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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?

#171

Post by yummyfajitas »

JDDunn9 wrote: post #170
yummyfajitas wrote: post #169

Earlier quoted context omitted.

On the contrary, there is no logical reason to tax investors/savers. I strongly recommend this article by Scott Sumner, who works through the details carefully. http://www.themoneyillusion.com/?p=28842 The key point is that taxes on investments create distortions while taxes on consumption don't. It's even worse if you tax different investments differently (e.g., interest vs cap gains, short term vs long term cap gai…

That article has too many flaws to go into, but the whole idea of all investments growing the economy are just false. Most of the investment dollars go to areas with little to no benefit. The (secondary) stock market, derivatives, commodity speculation, forex, etc. These produce almost no jobs, produce no goods/services, and do very little (aside from marginal liquidity) for the economy. An economy build on financial…

That article has too many flaws to go into...

Such a cute - yet content-free - dismissal. It's also pretty clear from your "critique" that you didn't even read the article - while Sumner's examples do use a positive rate of return, his argument is independent of it.

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

#172

Post by fsk »

vasilipupkin wrote: post #104
fsk wrote: post #99

Earlier quoted context omitted.

A bank borrows at the Fed Funds Rate (say 0.1%) and buys one year Treasuries (currently 0.26%). On Treasury trades, banks can do leverage of 100x or more. So the bank's profit is 0.16 times 100 or 16%. If the Federal Reserve raised the Fed Funds Rate to 1%, then the bank would be borrowing at 1% and lending at .26%, and they'd be .74% in the hole per bond, 74% accounting for 100x leverage. Big banks are comfortable d…

the problem with this theory is the bank doesn't borrow at zero. Goldman Sachs has 380 Bln of outstanding debt, and is paying roughly AA corporate rates on that debt. Overnight bank rate is 0.13 right now, which is the Fed Funds rate

That's only corporate bonds. Federal Reserve transactions are not publicly disclosed, which is one of the issues.

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

#173

Post by notNow »

narrator wrote: post #51

Here's my current map of where the money is coming from and going to. Fed buying trash MBSs with QE -> Investment Banks -> Stock Market -> Big Tech Companies -> Acquisitions -> Venture Capitalists -> Tech Companies -> Startup Employees -> San Francisco Landlords and Fancy Toast Restaurants.

Let me add to this amazing chain two important points

1) The FED is basically printing money out of thin air. 2) To close this open loop:

SF Landlords and Fancy Toast Restaurants -> IRS -> THE FED

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

#174

Post by unprepare »

_yosefk wrote: post #167
JDDunn9 wrote: post #140

Earlier quoted context omitted.

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, pu…

"No other options" than investing one's savings? Go to Russia to find out some of those other options, or any other place where people don't count on their wealth not to be confiscated at an unpredictable moment. Basically the other option is "doing expensive stupid shit" and you'd be surprised how many variations of this one can come up with. Certainly society as a whole ends up waaaay less wealthy if "the wealthy"…

Imagine you have a business; Would you rather have a customer or an investor?

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

#175

Post by mdemare »

sfjailbird wrote: post #153
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…

You just described the stock market. Public tech companies that make no profit (and/or issues no yields) trade at 30 times earnings. No connection to fundamentals, but everybody just agrees that is what it should cost.

Profits _are_ earnings. Companies that make no profit and trade at 30x earnings, trade at 0.

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

#176

Post by Lawtonfogle »

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…

Let me guess the end game: after a number of trades, ending up with pension funds having a large count of both both the money sock and money hat threads.

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

#177

Post by Lawtonfogle »

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.

You get enough people to preach it is worth $1m and you'll find many individuals really to buy 1/1000 for $900.

Done on a small scale, this would be fraud and would be illegal. But remember, it is illegal because it does work. On the large scale, you just have to wine and dine enough pension fund managers who are in way over their head.

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

#178

Post by eli_gottlieb »

golergka wrote: post #161
javajosh wrote: post #157

Earlier quoted context omitted.

Is the money the Fed lends out "hard-earned" or is it manufactured as a side-effect of fiscal policy (e.g. quantitative easing)? Does it seem right that public policy should so clearly benefit the wealthy by forcing money into the economy through private allocation experts? There should be a way for entrepreneurs to tap into that money directly, avoiding the wealthy, gate-keeping middle-men. I resent those people, be…

But still: whom would you give your money? To people who are wealthy because a lot of money have gone through them, or to entrepreneurs?

To entrepreneurs, of course. Money doesn't beget money by magic; it needs to flow to someone who actually makes things and works, or the rate of return drops for everyone.

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

#179

Post by nemo44x »

TTPrograms wrote: post #6

This doesn't really directly address the issue of valuations for the unicorns. P/E valuations are probably insane by most metrics - the type of user base growth required to get them in line (P/E wise) with other companies is on the order of double-digit percentages of the global population IIRC. This doesn't really mean there's a "tech bubble", though. It's possible we'll see a massive correction to those companies,…

We've already seen many isolated corrections in the public market over the last few years. 3D printing has corrected in a massive way. Biotech had a big correction a bit over a year ago, however it has recovered and continues to rally. Solar suffered a correction recently and many small to mid-cap technology companies had a correction about 1.5 years ago too.

Apple even saw an isolated correction a couple years ago.

That is one reason I believe the public markets are in fact healthy. Sectors have been allowed to correct on their own instead of everything just failing in a systemic way.

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

#180

Post by josu »

tsotha wrote: post #136
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…

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.

That's not an option for startups. Their choice is whether to sell equity to public or to private investors.

The ones that are borrowing the money are private investors.

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