Debt is coming to the tech industry • Hacker News Board

Re: Debt is coming to the tech industry

#21

Post by iso1631 » Sat, Feb 08, 2020, 2:18 PM UTC

katzgrau wrote: post #18

axegon_ wrote: post #12

Earlier quoted context omitted.

> 2008 is coming again soon I have no idea why people __LOVE__ making these statements. 2008 was something that affected mostly the US and while it affected the rest of the world to a certain degree, overall very little changed. Before jumping on my throat, hear me out: There have been several significant financial events since then: the European debt crisis, then Portugal(which is relatively small on a global scale)…

I'm equally perplexed as to why people always seem to think a big downturn is right around the corner. Maybe there are always enough warning signs that someone with a sufficient penchant for confirmation bias will latch on to. Regardless, nobody can tell the future - there are simply too many unknowns to consider. We will certainly have more good times and bad times. As to when they come, predict all you want, but hi…

> I'm equally perplexed as to why people always seem to think a big downturn is right around the corner.

There will be a downturn, sooner or later. Predict it every year and eventually you go down as the person who predicted the downturn.

Re: Debt is coming to the tech industry

#22

Post by lifeisstillgood » Sat, Feb 08, 2020, 2:19 PM UTC

Debt and VC are just sides of the same (multi-sided) coin. The money has to come from somewhere - domestic savings, commercial profit or sovereign wealth.

The unicorn phenomenon is easier to explain this way - if you are already a company that can consume huge amounts of debt (you have a business model, product and route to market and just need to replicate) then you used to have one choice - take on debt. Now, where the returns on money as debt is so low, the money may choose to be VC just to gets return.

As such the only likely way "debt is coming" is if interest rates climb, giving money an alternative to VC.

However what drives global interest rates as very little to do with tech sector (I think).

So - yes huge tech plays are going to become more and more common because software is eating the world and we are basically going to replace all our business has governmental processes with new software ones.

Those will need huge investment - but whether that is debt or VCor something inbetween (looking at you government bonds) - is more likely to be a function of interest rates than anything else.

My prediction - the next YCombinator will take VC sized money and deploy it at bank level scale - small and medium sized companies at non-unicorn stages, because with good software and models it will be feasible to deploy at smaller levels.

Debt may not be coming so soon

Re: Debt is coming to the tech industry

#23

Post by axegon_ » Sat, Feb 08, 2020, 2:21 PM UTC

onetimemanytime wrote: post #14

axegon_ wrote: post #12

Earlier quoted context omitted.

> 2008 is coming again soon I have no idea why people __LOVE__ making these statements. 2008 was something that affected mostly the US and while it affected the rest of the world to a certain degree, overall very little changed. Before jumping on my throat, hear me out: There have been several significant financial events since then: the European debt crisis, then Portugal(which is relatively small on a global scale)…

>> I have no idea why people __LOVE__ making these statements. 2008 was something that affected mostly the US and while it affected the rest of the world to a certain degree, overall very little changed. US is back on top. How's Italy, Greece, Spain etc doing?

Greece is a very different animal altogether and I struggle to see how it will ever recover. I've been to Greece and I'm sorry to say but the same problems are obvious at every step of the socioeconomic ladder.

Italy and Spain are recovering - new businesses are emerging, unemployment in Spain is down by 12% from 26%, Italy is at ~9.5% unemployment.

Comparing several small countries to the US is completely pointless given the difference in population, area, industry , resources and so on...

Re: Debt is coming to the tech industry

#24

Post by thrower123 » Sat, Feb 08, 2020, 2:24 PM UTC

onetimemanytime wrote: post #14

axegon_ wrote: post #12

Earlier quoted context omitted.

> 2008 is coming again soon I have no idea why people __LOVE__ making these statements. 2008 was something that affected mostly the US and while it affected the rest of the world to a certain degree, overall very little changed. Before jumping on my throat, hear me out: There have been several significant financial events since then: the European debt crisis, then Portugal(which is relatively small on a global scale)…

>> I have no idea why people __LOVE__ making these statements. 2008 was something that affected mostly the US and while it affected the rest of the world to a certain degree, overall very little changed. US is back on top. How's Italy, Greece, Spain etc doing?

They are essentially colonial dependents of Berlin. Which may have been the point all along.

Re: Debt is coming to the tech industry

#25

Post by shreyshrey » Sat, Feb 08, 2020, 2:25 PM UTC

Think of debt as a way to gain market leverage. Leverage is good if you are reasonably certain of the outcome.

https://news.ycombinator.com/item?id=20942950

Re: Debt is coming to the tech industry

#26

Post by satya71 » Sat, Feb 08, 2020, 2:26 PM UTC

ghastmaster wrote: post #2

Debt is dumb. The childish glee coming from this author should be ignored. 2008 is coming again soon and debt holders will suffer. Please get/keep your financial house in order. Business debt is just as dangerous as personal debt.

Finance 101: debt is cheaper than equity. Arguably in today's model it's actually less risky than equity for the founders.

Re: Debt is coming to the tech industry

#27

Post by streetcat1 » Sat, Feb 08, 2020, 2:27 PM UTC

debt and intellectual property do not mixup since by definition there is nothing to back up the debt (unlike real estate or any other industry outside of software).

The author suggests to backup of the debt with a revenue stream, but those :

1) depend on the churn rate. 2) Are stable only for mature companies. Post product-market fit.

Re: Debt is coming to the tech industry

#28

Post by opminion » Sat, Feb 08, 2020, 2:28 PM UTC

axegon_ wrote: post #12

ghastmaster wrote: post #2

Debt is dumb. The childish glee coming from this author should be ignored. 2008 is coming again soon and debt holders will suffer. Please get/keep your financial house in order. Business debt is just as dangerous as personal debt.

> 2008 is coming again soon I have no idea why people __LOVE__ making these statements. 2008 was something that affected mostly the US and while it affected the rest of the world to a certain degree, overall very little changed. Before jumping on my throat, hear me out: There have been several significant financial events since then: the European debt crisis, then Portugal(which is relatively small on a global scale)…

> while it affected the rest of the world to a certain degree, overall very little changed.

This only makes sense if you are making a sharp distinction between the 2008 US crisis and the European debt crisis, which is probably not what the parent meant. That's why people would strongly disagree with you.

Re: Debt is coming to the tech industry

#29

Post by axegon_ » Sat, Feb 08, 2020, 2:30 PM UTC

hobs wrote: post #17

onetimemanytime wrote: post #14

Earlier quoted context omitted.

>> I have no idea why people __LOVE__ making these statements. 2008 was something that affected mostly the US and while it affected the rest of the world to a certain degree, overall very little changed. US is back on top. How's Italy, Greece, Spain etc doing?

I dont know why this is downvoted - the EU implemented austerity and it took a gigantic chunk out of its economy in the last ten years - why is this controversial? Spain's growth rate has been what, 0%? Greece is totally screwed, and there's a strong set of evidence to say Brexit was a direct result of the 2008 crisis (because they pushed back so hard on austerity.)

> there's a strong set of evidence to say Brexit was a direct result of the 2008 crisis.

Nah. The only selling point on the referendum was immigration. The only one people really cared about anyway.

Re: Debt is coming to the tech industry

#30

Post by lmm » Sat, Feb 08, 2020, 2:34 PM UTC

lifeisstillgood wrote: post #22

Debt and VC are just sides of the same (multi-sided) coin. The money has to come from somewhere - domestic savings, commercial profit or sovereign wealth. The unicorn phenomenon is easier to explain this way - if you are already a company that can consume huge amounts of debt (you have a business model, product and route to market and just need to replicate) then you used to have one choice - take on debt. Now, where…

> As such the only likely way "debt is coming" is if interest rates climb, giving money an alternative to VC.

Surely that's backwards: a lot of money really wants to be invested in debt, and is only doing VC because the returns to debt investing are so bad. Offer those investors a better alternative - comparable returns to a second-tier VC fund (which is not actually that hard), with something they can pretend is a security backed by something (they want to believe, you don't have to give them much), and they'll beat a path to your door. Much easier to offer market-beating "startup user bonds" while interest rates are low than when (if) some decent bond investing opportunities come back.