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Minsky Moments in Venture Capital

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Re: Minsky Moments in Venture Capital

#31

Post by onlyrealcuzzo »

lumost wrote: post #29
onlyrealcuzzo wrote: post #26

Earlier quoted context omitted.

16x over how many years? A lot of companies are growing 40%+ I don't think it's absurd to think AWS and GCP can keep rates like this up for another 4-5 years. If SNOW could do it for 8.5 years - that's ~16x growth. Still that seems way too optimistic for me - unless I'm purely speculating on greater fools willing to pay more.

aye - effectively this says that SnowFlake will execute perfectly for 4 years, or slow to 40% growth for 8.5 years and will maintain/reach a healthy margin. For this, the market is willing to price this performance in today . Meanwhile a dollar placed in the S&P 500 would likely 2x over the same time frame. To see a return on a dollar placed into snowflake we'd need to start adding in assumptions like "SnowFlake doub…

Why? Google's PE isn't going to drop to 13 with NRIRP and its current growth rate.

Re: Minsky Moments in Venture Capital

#32

Post by onlyrealcuzzo »

cs702 wrote: post #21
hncommenter13 wrote: post #8

Interesting piece. But speaking as someone who was formerly a very junior VC through the dot-com era, there most certainly can be a negative spiral. The public and private markets aren't as distinct as they might appear to be. A VC buying shares in a private company at valuation X must believe that a sale is possible at a big multiple of X, and soon. Some VC will be the last investor before the company goes public or…

One other thing that happened in the dot-com era, which is also happening today, is that many new companies would spend fresh funds raised from VCs and even from IPOs to buy products and services from each other , spending money aggressively to deliver such products and services, and generating revenue growth that would look impressive in the short run... but ultimately would prove unsustainable. Such growth can last…

This seems to be A LOT of Series A SaaS.

Theoretically, who cares. If you can convince people to buy your product - even if only to scratch each other's backs - that's better than all the other people who can't / don't have the network.

Re: Minsky Moments in Venture Capital

#33

Post by lumost »

onlyrealcuzzo wrote: post #31
lumost wrote: post #29

Earlier quoted context omitted.

aye - effectively this says that SnowFlake will execute perfectly for 4 years, or slow to 40% growth for 8.5 years and will maintain/reach a healthy margin. For this, the market is willing to price this performance in today . Meanwhile a dollar placed in the S&P 500 would likely 2x over the same time frame. To see a return on a dollar placed into snowflake we'd need to start adding in assumptions like "SnowFlake doub…

Why? Google's PE isn't going to drop to 13 with NRIRP and its current growth rate.

Google has multiple high margin business lines which have grown rapidly for the last 2 decades. Snowflake operates in a specific competitive market, with a yet to be determined profit margin.

Re: Minsky Moments in Venture Capital

#34

Post by onlyrealcuzzo »

lumost wrote: post #33
onlyrealcuzzo wrote: post #31

Earlier quoted context omitted.

Why? Google's PE isn't going to drop to 13 with NRIRP and its current growth rate.

Google has multiple high margin business lines which have grown rapidly for the last 2 decades. Snowflake operates in a specific competitive market, with a yet to be determined profit margin.

I mean - I agree. But who's to say people aren't willing to bet this as yet to be determined business ends up being the best business of them all?

Re: Minsky Moments in Venture Capital

#35

Post by lumost »

onlyrealcuzzo wrote: post #34
lumost wrote: post #33

Earlier quoted context omitted.

Google has multiple high margin business lines which have grown rapidly for the last 2 decades. Snowflake operates in a specific competitive market, with a yet to be determined profit margin.

I mean - I agree. But who's to say people aren't willing to bet this as yet to be determined business ends up being the best business of them all?

I mean there will always be a next rocket ship, and it’s obviously clear that people are willing to take this bet.

However at the same time, I’d be curious why a lot of money is taking snow as being the next google as a given. My bet is because other institutional investors are taking this as a given, and the time value of capital has been distorted by low interest rates.

If this illusion pops before snow hits 10 billion in revenue it’s likely going to cost investors dearly. As of right now a plausible downside of 95% exists should the market choose to take the common valuations of 2016.

Re: Minsky Moments in Venture Capital

#36

Post by ewuhic »

lordnacho wrote: post #4

One thing I always wondered as a hedge fund guy was where all the reports of VC/PE doing badly went. You always hear about some hedge fund blowing up or having a terrible month, but I seem to never hear any bad news from the private markets world. In fact it's all "we returned 10x capital" which is pretty good even if it takes a few years, especially if there's no losses. Even Softbank seems to be doing okay consider…

Possibly silly question: how does one transition from software engineering to hedge fund management?
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