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This is called the 'free market' in action. With very low interest rates, and ridiculous Fed policies (QE) designed to 'reinvigorate the economy', but which re

This is called the 'free market' in action. With very low interest rates, and ridiculous Fed policies (QE) designed to 'reinvigorate the economy', but which really just pumped tons of extra cash into stocks and bonds (i.e. mostly the 1%, and institutional holders like pension funds) - you have tons of liquidity chasing value creation. It'd rather seem that 'the power' is now in the hands of those who can create value. Or more cynically: money goes to those who can convince others that value is being created so they can 'collect money' for their product/service. There's nothing inherently wrong with this situation, it just means VC's are getting squeezed, and their 'amazing skill' of being able to 'spot the best opportunities' might be being commoditized a little bit. The 'risk' really is a sudden change one way or the other, i.e. fed-rate change, china-flop, tump-risk or just some general fear based panic causing a bubble burst.

CalChris 10y ago
Your second paragraph completely contradicts your first. Our very low interest rates are anything but free market. They are a Fed monetary policy.
jartelt 10y ago
Employees are also getting forced to wait much longer before their equity stakes become liquid. It can be tough on an employee if they cannot leave their job without either losing all their options or paying a large upfront tax bill to exercise options (which may not be liquid for a while longer).
- marblar 10y ago
  > (which may not be liquid for a while longer). (Or ever)
URSpider94 10y ago
I disagree. The article isn't at all about the returns that people are getting on their investments. It's more about the fact that there's a normal lifecycle for venture-backed companies that ends with going public or being acquired. That lifecycle seems to have stalled out with mega-companies staying private for long periods of time. It's still highly likely that Uber's investors will make tons of cash when the company finally decides to go public, whenever that is. It's just that the VC money is staying locked up much longer, so that it's not available to fund other early-stage start-ups.
- jhoechtl 10y ago
  I still don't get the hype aroumd Uber or why would they IPO as they are not profitable at all, prevent the creation of proper public transport and helped destroy the otherwise profitable taxi business and weakened the unions? http://www.wired.co.uk/article/uber-finances-losses-driverless-cars http://www.wired.co.uk/article/uber-finances-losses-driverle...
- edblarney 10y ago
  "It's more about the fact that there's a normal lifecycle for venture-backed companies that ends with going public or being acquired. That lifecycle seems to have stalled out with mega-companies staying private for long periods of time." No. There is no 'normal'. There was X money going in Y coming out. Now there is 2X money going in, and still Y going out. It means a lower rate of return for those putting money in. As for 'money not available to fund other startups' - clearly it is - the charts show actual investment is still high.
  - URSpider94 10y ago
    You are missing the fact that the amount of money tied up in the companies is growing. 2x is going in, x is coming ng out, but the missing x is still (mostly) in there tied up in unicorns. The rate of return is dropping, but not because the money is gone, just because it's taking longer to come back.
    - fourthark 10y ago
      If those untested valuations are correct.
ryandamm 10y ago
I hear QE being disparaged a lot, but I'm not sure why. The world economy has been in a doldrums, and QE was the only monetary lever left to pull (given that fiscal tightening, rather than expansion, was the political calculation). Look, interest rates are low because the world has a deficit of assets that offer a good return. More to the point, dollar-denominated interest rates are low because the world seeks stability in the dollar. Capital flows reflect this, and Fed policy is only a tiny input to the overall system. In fact, QE and fed policy in general is reactive to global macro; we assume it has much more influence than it does, particularly when much of the developed world is in a liquidity trap. There are serious macro debates going on (secular stagnation? decreasing productivity returns from tech?). But whether or not QE is "ridiculous" isn't actually a serious debate. Unless you care more about equity prices than overall growth -- but I think that's missing the forest for the trees. Railing against QE without understanding the context (including the lack of alternatives) isn't particularly illuminating.

CalChris 10y ago

Your second paragraph completely contradicts your first. Our very low interest rates are anything but free market. They are a Fed monetary policy.

jartelt 10y ago

Employees are also getting forced to wait much longer before their equity stakes become liquid. It can be tough on an employee if they cannot leave their job without either losing all their options or paying a large upfront tax bill to exercise options (which may not be liquid for a while longer).

marblar 10y ago
> (which may not be liquid for a while longer). (Or ever)

URSpider94 10y ago

I disagree. The article isn't at all about the returns that people are getting on their investments. It's more about the fact that there's a normal lifecycle for venture-backed companies that ends with going public or being acquired. That lifecycle seems to have stalled out with mega-companies staying private for long periods of time. It's still highly likely that Uber's investors will make tons of cash when the company finally decides to go public, whenever that is. It's just that the VC money is staying locked up much longer, so that it's not available to fund other early-stage start-ups.

jhoechtl 10y ago
I still don't get the hype aroumd Uber or why would they IPO as they are not profitable at all, prevent the creation of proper public transport and helped destroy the otherwise profitable taxi business and weakened the unions? http://www.wired.co.uk/article/uber-finances-losses-driverless-cars http://www.wired.co.uk/article/uber-finances-losses-driverle...
edblarney 10y ago
"It's more about the fact that there's a normal lifecycle for venture-backed companies that ends with going public or being acquired. That lifecycle seems to have stalled out with mega-companies staying private for long periods of time." No. There is no 'normal'. There was X money going in Y coming out. Now there is 2X money going in, and still Y going out. It means a lower rate of return for those putting money in. As for 'money not available to fund other startups' - clearly it is - the charts show actual investment is still high.
- URSpider94 10y ago
  You are missing the fact that the amount of money tied up in the companies is growing. 2x is going in, x is coming ng out, but the missing x is still (mostly) in there tied up in unicorns. The rate of return is dropping, but not because the money is gone, just because it's taking longer to come back.
  - fourthark 10y ago
    If those untested valuations are correct.

ryandamm 10y ago

I hear QE being disparaged a lot, but I'm not sure why. The world economy has been in a doldrums, and QE was the only monetary lever left to pull (given that fiscal tightening, rather than expansion, was the political calculation). Look, interest rates are low because the world has a deficit of assets that offer a good return. More to the point, dollar-denominated interest rates are low because the world seeks stability in the dollar. Capital flows reflect this, and Fed policy is only a tiny input to the overall system. In fact, QE and fed policy in general is reactive to global macro; we assume it has much more influence than it does, particularly when much of the developed world is in a liquidity trap. There are serious macro debates going on (secular stagnation? decreasing productivity returns from tech?). But whether or not QE is "ridiculous" isn't actually a serious debate. Unless you care more about equity prices than overall growth -- but I think that's missing the forest for the trees. Railing against QE without understanding the context (including the lack of alternatives) isn't particularly illuminating.