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In a town of gamblers, Mattermark is counting cards

venturebeat.com

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Re: In a town of gamblers, Mattermark is counting cards

#11

Post by mynameisme »

lightbritefight wrote: post #9
mynameisme wrote: post #5

Earlier quoted context omitted.

If you could provide information useful enough to provide a competitive advantage in investing, why provide it at all? Just invest in the companies yourself and put the millions in your own pocket. To me, what it looks like (not saying it's true) is that it's a ycombinator shill company the backers of ycombinator are using to pump up other companies. After all, a lot of these companies are successful/bought out becau…

A competitive advantage is not a sure thing, its just an edge. Their tech could make a 90%/10% fail/win risk a 85%/15%, which would be a huge boon, but extremely dangerous for someone to place their life's savings on. Speaking of, just because I may know a good investment, doesn't mean I have the resources to actually capitalize on it. I may know a likely way to make 10 Million/year, but if the buy in is 5 million, I…

Say there is a game at a casino, that has a 1/100 chance of winning, and if you win, you get a payout of 100.01(original bet). You have $100. How would you play without it being extremely dangerous?

Re: In a town of gamblers, Mattermark is counting cards

#13

Post by btilly »

mynameisme wrote: post #11
lightbritefight wrote: post #9

Earlier quoted context omitted.

A competitive advantage is not a sure thing, its just an edge. Their tech could make a 90%/10% fail/win risk a 85%/15%, which would be a huge boon, but extremely dangerous for someone to place their life's savings on. Speaking of, just because I may know a good investment, doesn't mean I have the resources to actually capitalize on it. I may know a likely way to make 10 Million/year, but if the buy in is 5 million, I…

Say there is a game at a casino, that has a 1/100 chance of winning, and if you win, you get a payout of 100.01(original bet). You have $100. How would you play without it being extremely dangerous?

By the Kelly criterion, you should bet edge/odds of your bankroll. Your edge here is 0.01 * 0.0001 = 0.000001. Your odds are 0.01. Therefore you should bet 0.0001 of your net worth. So if you had a million dollars, that $100 bet would be a sensible investment. If you've only got, say, $100k then you should only bet for entertainment value.

The investment rule that underlies Kelly is to maximize the log of your net worth. Why? Bets multiply your net worth by a random factor, take logs and you're adding a random factor. In the long run a sum of independent random factors tends to converge to the expected value, so maximizing the expected log of your net worth will result in a strategy that with 100% odds will, in the long run, beat any other.

Re: In a town of gamblers, Mattermark is counting cards

#14

Post by mynameisme »

btilly wrote: post #13
mynameisme wrote: post #11

Earlier quoted context omitted.

Say there is a game at a casino, that has a 1/100 chance of winning, and if you win, you get a payout of 100.01(original bet). You have $100. How would you play without it being extremely dangerous?

By the Kelly criterion, you should bet edge/odds of your bankroll. Your edge here is 0.01 * 0.0001 = 0.000001. Your odds are 0.01. Therefore you should bet 0.0001 of your net worth. So if you had a million dollars, that $100 bet would be a sensible investment. If you've only got, say, $100k then you should only bet for entertainment value. The investment rule that underlies Kelly is to maximize the log of your net wo…

Sorry, I was being rhetorical, I guess it wasn't obvious. My point to the parent was that no need to bet your entire life savings on one company, you can split it among hundreds and take advantage of your edge.

Re: In a town of gamblers, Mattermark is counting cards

#15

Post by peterjancelis »

mynameisme wrote: post #10
peterjancelis wrote: post #7

Earlier quoted context omitted.

The best way to get rich in a gold rush is to sell the shovels.

Not if you know where the gold is buried and no one else does (which is what their purpose is). In your analogy, the shovels would be something like Meteor, or one of those "learn to rails in 24 hours!" startups.

Or Mattermark just has slightly better shovels than the competition, and they know that focusing on keeping a slight lead in shovel making by selling a ton of shovels is more profitable in the long run than going for a single quick pile of gold asap.

Edit: Especially so if the gold doesn't want to be 'discovered' by just anybody. Founders have VC preferences.

Re: In a town of gamblers, Mattermark is counting cards

#16

Post by vinceguidry »

peterjancelis wrote: post #7
mynameisme wrote: post #5

Earlier quoted context omitted.

If you could provide information useful enough to provide a competitive advantage in investing, why provide it at all? Just invest in the companies yourself and put the millions in your own pocket. To me, what it looks like (not saying it's true) is that it's a ycombinator shill company the backers of ycombinator are using to pump up other companies. After all, a lot of these companies are successful/bought out becau…

The best way to get rich in a gold rush is to sell the shovels.

Is there really a gold rush going on? From everything I see, the startup market is maturing, not emerging.

Re: In a town of gamblers, Mattermark is counting cards

#17

Post by malandrew »

What I don't get it how relevant this info is for companies at such an early stage. For the few home runs each year, oftentimes a bunch of the success can be attributed to aid provided by some of the VCs. They may provide value between seed and an A round since the investors often matter less there, but one there is a provable business model after A or after B, the investor, if chosen correctly, can be a big multiplier of value, especially for first time entrepreneurs.

Good VCs like A16Z, help with hiring, provide great signaling to potential partners, potential hires and future investors, and well as helping refine the business model.

Seems like any score they ascribe to a company would have to incorporate the value of each of their clients. e.g. the scores given to A16Z would look different from VenRock, since the compatibilities between the startup and the VC matter. VenRock is likely to multiply the value of a health-related startup in a way that most other VCs can't and this changes things.

I'd even go as far as saying that for some VCs the partner you get should be factored into the scores as well.

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