It's weird to keep referring to these AI behemoths as "startups".
Trade Dollars with other startups. Book it as revenue
51–60 of 175 posts
Re: Trade Dollars with other startups. Book it as revenue
#52Activities like this are a good sign of a bubble close to bursting. The circular deals Nvidia and OpenAI have done are good examples of this. https://www.bloomberg.com/graphics/2026-ai-circular-deals
It's a joke
It’s a funny joke because it is truly happening (without the fraud as a service middleman). This sort of trade has been rampant the last few years in the AI and GPU space, as you can see from the link above, which details people doing exactly this in the real world with armies of accountants to make it appear legal.
Re: Trade Dollars with other startups. Book it as revenue
#53I pay you a million dollars to eat dog shit. You pay me a million dollars to eat dog shit. The result? The GDP goes up two million and we both have shit eating grins.
It's a bad example, because both sides actually got the entertainment they paid for and is totally valid economic activity.
Re: Trade Dollars with other startups. Book it as revenue
#54Services in kind is a pretty common business practice. You see this a lot at the SMB level especially outside of the US. Small businesses are cash strapped. So you find someone who needs your services and you need their services. Instead of exchanging cash, you exchange invoices and do the work. You build them, say, a $5000 website, they perform, say, $5000 of landscaping. At big boy levels this is often structured a…
This feels very adjacent to the story about the whole town in debt, and the rich guy leaves a $100 bill on the table, [and so on], in a way that I can't quite put my finger on.
You can't put your finger on it because money is merely an accumulator and medium of exchange of economic performance. The performance of services in exchange for other services without money is a perfectly valid economic exchange that can and should be booked to revenue of each of the parties, if actually performed.
Loans without any economic performance of services generate circular meaningless cash flows yeah, but that's not the case when services are actually performed.
Loans are promises to pay. Business deals are promises to perform services or deliver goods. The difference is easily lost in the details even for accountants and economists.
Re: Trade Dollars with other startups. Book it as revenue
#55Services in kind is a pretty common business practice. You see this a lot at the SMB level especially outside of the US. Small businesses are cash strapped. So you find someone who needs your services and you need their services. Instead of exchanging cash, you exchange invoices and do the work. You build them, say, a $5000 website, they perform, say, $5000 of landscaping. At big boy levels this is often structured a…
the last thing you should do in this scenario is book that as revenue. Of course I would never do this, but you could keep it off the books.
It depends if your goal is to sell the company or evade taxes, of course.
Re: Trade Dollars with other startups. Book it as revenue
#56Services in kind is a pretty common business practice. You see this a lot at the SMB level especially outside of the US. Small businesses are cash strapped. So you find someone who needs your services and you need their services. Instead of exchanging cash, you exchange invoices and do the work. You build them, say, a $5000 website, they perform, say, $5000 of landscaping. At big boy levels this is often structured a…
The key realization is that it increases expenses at an equal rate as the revenue increase.
You get $5000 of revenue but spent $5000 on services.
You also have to pay taxes on that $5000 like other revenue.
So many small businesses will try to just exchange the services more directly in some way, or give steep discounts. (Tip: This doesn’t mean it’s entirely correct for tax/legal/accounting purposes, so don’t do big deals like this without consulting professionals. I’m just saying this is what’s done by some people)
> The part that makes it not fraud is that both parties do actually do the work.
The cheap criticisms of these deals always miss this part: something of value is traded for the dollars by both parties. Companies can’t simply circulate dollars between themselves.
Re: Trade Dollars with other startups. Book it as revenue
#57I find this amusing: I'm from Poland, where after the VAT tax was introduced in the 1990s, there were famous "VAT carousel" crimes, with people ending up in prison. The basic idea was similar, except you also collected VAT refunds from the state. If you search for "vat carousel" today, it seems this is still a thing.
I first hear about this from a guy running a warehouse. He noticed the same boxes commining in again and again.
Re: Trade Dollars with other startups. Book it as revenue
#58Services in kind is a pretty common business practice. You see this a lot at the SMB level especially outside of the US. Small businesses are cash strapped. So you find someone who needs your services and you need their services. Instead of exchanging cash, you exchange invoices and do the work. You build them, say, a $5000 website, they perform, say, $5000 of landscaping. At big boy levels this is often structured a…
The key realization is that it increases expenses at an equal rate as the revenue increase. You get $5000 of revenue but spent $5000 on services. You also have to pay taxes on that $5000 like other revenue. So many small businesses will try to just exchange the services more directly in some way, or give steep discounts. (Tip: This doesn’t mean it’s entirely correct for tax/legal/accounting purposes, so don’t do big…
> You also have to pay taxes on that $5000 like other revenue.
Businesses do not pay taxes on revenue, they pay taxes on profit.
Other taxes may be applicable though (such as VAT or sales taxes).
Re: Trade Dollars with other startups. Book it as revenue
#59Re: Trade Dollars with other startups. Book it as revenue
#60It's weird to keep referring to these AI behemoths as "startups".
They have no scalable business model that yields profit outside of raising more investment, so yes, somehow they are still startups