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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?

#161

Post by golergka »

javajosh wrote: post #157
golergka wrote: post #154

Earlier quoted context omitted.

Since I sense (from the phrase "the rich") that you mean it as something bad: it's not. Just imagine whom would you rather lend your hard-earned money to: a wealthy investor with a proven track record, or a regular Joe. Well, that's exactly what the bank you keep your money it is doing.

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?

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

#162

Post by zby »

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…

I don't see how this hype game you describe would be characteristic of private sales more than of public offerings. It is the mechanism that drives all bubbles.

In fact root of the often criticized short termism of publicly traded companies is exactly this hype game - the company management paints the sock impressively to fuel the hype.

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

#163

Post by jackgavigan »

I think a lot of people don't grasp the extent to which the cost of founding a tech company has fallen since the dot-com boom. I remember forking out tens of thousands of pounds for physical hardware (which then had to be hosted somewhere) and software licences for things like Oracle and Checkpoint firewall, which I then had to install, set up, admin and maintain.

These days, with Google, AWS, Rackspace, Heroku, there's none of that. You can spin up a new server in minutes and scale up as required. All the technical infrastructure is already there, so you can focus on the product and market.

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

#164

Post by zby »

javert wrote: post #88
Moshe_Silnorin wrote: post #69

Earlier quoted context omitted.

>Sarbanes-Oxley We'll never be rid of it. Like copyright law, It's crystallized into a self-perpetuating incentive structure. Everyone knows it's stupid, no individual has much incentive to try and change things. The ability to restore to a previous state is essential in the design of institutions, one lacking in our current governments. This is a very hard problem, but I'm hopeful prediction markets may be able to h…

Yeah, but prediction markets are basically illegal, because---again---government regulation. Prediction markets are so vastly powerful, both as a financial tool (hedging) and an information tool, that people would be screaming bloody murder if we already had them and then they were taken away.

They are illegal - because it is impossible to limit the participants to just betting on the outcome instead of trying actively to get the outcome. Imagine for example a prediction market for Obama dying this year - if the price is big enough it would become an assassination market.

Nick Szabo explains it in: http://unenumerated.blogspot.co.uk/2015/05/small-game-fallac...

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

#165

Post by jackgavigan »

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.

Until interest rates start going up, at which point things could get a bit messy.

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

#166

Post by freyr »

vasilipupkin wrote: post #77
ThomPete wrote: post #34

As I have mentioned in another thread. We don't have a tech bubble we have a Silicon Valley valuation bubble, one a16z is part of themselves. The discussion isn't whether tech companies are under or overvalued, they are most likely in general undervalued. The discussion is whether the kind of investments that companies like a16z and other VC companies make are over valued or even valuable. In other words, they are se…

they made a number of specific points about why they don't think it's a bubble. Now, they could be wrong, but at least they are coherent

It's a red herring. They present data about public markets to conclude there's no bubble. But the bubble, whether real or not, is generally considered a funding bubble taking place in private markets.

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

#167

Post by _yosefk »

JDDunn9 wrote: post #140
blazespin wrote: post #133

Earlier quoted context omitted.

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, 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" (or those with any sort of surplus, really) end up strongly preferring spending to investment.

Hence taxing yachts sounds to me like it could be smarter than taxing investment. (Not 100% sure, as usual with these things, just looks sensible at first glance.)

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

#168

Post by ThomPete »

freyr wrote: post #166
vasilipupkin wrote: post #77

Earlier quoted context omitted.

they made a number of specific points about why they don't think it's a bubble. Now, they could be wrong, but at least they are coherent

It's a red herring. They present data about public markets to conclude there's no bubble. But the bubble, whether real or not, is generally considered a funding bubble taking place in private markets.

Exactly!

They are showing that there is in fact no tech bubble which I agree with. But that doesn't mean there isn't a bubble far more problematic inside the tech sector. There are a bunch of companies that get a lot of attention for their valuation but without any real proven path to ever honor it.

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

#169

Post by yummyfajitas »

JDDunn9 wrote: post #140
blazespin wrote: post #133

Earlier quoted context omitted.

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, pu…

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 gains).

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

#170

Post by JDDunn9 »

yummyfajitas wrote: post #169
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…

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 magic and imaginary money isn't sound.
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