. You know, we can't do this series without you.

Please tell us what's happening in your economy. You can do that at marketplace.org slash my economy. This final note on the way out today, we started with jobs, so let's end with jobs, in particular those with the word chief in the title. S&P Global says for the first time in two decades, the growth of women in senior corporate roles has backslid. Last year, women held 11.8 percent of the 15,000 C-suite positions in the S&P Global Total Market Index. That's down from 12.2 percent the year before. Growth in all senior positions fell to the lowest level in a decade. One possible factor researchers cited? A waning focus on diversity initiatives. Our media production team includes Brian Allison, Jake Cherry, Jessen Duhler, Drew Jostad, Gary O'Keefe, Charlton Thorpe, Juan Carlos Torado, and Becca Weinman. Jeff Peters is the manager of media production.

I'm Amy Scott. We'll be back tomorrow. This is APN. All over the country. We need to improve reading in Wisconsin. Schools are changing the way they teach reading. I'm calling for a renewed focus on literacy. We have gotten this wrong in New York and all across the nation. And it's happening because of a podcast.

I think your podcast has changed my life. And I'm going to share this podcast with everyone I meet. Sold a Story investigates how teaching kids to read went wrong. New episodes of Sold a Story are available now.