Smells like a bubble....
Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave
71–80 of 163 posts
Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave
#72Let’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)
An age-old question. If you look at Larry Ellison or Bill Gates, they would not be where their are without holding a whole lot of stock when the could have sold. Personally, in the case of your first liquidity event, it is a great time to take enough off the table to never have to worry about money again. Beyond that, it is a matter of risk tolerance and what you find entertaining. Here are the wise words from the CE…
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Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave
#73Earlier quoted context omitted.
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 t…
> YC, for all it’s prestige, has only had one startup actually IPO, and only recently.
That may be perfectly consistent with my point - VC's typically provide multiple large rounds of financing, something that formerly would have required going to the public markets, and this can delay IPO's until companies are heavyweights and most of the big gains are in the bag.
Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave
#74Earlier 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…
Note that not all stock compensation is the same. It sounds like you’re talking about restricted stock units, but with (say) ESPP, immediate sales can have less-than-optimal tax implications.
Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave
#75Earlier quoted context omitted.
Exactly. From personal experience, "wealth managers" are a scam. They're just below the scam scale from mortgage brokers and real estate agents.
You're thinking of people who charge you a management fee and try to "beat the market". I'm talking about people who charge you by the hour to explain to you how to manage your money. Maybe "financial advisor" is a better term? Either way qualifying any form of professional counsel as "a scam" seems a bit excessive, and also bad avice.
"By their fruits you'll know them". One has to be careful, because there is a lot of professional-looking scam artistry going in this space.
Also, you mention the term "financial advisor". I urge people to remember that there are different kinds of those, including those who know shit and care even less, and all they want is to sign you up to some financial MLM scheme. Source: I know some of the latter kind personally.
Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave
#76A fine day for corporate. http://www.connectnowbusinessnetwork.com/wp-content/uploads/...
Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave
#77Earlier quoted context omitted.
You're missing an important caveat in number 1, which is the tax implications. You've got to compare selling immediately and paying regular income tax vs selling in a year and paying long term capital gains tax. If you can beat that difference regularly in the market then you're probably in the wrong industry...
When the stock units vest (or are exercised in the case of options), you are taxed on their current value at the regular income tax rates. What would be taxed at the long term capital gains rate are any gains that happen _after_ the stock is in your possession. The former component is likely the one that will dominate within the timespan of a year.
Not in the case of Incentive Stock Options. They are taken into account with AMT, but you do not pay regular income tax at the time of exercise. If you have ISOs, selling within a year is subject to regular income tax, but if you exercise and hold the shares for more than a year, you only pay cap gains tax. And if they have a low strike price relative to current value, the difference can be quite significant. I know this because I'm dealing with precisely this situation right now and trying to decide my best move. I'll probably hedge my bets and do some of each.
Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave
#78Earlier quoted context omitted.
If you had $1MM in cash, how much of it would you use to buy the company's stock?
This is absolutely the right way to think about this. However if you have options the situation is different. There may also be tax considerations. Another variable is whether your personal effort materially affects the outcome for the company. If you think your work will dramatically increase the value of the company you may want to own more stock ... presumably though if this is the case it's already reflected in y…
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Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave
#79something tells me all stars are aligning for a huge correction. real estate prices inflated beyond imaginable while wages bave been stagnant. almost a decade old tech companies not making any money valued in billions and an administration made up of moron wages war on issues that have no relation to the country. something tells me shit will collapse big time in Trump's last term and everything will be blamed on him…
The only problem with the "something tells me" line of reasoning is that it's always being espoused by someone. Literally at any point you can find people who feel the way you do. Good news is that if you keep it up you'll eventually be right for a little while.
> Good news is that if you keep it up you'll eventually be right for a little while.
A broken clock...
Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave
#80Earlier 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…
If you feel your company will do better than an average company based on knowing the employees and strongly believing in its roadmap, culture and ability to innovate, it isn’t irrational to accumulate stock in it.