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Facebook establishing a venture arm to invest in startups

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Re: Facebook establishing a venture arm to invest in startups

#51

Post by freehunter »

gimmeThaBeet wrote: post #39
a13n wrote: post #27

It's pretty interesting that FAANG doing venture capital is basically like legal insider trading. They clearly have data on web traffic, consumer usage, advertising spend, etc. that other VC firms and investors generally don't have access to. They can use this to understand entire markets, see who the incumbents are, estimate revenue/users, see who's up-and-coming, etc. Obviously within some margin of error. I wonder…

That's not really insider trading. Matt Levine pops up here all the time, and one of the really distilled mantras he has: inside trading isn't about fairness , it's about theft . Like the people who track flights to speculate on M&A, or use satellite and aerial imagery to look at parking lots. Gathering information isn't a crime, in fact gathering and acting on that information is explicitly what you want at an aggre…

But one argument for breaking up Amazon hinges on how they unfairly compete with their sellers by collecting data on what sells and what doesn't sell on Amazon and using that data to come up with their own in-house brands.

Is that different from what Facebook can do for their funded startups?

Re: Facebook establishing a venture arm to invest in startups

#52

Post by tfehring »

a13n wrote: post #27

It's pretty interesting that FAANG doing venture capital is basically like legal insider trading. They clearly have data on web traffic, consumer usage, advertising spend, etc. that other VC firms and investors generally don't have access to. They can use this to understand entire markets, see who the incumbents are, estimate revenue/users, see who's up-and-coming, etc. Obviously within some margin of error. I wonder…

Others have mentioned that "insider trading" isn't the right terminology here. But more generally, I honestly don't think this is an issue from antitrust perspective. Imagine that instead Facebook granted exclusive access to all of that data to an external VC firm for a fee. IANAL but my impression is that relationship would be perfectly legal - just like similar arrangements between, e.g., hedge funds and satellite data companies.

Now, compare that to a retail store working with the store across the street to fix prices - very illegal, unless the same company owns both stores, in which case it's just called "price discrimination" or "good business". That type of instance - where the behavior would be illegal if it were coordinated between competing firms - is where antitrust concerns really come into play.

Of course, it gets murkier (and becomes a very obvious anti-trust issue) when it comes to acquisitions of competing firms like Instagram. I wouldn't be surprised at all if Facebook's goal here is to acquire stakes in potential competitors while they're still small enough to fly under antitrust authorities' radar.

Re: Facebook establishing a venture arm to invest in startups

#53

Post by cortesoft »

freehunter wrote: post #51
gimmeThaBeet wrote: post #39

Earlier quoted context omitted.

That's not really insider trading. Matt Levine pops up here all the time, and one of the really distilled mantras he has: inside trading isn't about fairness , it's about theft . Like the people who track flights to speculate on M&A, or use satellite and aerial imagery to look at parking lots. Gathering information isn't a crime, in fact gathering and acting on that information is explicitly what you want at an aggre…

But one argument for breaking up Amazon hinges on how they unfairly compete with their sellers by collecting data on what sells and what doesn't sell on Amazon and using that data to come up with their own in-house brands. Is that different from what Facebook can do for their funded startups?

That is a different crime: anti-trust violation. That is when you use your dominant market position to harm consumers.

This is unrelated to insider trading.

Re: Facebook establishing a venture arm to invest in startups

#54

Post by cortesoft »

a13n wrote: post #27

It's pretty interesting that FAANG doing venture capital is basically like legal insider trading. They clearly have data on web traffic, consumer usage, advertising spend, etc. that other VC firms and investors generally don't have access to. They can use this to understand entire markets, see who the incumbents are, estimate revenue/users, see who's up-and-coming, etc. Obviously within some margin of error. I wonder…

As many others have pointed out, this isn't insider trading. To drive home the point of how much insider trading laws aren't about fairness, consider this:

It isn't insider trading for Facebook to use all the information it has about web trends to buy companies. However, if a Facebook employee used the non-public information Facebook has to go and buy stock in those same companies, that would be insider trading and be illegal.

Re: Facebook establishing a venture arm to invest in startups

#55

Post by bigpumpkin »

a13n wrote: post #27

It's pretty interesting that FAANG doing venture capital is basically like legal insider trading. They clearly have data on web traffic, consumer usage, advertising spend, etc. that other VC firms and investors generally don't have access to. They can use this to understand entire markets, see who the incumbents are, estimate revenue/users, see who's up-and-coming, etc. Obviously within some margin of error. I wonder…

Facebook will next give preferential treatments to startups it has stakes in through more access to data and users, while putting those who choose to not take Facebook's money at a disadvantage.

Re: Facebook establishing a venture arm to invest in startups

#56

Post by ergocoder »

kgraves wrote: post #26
thirtythree wrote: post #22

Earlier quoted context omitted.

Is it worth the ride though? If your goal is to spend your time building something you love then it's a win.

That's fair, looking forward to your 'incredible journey' with Facebook. I'm sure they can't wait to see what your startup will come up with. /s

Why the sarcasm?

Most of the times, acquirehire by these top companies is probably better than being a regular senior FAANG engineers.

Not sure why that is bad. It's probably not the top of the world (e.g. billionaires). But it's definitely a great situation to be in.

Re: Facebook establishing a venture arm to invest in startups

#57

Post by chrisseaton »

a13n wrote: post #37
Mikeb85 wrote: post #31

Earlier quoted context omitted.

> They clearly have data on web traffic, consumer usage, advertising spend, etc. that other VC firms and investors generally don't have access to. I mean, this wouldn't be insider trading since anyone can do their own legwork to get this information. Insider information would be things that aren't (yet) disclosed to the public, not things that can be ascertained through thorough research. > Since startups aren't publ…

> anyone can do their own legwork to get this information Can they though? My point is that FAANG companies are uniquely positioned by having access to this data that the public couldn't possibly have access to.

> My point is that FAANG companies are uniquely positioned by having access to this data that the public couldn't possibly have access to.

People working to build unique skills and data is normal competition and building up a competitive advantage, not 'insider trading'.

Re: Facebook establishing a venture arm to invest in startups

#58

Post by bryanrasmussen »

a13n wrote: post #27

It's pretty interesting that FAANG doing venture capital is basically like legal insider trading. They clearly have data on web traffic, consumer usage, advertising spend, etc. that other VC firms and investors generally don't have access to. They can use this to understand entire markets, see who the incumbents are, estimate revenue/users, see who's up-and-coming, etc. Obviously within some margin of error. I wonder…

I remember reading an argument at the time, probably from Daring Fireball, that Zuckerberg has such a feeling for growth of social media by then, that he could see that Instagram was a great deal, also the same for WhatsApp.

Re: Facebook establishing a venture arm to invest in startups

#59

Post by exolymph »

tych0 wrote: post #50
a13n wrote: post #29

Earlier quoted context omitted.

I would guess it's more about the money than you think. Public companies have a fiduciary duty to maximize profits and investor returns. They're simply using the data that's available to them to make great investment decisions to make more money. It seems like a conflict of interest to invest in a company and then turn around and compete with them. If the end plan is to take their ideas once they start becoming succe…

> Public companies have a fiduciary duty to maximize profits and investor returns. No, they don't. There are many articles on the subject, here is one: https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...

In practice, firms controlled by shareholders tend to be run for the benefit of shareholders. Facebook is controlled by its founder so it's a different situation.

Re: Facebook establishing a venture arm to invest in startups

#60

Post by Fezzik »

alasdair_ wrote: post #36
a13n wrote: post #28

Earlier quoted context omitted.

How does investing in startups make you an internet gangster cartel?

"I'm gonna make him an offer he can't refuse..." "... one billion dollars in cash and stock."

I mean, that’s a bit of the stretch. The implication in “an offer he can’t refuse” is that the mob is going to kill you if don’t accept the offer, not that they are going to drown you in more dollar bills than you can swim through.
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