20% Of Valley Startups Can’t Get To Their Cash
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20% Of Valley Startups Can’t Get To Their Cash
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Re: 20% Of Valley Startups Can’t Get To Their Cash
#2A couple of days ago, Fred Wilson made a relevant post about his near escape from the auction rate bond market. Its an interesting read, with more detail on how these bonds usually function and how the recent malfunction developed. From what I understood, these bonds don't lose all their liquidity overnight. After they lose their "primary" liquidity (by failing an auction), there is a secondary market that kicks in because of the high interest rates that the bonds are contractually required to offer once they fail an auction.
Fred says he got a call from his broker saying "your bonds have not yet failed an auction but you should know that the risk of it happening has gone up". I imagine that a lot of startups must have got a similar call, but perhaps the founders were too focused elsewhere to pay attention. Or maybe the smart ones did listen and were able to avoid this sorry mess.
Re: 20% Of Valley Startups Can’t Get To Their Cash
#3A couple of days ago, Fred Wilson made a relevant post about his near escape from the auction rate bond market. Its an interesting read, with more detail on how these bonds usually function and how the recent malfunction developed. From what I understood, these bonds don't lose all their liquidity overnight. After they lose their "primary" liquidity (by failing an auction), there is a secondary market that kicks in b…
Why on Earth would ANY startup want to play "Treasury" like a large corporation? Using the KISS Principle an 'normal' bank account is much better. We all have better things to worry about than an extra 1% return on 'cash'.
As Warren Buffet says, if you don't understand it not invest in it.
Re: 20% Of Valley Startups Can’t Get To Their Cash
#4A couple of days ago, Fred Wilson made a relevant post about his near escape from the auction rate bond market. Its an interesting read, with more detail on how these bonds usually function and how the recent malfunction developed. From what I understood, these bonds don't lose all their liquidity overnight. After they lose their "primary" liquidity (by failing an auction), there is a secondary market that kicks in b…
Why on Earth would ANY startup want to play "Treasury" like a large corporation? Using the KISS Principle an 'normal' bank account is much better. We all have better things to worry about than an extra 1% return on 'cash'. As Warren Buffet says, if you don't understand it not invest in it.
Because "the experts" told them to.
One wouldn't want to be "miss out" on "greater returns for 'virtually' no risk" because they were "too stupid or cowardly to understand it..." according to your VC.
Re: 20% Of Valley Startups Can’t Get To Their Cash
#5The underlying muni's aren't faulting, right? You're losing liquidity, not assets --- why are people taking writedowns on these?
Re: 20% Of Valley Startups Can’t Get To Their Cash
#6This is why I put our company's savings into potatoes.
Re: 20% Of Valley Startups Can’t Get To Their Cash
#7from the comments:
# Michael Arrington
March 11th, 2008 at 9:10 am
one VC, speaking off record, said that some of their portfolio companies would likely fail because of this. When I asked him why he wouldn’t loan the companies money, he said that perhaps they wouldn’t make the investment decision again given where the companies have gone, and that the fact that there are other VCs investing makes it hard/impossible to figure out who should pay how much.
translation: they are on their own.
Re: 20% Of Valley Startups Can’t Get To Their Cash
#8Earlier quoted context omitted.
Why on Earth would ANY startup want to play "Treasury" like a large corporation? Using the KISS Principle an 'normal' bank account is much better. We all have better things to worry about than an extra 1% return on 'cash'. As Warren Buffet says, if you don't understand it not invest in it.
Because "the experts" told them to. One wouldn't want to be "miss out" on "greater returns for 'virtually' no risk" because they were "too stupid or cowardly to understand it..." according to your VC.
These things were seen as no-risk, basically like money market funds. Some startups have raised 8 digit numbers of money, and they have a CFO, and that CFO would be neglecting his fiduciary duty if he left millions in an account that earned 0.25% interest.
Re: 20% Of Valley Startups Can’t Get To Their Cash
#9The underlying muni's aren't faulting, right? You're losing liquidity, not assets --- why are people taking writedowns on these?
If you need money and it's all locked up in non-liquid assets, you do what you have to do to stay afloat.
Re: 20% Of Valley Startups Can’t Get To Their Cash
#10Earlier quoted context omitted.
Because "the experts" told them to. One wouldn't want to be "miss out" on "greater returns for 'virtually' no risk" because they were "too stupid or cowardly to understand it..." according to your VC.
These things were seen as no-risk, basically like money market funds. Some startups have raised 8 digit numbers of money, and they have a CFO, and that CFO would be neglecting his fiduciary duty if he left millions in an account that earned 0.25% interest.
Excuse me, but since when do money market funds earn 0.25% interest?