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U.S. Tech Funding – What’s Going On?

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Re: U.S. Tech Funding – What’s Going On?

#131

Post by hueving »

pbreit wrote: post #128
bane wrote: post #90

Earlier quoted context omitted.

I'd also add that until the public validation of an IPO and some time trading on the markets, tech companies have just become investment "tokens" that hold arbitrary amounts of wealth as "valuations" that make no meaningful sense. M&A efforts are simply capturing this fanciful valuation and hoping they can sell this token off in some way for more to somebody else. It's like putting $1 in a sock and under your mattres…

If you're able to sell a sock for $1m then, yes, it's worth $1m. But I strongly suspect that you could not. Which is why the analogy is flawed.

No, but you may be able to sell a 0.01% stake in the sock to someone for $100 and tell everyone that makes it worth $1m.

Re: U.S. Tech Funding – What’s Going On?

#132

Post by AndrewKemendo »

graycat wrote: post #118
AndrewKemendo wrote: post #97

Earlier quoted context omitted.

I can't really parse what you are stating. You don't think CV, ML/DL, VR are worth pursuing? Or are you saying that those are not "mathematically" technical? If the latter then you are decidedly wrong as proven by any number of research teams at MSFT/FB/GOOG etc... >Not really expensive. So applied math researchers aren't expensive? Tell that to every PhD Mathematician at Google/FB.

> Or are you saying that those are not "mathematically" technical? Right. They are overwhelmingly merely heuristic. The methodology is to guess, with heuristics, and then try it and find out (TIFO method) on real data, maybe adjust, and use it when it appears to work. There's next to nothing in theorems and proofs before hand that show that the manipulations will be powerful or yield valuable results. There is a long…

I'll be interested to see how it goes for you.

Re: U.S. Tech Funding – What’s Going On?

#133

Post by blazespin »

javajosh wrote: post #124
Animats wrote: post #117

Earlier quoted context omitted.

"It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley." No, it's a consequence of low interest rates. "Private equity" is mostly borrowed money. Think "leveraged buyout", not "all-cash deal". Here's a list of the top 10 private equity lenders for 2011.[1] #1 is Bank of America. Back in 2000, 1-year Treasury bills were paying around 5.11%. Today they're around 0.26%. Debt financ…

So the rich borrow cheaply, invest the money, and profit?

Those who dedicated their life to capital allocation, yes, they are allowed to borrow cheaply and profit. I thought about going into this in university, but there is something very soul draining about it. Too bad I discovered warren buffet later in life. More power to these folks. In fact, we shouldn't even be taxing them. We should just start taxing things like mansions, yachts, and super cars by 5x.

Re: U.S. Tech Funding – What’s Going On?

#134

Post by kenrikm »

hueving wrote: post #131
pbreit wrote: post #128

Earlier quoted context omitted.

If you're able to sell a sock for $1m then, yes, it's worth $1m. But I strongly suspect that you could not. Which is why the analogy is flawed.

No, but you may be able to sell a 0.01% stake in the sock to someone for $100 and tell everyone that makes it worth $1m.

By telling the investors that while it may look like a sock now, later it'll be a sock puppet and you can sell tickets to the show due to the network effects.

Re: U.S. Tech Funding – What’s Going On?

#135

Post by tsotha »

bane wrote: post #90
thorfish wrote: post #3

"And the tech IPO is basically dead. The tech IPO market is at early 1980's volumes. For most of the 90's the majority of tech funding was public. This has reversed. It used to be routine to hit $20 million in revenues and go public. Not anymore." It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley. Before an engineer might vest after four or five years, just as the company is…

I'd also add that until the public validation of an IPO and some time trading on the markets, tech companies have just become investment "tokens" that hold arbitrary amounts of wealth as "valuations" that make no meaningful sense. M&A efforts are simply capturing this fanciful valuation and hoping they can sell this token off in some way for more to somebody else. It's like putting $1 in a sock and under your mattres…

The great thing is when one of your other properties has a good year you can lower the valuation of that sock to reduce your tax burden.

Re: U.S. Tech Funding – What’s Going On?

#136

Post by tsotha »

Animats wrote: post #117
thorfish wrote: post #3

"And the tech IPO is basically dead. The tech IPO market is at early 1980's volumes. For most of the 90's the majority of tech funding was public. This has reversed. It used to be routine to hit $20 million in revenues and go public. Not anymore." It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley. Before an engineer might vest after four or five years, just as the company is…

"It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley." No, it's a consequence of low interest rates. "Private equity" is mostly borrowed money. Think "leveraged buyout", not "all-cash deal". Here's a list of the top 10 private equity lenders for 2011.[1] #1 is Bank of America. Back in 2000, 1-year Treasury bills were paying around 5.11%. Today they're around 0.26%. Debt financ…

That sounds right to me. Why sell off equity when you can borrow the money you need? There's a hell of a lot of money out there willing to take risks for what used to be considered a mediocre rate of return.

Re: U.S. Tech Funding – What’s Going On?

#137

Post by tsotha »

pbreit wrote: post #127
Animats wrote: post #117

Earlier quoted context omitted.

"It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley." No, it's a consequence of low interest rates. "Private equity" is mostly borrowed money. Think "leveraged buyout", not "all-cash deal". Here's a list of the top 10 private equity lenders for 2011.[1] #1 is Bank of America. Back in 2000, 1-year Treasury bills were paying around 5.11%. Today they're around 0.26%. Debt financ…

I don't think this is accurate. All the companies I know would rather go public in order to enable investors/employees/shareholders to get some liquidity (and for the company to gain credibility). The secondary market, while fulfilling this desire to some extent, is still not even close to what you get in an IPO. The onerous regulations are still clearly depressing the IPO market.

The big payday isn't from an IPO any more, but rather from selling out to a larger company. Big tech companies have more money than they know what to do with.

Re: U.S. Tech Funding – What’s Going On?

#138

Post by xenophon »

pbreit wrote: post #127
Animats wrote: post #117

Earlier quoted context omitted.

"It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley." No, it's a consequence of low interest rates. "Private equity" is mostly borrowed money. Think "leveraged buyout", not "all-cash deal". Here's a list of the top 10 private equity lenders for 2011.[1] #1 is Bank of America. Back in 2000, 1-year Treasury bills were paying around 5.11%. Today they're around 0.26%. Debt financ…

I don't think this is accurate. All the companies I know would rather go public in order to enable investors/employees/shareholders to get some liquidity (and for the company to gain credibility). The secondary market, while fulfilling this desire to some extent, is still not even close to what you get in an IPO. The onerous regulations are still clearly depressing the IPO market.

I work for a company that has deferred its IPO from plan, and from what I understand the SOX regulatory burden has very little, if anything to do with it.

Credibility and providing liquidity for investors and shareholders are certainly important reasons why companies decide to go public. But there are also downsides to going public -- most notably the myopic time horizon of the public markets, which is a huge barrier to the kind of long-term product and user acquisition investments pursued by tech companies in particular.

You can weigh these factors against one another, but ultimately the fundamental reason a company IPOs is to raise a large sum of money at an attractive valuation. Given that investors are lining up to help private companies meet this goal, the ancillary drivers you mention just aren't enough to push companies over the edge into the public markets.

Re: U.S. Tech Funding – What’s Going On?

#139

Post by hkmurakami »

tsotha wrote: post #137
pbreit wrote: post #127

Earlier quoted context omitted.

I don't think this is accurate. All the companies I know would rather go public in order to enable investors/employees/shareholders to get some liquidity (and for the company to gain credibility). The secondary market, while fulfilling this desire to some extent, is still not even close to what you get in an IPO. The onerous regulations are still clearly depressing the IPO market.

The big payday isn't from an IPO any more, but rather from selling out to a larger company. Big tech companies have more money than they know what to do with.

One benefit of this to founders is that a M&A deal provides instant liquidity (barring earn outs), whereas an IPO largely prohibits you from selling off a large percentage of your stock.

Re: U.S. Tech Funding – What’s Going On?

#140

Post by JDDunn9 »

blazespin wrote: post #133
javajosh wrote: post #124

Earlier quoted context omitted.

So the rich borrow cheaply, invest the money, and profit?

Those who dedicated their life to capital allocation, yes, they are allowed to borrow cheaply and profit. I thought about going into this in university, but there is something very soul draining about it. Too bad I discovered warren buffet later in life. More power to these folks. In fact, we shouldn't even be taxing them. We should just start taxing things like mansions, yachts, and super cars by 5x.

There's no logical reason not to tax investors. They aren't unique butterflies that make the economy flourish. Investment is just one component of a functioning economy. So is education, saving, consumption, etc. Too much focus on one is not a good thing. This is one of the reasons we have so many investor bubbles. Also, the wealthy have no other options than to invest their money. What else would they do with it, put it under their mattress? The ROI is the only incentive they need. All this does is increase income inequality.
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