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Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

nytimes.com

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Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#31

Post by rifung »

mgummelt wrote: post #24
baron816 wrote: post #18

Let’s say the company you work for goes public and your stock is suddenly worth $1,000,000 (as an example). A wise investor, you normally put all of your other savings into broad market index funds. Now, do you sell your company’s stock that was given to you and took you four years to vest into, or do you hold on to it and hope the valuation keeps rising? (This is a rhetorical question btw)

If you had $1MM in cash, how much of it would you use to buy the company's stock?

This exactly.

I work at Google and it astonishes me how surprised people are when I tell them I use autosale, the company program where your stocks are sold immediately as they vest.

They always ask "Don't you think Google stock is going to go up?" And I always reply that yes I do think it will go up but

1) that's not the right question to ask, you should ask whether it will go up more/less than anything else you could invest in with that money

2) My future compensation, both in terms of stock and salary, is already heavily tied to Google's future performance, so I have even more incentive to diversify compared with someone who doesn't work there.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#32

Post by woolvalley »

asabhi wrote: post #2

There are some good and some not so good among these companies. Uber is a taxi company with an app. Cars still cost the same as before to run, drivers still cost the same as before, all costs are the same as before. So once the subsidization by VCs stops, Uber rides will be as expensive as any other ride. Self-driving cars will not save Uber either. There is no network effect with self-driving cars, and once the tech…

Things like uber pool & friends is something that is hard to do efficiently as a dude with a few weeks. While airbnb is a fancy ecommerce website ;).

"Airbnb is just a fancy ebay CRUD app for rooms, anybody can code that!"

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#33

Post by louprado »

mgummelt wrote: post #24
baron816 wrote: post #18

Let’s say the company you work for goes public and your stock is suddenly worth $1,000,000 (as an example). A wise investor, you normally put all of your other savings into broad market index funds. Now, do you sell your company’s stock that was given to you and took you four years to vest into, or do you hold on to it and hope the valuation keeps rising? (This is a rhetorical question btw)

If you had $1MM in cash, how much of it would you use to buy the company's stock?

And then take that answer and invest even less given that, as an employee, you are already exposed to downside risk.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#34

Post by rpedela »

baron816 wrote: post #18

Let’s say the company you work for goes public and your stock is suddenly worth $1,000,000 (as an example). A wise investor, you normally put all of your other savings into broad market index funds. Now, do you sell your company’s stock that was given to you and took you four years to vest into, or do you hold on to it and hope the valuation keeps rising? (This is a rhetorical question btw)

I had a friend who chose the latter during the dotcom boom, and he lost everything when the market crashed. When the company we were working for got acquired, he couldn't believe he was getting a second chance and kept telling me to cash out so I didn't end up like him.

If you really believe that the company's stock price will do well in the future, go ahead and keep some shares. But I would still put a significant percentage in safer investments.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#35

Post by sp527 »

mistermann wrote: post #15
adventured wrote: post #12

Earlier quoted context omitted.

That depends on what you're buying. Atlassian has tripled since the early days of its post IPO trading. Shopify is up 5-6 fold in two years. Square is up four fold in 2.x years. Baozun is up seven fold in 2.x years.

I've thought for quite some time that rather than the broader overall market being allowed to participate in the possibility of crazy gains from technology startups, the rise of the VC financing model has resulted in the lion's share of gains (and losses) going to an elite group of well connected people, and once the easiest money is made, let the market have what's left over in a traditional IPO. As you point out, t…

Isn’t that just a long-winded way of saying that early investors, who take on more risk, earn superior returns?

As for the barriers to the general public investing in risky startups, that’s a feature not a bug. Look no further than dotcom 1.0 or the present day ICO market to understand why.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#36

Post by matte_black »

mistermann wrote: post #15
adventured wrote: post #12

Earlier quoted context omitted.

That depends on what you're buying. Atlassian has tripled since the early days of its post IPO trading. Shopify is up 5-6 fold in two years. Square is up four fold in 2.x years. Baozun is up seven fold in 2.x years.

I've thought for quite some time that rather than the broader overall market being allowed to participate in the possibility of crazy gains from technology startups, the rise of the VC financing model has resulted in the lion's share of gains (and losses) going to an elite group of well connected people, and once the easiest money is made, let the market have what's left over in a traditional IPO. As you point out, t…

This is something you can believe only if you think the vast majority of startups are making these returns. The fact is the lions share of risk also goes to VCs.

If you gave an average investor the kind of deal flow that big name VCs have access to you’d fry their central nervous system.

YC, for all it’s prestige, has only had one startup actually IPO, and only recently. Can an average investor survive this kind of torture? Never knowing if maybe one day all the money they put down will actually net some return? Knowing that they will have to continue investing or else hang all their hope on what they’ve invested in so far?

There’s plenty of sure money to be made buying post IPO, be content with that.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#37

Post by jayess »

frisco wrote: post #26
zapita wrote: post #21

Earlier quoted context omitted.

The short version is: retain a competent wealth manager to advise you. EDIT: not all wealth managers are scam artists. If you suddenly earn lots of money and don't know what to do with it, find a professional paid by the hour to advise you. Do not listen to the people telling you that anyone charging you for advice is automatically a scammer. Also don't listen to people telling you that it's "not that hard" without a…

> The short version is: retain a competent wealth manager to advise you. This is not good advice. "Wealth managers" are totally useless and exist just to charge you fees and create complexity. I really like mgummelt's comment above; it doesn't have to be more complicated than that!

Exactly. From personal experience, "wealth managers" are a scam. They're just below the scam scale from mortgage brokers and real estate agents.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#38

Post by anitil »

rifung wrote: post #31
mgummelt wrote: post #24

Earlier quoted context omitted.

If you had $1MM in cash, how much of it would you use to buy the company's stock?

This exactly. I work at Google and it astonishes me how surprised people are when I tell them I use autosale, the company program where your stocks are sold immediately as they vest. They always ask "Don't you think Google stock is going to go up?" And I always reply that yes I do think it will go up but 1) that's not the right question to ask, you should ask whether it will go up more/less than anything else you cou…

I had a friend lose almost everything in the dotcom crash by being solely invested in his employer.

His advice exactly mirrored yours

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#39

Post by lathiat »

Retric wrote: post #7
BurningFrog wrote: post #4

Earlier quoted context omitted.

My impression is that Uber is making money of the rides. It loses money on all its other research and investment schemes. I don't know if there are any actual facts out?

No, "Uber passengers paid only 41% of the cost of their trips for the fiscal year ended in September 2015." Prices have not changed much since then, so they are a long way from break even. https://www.reuters.com/article/us-uber-profitability/true-p...

That's assuming the only reason they paid that much of those trips was because of price. That's not true of how Uber operates.

They do a lot of things like driver incentives (for being logged on a certain amount of time etc, or for signing up in the first place - a lot of this is during market setup for a given city), complete discounted rides based on new signups for riders, etc. You can assume as their penetration into the market saturates for both drivers and riders that both of these costs will diminish.

A lot of people on Hacker News being US based also ignore the fact that Uber is highly international. I use it almost everywhere I travel for work, I think Malta was one of the few places they weren't. Lyft and similar competitors are mostly either US-specific or even city-specific. There is a lot of different economies in other regions to look at.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#40

Post by closeparen »

frisco wrote: post #26
zapita wrote: post #21

Earlier quoted context omitted.

The short version is: retain a competent wealth manager to advise you. EDIT: not all wealth managers are scam artists. If you suddenly earn lots of money and don't know what to do with it, find a professional paid by the hour to advise you. Do not listen to the people telling you that anyone charging you for advice is automatically a scammer. Also don't listen to people telling you that it's "not that hard" without a…

> The short version is: retain a competent wealth manager to advise you. This is not good advice. "Wealth managers" are totally useless and exist just to charge you fees and create complexity. I really like mgummelt's comment above; it doesn't have to be more complicated than that!

The recommendation is typically to use a "fee only" financial planner, who actually charges by the hour for advice instead of taking commissions on the products they sell you.
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