4 ms·

The whole situation is a bit confusing to me. A bunch of people have given a disproportionate amount of money to a few companies and those companies now have ma

The whole situation is a bit confusing to me. A bunch of people have given a disproportionate amount of money to a few companies and those companies now have massive valuations. If the people giving them money shared the regulators concern, it seems simple enough to just, well, stop giving them money. And yet Slack gets $200 mil just a few days ago. So what is happening exactly? Is there unrealistic optimism happening here or are people being suckered out of their money. Is the government concerned about the eventual pop and so is telling the very people who would benefit the most to quit it? Seems like they should be telling the _investors_ to stop, no?

nivertech 11y ago
These are not real valuations. The more realistic valuations are for common stock. Most of those deals are really a debt disguised as an equity. It just a way to give companies loans, which should be repaid via either cashflow or future IPO. When reading news headline just replace: "Uber raised another $1B round" with "Uber took another $1B loan". One of the unicorn CEOs said: We need to be worth a billion dollars to be able to recruit new engineers. So we decided that was our valuation. If you are issuing options to employees based on valuations fabricated to attract them, you are pretty clearly committing securities fraud. http://blogs.wsj.com/moneybeat/2016/04/01/sec-chief-warns-silicon-valley-unicorns-about-the-horn-wagging-the-tail/ http://blogs.wsj.com/moneybeat/2016/04/01/sec-chief-warns-si...