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If the fed would raise interest rates, that'd go a long way to helping clear at least some of the backlog. Right now you got a lot of dumb money behind a lot o

If the fed would raise interest rates, that'd go a long way to helping clear at least some of the backlog. Right now you got a lot of dumb money behind a lot of startups with bad business plans because there's no other place for the money to earn reasonable yields.

ghaff 10y ago
Higher interest rates aren't a magical elixir for investment returns though I agree that there's a lot of dumb money going into bad, me too business plans. However, the author seems to be most focused on how invested money gets out of the pipeline once it's in. In may well be the case that there aren't enough worthwhile tech VC targets to absorb the money people want to put in. (see also the boatloads of cash some companies are sitting on.) But that's a different argument from companies unwilling/unable to exit.
- Spooky23 10y ago
  They're not magical, but there's literally nowhere to safely save liquid cash these days. I have a 6% Capital One 360 CD that matured last year. My credit union is offering 2.75% auto loans on 2014 model year cars up to 72 months. Clearly, money is too cheap when you're getting super low rates on terrible loan products.
  - toomuchtodo 10y ago
    If the car lasts at least 72 months, and you stay ahead of the depreciation, it's not a terrible loan product. It's a benefit of the world being awash in capital.
- jimmywanger 10y ago
  Well, there is a way for invested money to get out, as she points out. It's just that the incoming money is too great in volume. If we restricted the incoming money, the money in the pipeline would drain out the normal way.
- quanticle 10y ago
  However, the author seems to be most focused on how invested money gets out of the pipeline once it's in. The two problems are related. Money isn't being pulled out of the pipeline because investors are willing to let venture funds hold onto their cash for long periods of time. If investors had other opportunities for getting returns, they'd pressure venture funds to have shorter time horizons, and this, in turn, would lead venture funds to pressure companies to cash out or die.
deleted 10y ago
[deleted]
obstinate 10y ago
S&P 500 returned an inflation adjusted 9% last year (Dec '15-Dec '16). If that's not a "reasonable yield," what is?
- zeroer 10y ago
  The S&P 500 returned 12.25% last year. Unless you're throwing money away, you have to count dividends, too. https://dqydj.com/2016-sp-500-return/ https://dqydj.com/2016-sp-500-return/
  - obstinate 10y ago
    The number you're quoting is pre-inflation adjustment, I think? Or maybe I used the wrong endpoints. I used the calculator on that site [1], with the setting being from December '15 to December '16 since I'm not sure what moment in January '17 they measured. If I go Jan '16 to Jan '17, then we end up with 17.952%, which doesn't sound right. [1]: https://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/
    - zeroer 10y ago
      You're right -- 12.25 is nominal, not inflation-adjusted. But inflation was in the range of 1.5-2%, so even adjusted for inflation, the real return exceeds 10% any way to slice it. I'm not sure what your calculator is measuring -- the date selection has a precision of one month. But swings of 5% in a month are common, so I would not immediately discount the idea that there are endpoint dates you could choose to get a 17% return.

ghaff 10y ago

Higher interest rates aren't a magical elixir for investment returns though I agree that there's a lot of dumb money going into bad, me too business plans. However, the author seems to be most focused on how invested money gets out of the pipeline once it's in. In may well be the case that there aren't enough worthwhile tech VC targets to absorb the money people want to put in. (see also the boatloads of cash some companies are sitting on.) But that's a different argument from companies unwilling/unable to exit.

Spooky23 10y ago
They're not magical, but there's literally nowhere to safely save liquid cash these days. I have a 6% Capital One 360 CD that matured last year. My credit union is offering 2.75% auto loans on 2014 model year cars up to 72 months. Clearly, money is too cheap when you're getting super low rates on terrible loan products.
- toomuchtodo 10y ago
  If the car lasts at least 72 months, and you stay ahead of the depreciation, it's not a terrible loan product. It's a benefit of the world being awash in capital.
jimmywanger 10y ago
Well, there is a way for invested money to get out, as she points out. It's just that the incoming money is too great in volume. If we restricted the incoming money, the money in the pipeline would drain out the normal way.
quanticle 10y ago
However, the author seems to be most focused on how invested money gets out of the pipeline once it's in. The two problems are related. Money isn't being pulled out of the pipeline because investors are willing to let venture funds hold onto their cash for long periods of time. If investors had other opportunities for getting returns, they'd pressure venture funds to have shorter time horizons, and this, in turn, would lead venture funds to pressure companies to cash out or die.

deleted 10y ago

[deleted]

obstinate 10y ago

S&P 500 returned an inflation adjusted 9% last year (Dec '15-Dec '16). If that's not a "reasonable yield," what is?

zeroer 10y ago
The S&P 500 returned 12.25% last year. Unless you're throwing money away, you have to count dividends, too. https://dqydj.com/2016-sp-500-return/ https://dqydj.com/2016-sp-500-return/
- obstinate 10y ago
  The number you're quoting is pre-inflation adjustment, I think? Or maybe I used the wrong endpoints. I used the calculator on that site [1], with the setting being from December '15 to December '16 since I'm not sure what moment in January '17 they measured. If I go Jan '16 to Jan '17, then we end up with 17.952%, which doesn't sound right. [1]: https://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/
  - zeroer 10y ago
    You're right -- 12.25 is nominal, not inflation-adjusted. But inflation was in the range of 1.5-2%, so even adjusted for inflation, the real return exceeds 10% any way to slice it. I'm not sure what your calculator is measuring -- the date selection has a precision of one month. But swings of 5% in a month are common, so I would not immediately discount the idea that there are endpoint dates you could choose to get a 17% return.