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VCs are scared when they should be greedy

blog.aaronkharris.com

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Re: VCs are scared when they should be greedy

#201

Post by quickthrower2 »

kbuchanan wrote: post #50

This post reminded me a little of my real estate agent's newsletter: 2007: There's never been a better time to buy! 2008: There's never been a better time to buy! 2012: There's never been a better time to buy! 2020: There's never been a better time to buy! 2022: There's never been a better time to buy!

My agents:

All years: There’s never been a better time to sell!

In other countries the agents only make commissions from the seller not the buyer, hence getting the listing is the big thing.

Re: VCs are scared when they should be greedy

#202

Post by quickthrower2 »

gumby wrote: post #106
ffggvv wrote: post #103

Earlier quoted context omitted.

tell that to fang companies. some fire less than 2% of the work force.

Startups can't afford to be like that. Those huge companies have a lot of fat so can get away with being slack, which is also why a company like Google can drift around in such an indifferent and aimless manner for over a decade. BTW the "N" has long had a "fire early" philosophy, and so it will be interesting to see how their current troubles play out.

Is Google a kind of Basic Income?

Re: VCs are scared when they should be greedy

#203

Post by chii »

rocqua wrote: post #186
chii wrote: post #172

Earlier quoted context omitted.

uber's unit economics will easily work out if they stop expanding (which is where the expenses are). Their backend services have a "fixed cost", if you assume they've designed it to be scalable, such that the marginal cost of a new user doesn't add more cost to hosting and compute. Then fire most engineers, and keep some skeleton crew maintaining the services. The other cost is obviously the payment to drivers. I bel…

> Uber can choose to stop the subsidizing, which can then make the unit economics positive. How much will their market share fall when they do this though? And will uber be able to survive the corresponding reduction in revenue?

> How much will their market share fall when they do this though?

who knows? But if their competitor is going to subsidize, but uber doesn't then they'd lose most of their marketshare. But the same story would be true for their competitors.

So the subsidy would drop slowly for every player in this market, until they reach an equilibrium, where the final margins for every player is as thin as possible but still pay the bills.

Re: VCs are scared when they should be greedy

#204

Post by peyton »

pedalpete wrote: post #199
peyton wrote: post #191

Earlier quoted context omitted.

Pro rata and follow-on I believe.

As in more $$ will go into follow-on companies rather than letting the bad bets die? Or we'll likely see more money going into follow-on rounds, inflating that end of the market? You could be right.

Oh, follow-on money goes to good bets, and you’d get more aggressive on terms. The good bets get money anyway. I don’t think there’d be much change. But who knows what ppl will do.

Re: VCs are scared when they should be greedy

#206

Post by drdrek »

simonbarker87 wrote: post #200
lpolovets wrote: post #22

(Context: I'm a VC) Some great points in the post, but I also see a few additional dynamics at play: 1) The last 10 years have been great for VCs and startups, but now VCs are thinking about how to make their funds last longer. Two reasons for this: first, time diversification matters. If you think markets might go down even more, you don't want to deploy the rest of your fund quickly, you want to spread it out over…

I’ve often heard the modern VC route described as a Ponzi scheme with the public market being the greatest of the fools, I don’t totally buy into the idea but your 3rd point really does highlight how close it all is to a Ponzi scheme. So much value is absorbed in the VC pipe than by the time a company IPOs the chance of retail investors seeing returns is minimal to none.

Think about it in this way: You want to open a wholesale food distribution business for restaurants in a Manhattan You want to make sure that enough restaurants will buy from you They want to make sure that enough costumers will buy from them The customers are going out less because of a downturn in the economy So you do not open our business because the stock market is down

Is any business a ponzi scheme?

P.S Saying that, there is research that buying at IPO is rarely a good idea: https://www.youtube.com/watch?v=2a7qhIpxv60

Re: VCs are scared when they should be greedy

#207

Post by lotsofpulp »

throwawaytemp27 wrote: post #192
HWR_14 wrote: post #161

Earlier quoted context omitted.

> We all hate for our homes to be worth 10% less in 2023 compared to 2022 Speak for yourself. If all property drops, I'm ecstatic. I'm not moving or withdrawing money with a HELOC. So lower property values just mean less taxes for me. I mean, sure, it also means I may be underwater, but who cares? And if I decide to move, that just means the delta between my current place and a new place is smaller in absolute terms.…

Not sure where you live, but where I’m from, an increase/decrease in home value affects your proportion of the overall property taxes but not the absolute amount. If everyone’s home goes down by 20% then everyone gets same tax bill.

On a sufficiently long timeline, the government has to pay more for land/payroll/other services if all the land prices increase because working people will want more pay to be able to afford their own land.

Everyone would get to pay the same tax bill proportionally, but not nominally.

Re: VCs are scared when they should be greedy

#208

Post by lotsofpulp »

quickthrower2 wrote: post #201
kbuchanan wrote: post #50

This post reminded me a little of my real estate agent's newsletter: 2007: There's never been a better time to buy! 2008: There's never been a better time to buy! 2012: There's never been a better time to buy! 2020: There's never been a better time to buy! 2022: There's never been a better time to buy!

My agents: All years: There’s never been a better time to sell! In other countries the agents only make commissions from the seller not the buyer, hence getting the listing is the big thing.

Assuming you are referring to the US, buy side real estate agents get paid by the sell side real estate agent (technically the real estate seller pays commission to the sell side real estate broker, which then pays the sell side real estate agent and the buy side real estate broker which then pay the buy side real estate agent).

Re: VCs are scared when they should be greedy

#209

Post by peyton »

jacquesm wrote: post #110
Bubble_Pop_22 wrote: post #108

Earlier quoted context omitted.

There are LPs and LPs. The LPs which the user above refers to are the APGs, the PFZWs type.

Show me a contract where an LP gets to renege penalty free on their obligations to a VC and I'll be happy to believe you. I have been part of 222 VC/PE deals to date (that's not a typo, just a coincidence) and not once has an LP reneged on their obligation to honor a capital call without penalty. That's not saying it doesn't happen, it may well happen, or it may have happened and it was kept so quiet that nobody pick…

> Just to give you one example: a VC enters into a deal, signs a non-binding terms sheet conditional on doing DD, goes through a full DD and then has to back out of the deal because a large LP does not honor their commitment. The fall out from that would be massive.

Is this in Europe?

Re: VCs are scared when they should be greedy

#210

Post by danjac »

vcfundedmylife wrote: post #21
skippyboxedhero wrote: post #9

Earlier quoted context omitted.

> I think tech investors are unable to see their bias for just how awful most tech companies today are I agree. Ecomm broke first in other markets, and I am seeing profitable ecomm companies still having to raise capital. Uber is one of the worst ones (they took a business that is very profitable, and lost absolutely staggering amounts of money, they probably need to cut 50% of the workforce to start with, and then k…

I agree, crypto and fintech will be the first dominos to fall - they’re in free fall already. There’s a lot of copycat B2B startups that extremely dependent on crypto and fintech for their revenue. They will be the next domino to fall. After that, it would be infrastructure, security, and analytics vendors that will face a revenue crunch and will be unable to raise another round of funding. And then, all the startups…

The Bay Area has never really reconciled being a protective property market (the old money NIMBYs) and being a high-growth business hub. One of the two had to give, and another tech market crash plus remote work becoming the norm (despite wailing and gnashing of teeth from some CEOs and VCs) will probably see SF reverting to the former.
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