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While I don't believe that $SNAP financials are solid (I am bearish), I do applaud them and Mulesoft for going public. Too often today large (well past series

While I don't believe that $SNAP financials are solid (I am bearish), I do applaud them and Mulesoft for going public. Too often today large (well past series C) tech companies (I won't name any names) refuse to go public and instead continue to take private equity and foreign investment and prop themselves up on absurd valuations with no-checks and balances. Some of these companies are absolute dog shit, yet they continue to receive unlimited funding and insane valuations in a vacuum with no market to short them. Wall Street calls bullshit when they see it, and smart people short bad companies when they find them. Silicon Valley doesn't provide a way to short these propped-up companies, they just continue to self-promote themselves on private equity and foreign investment.

jedberg 10y ago
I saw this and thought I was going crazy. I could have sworn I just read it. And I was right! https://news.ycombinator.com/item?id=13672675 https://news.ycombinator.com/item?id=13672675 You made the same comment on the Mulesoft IPO announcement. :)
- nodesocket 10y ago
  Hah, caught me copying from myself a bit ;-). Still my comment applies.
  - jedberg 10y ago
    Yeah, it's totally relevant to this discussion. It just threw me off. I happend to be looking at that 17 day old thread earlier to see what people said about the Mulesoft IPO to see if it was worth participating in.
  - cwilkes 10y ago
    Also regarding twitter :) https://news.ycombinator.com/item?id=13620748 https://news.ycombinator.com/item?id=13620748 Wall Street calls bullshit when they see it, and smart people short these types of companies. Silicon Valley doesn't provide a way to short these propped-up companies, they just continue to self-promote themselves on private equity and foreign investment.
  - aedron 10y ago
    I don't often get caught copying myself. But when I do, it's by jedberg.
wapz 10y ago
I don't understand what the advantage of companies going public is. If they are public don't they have to essentially "force" profits for their shareholders? Wouldn't a company that has a sustainable income that doesn't want to grow be better off staying private where they can be "themselves?"
- xapata 10y ago
  Not exactly. There's benefit to staying private, but it's more about the time-value of money than the need to grow. Private companies can generally optimize for longer timeframes than public companies. Except for Amazon, whose shareholders seem cool with the idea of plowing all free cash flow into growth. Shareholders are often much more conservative than private owners and won't allow drastic changes. Private owners are more comfortable with variation. Growth is necessary for all companies, public or private. If you're not growing, you're dying. That's not always true, but it's true enough -- not just in economics, but for all organisms, literal and metaphorical. It's less about absolute growth than relative growth. If your competitor is growing faster, eventually they will crowd you out of the market.
  - ClassyJacket 10y ago
    >Growth is necessary for all companies, public or private. Well, no. Only public ones have that pressure. If the owners of a private company agree, they can sit at any size and make a steady profit.
- CobrastanJorji 10y ago
  I'm no startup expert, but I imagine part of it is that the company's owners (founder, VCs, etc) would like to reap some rewards of their successful endeavor and diversify their riches into other businesses. That means finding buyers, which is presumably most easily accomplished by going public. It's great to build a billion dollar business, but it might as well not exist until you sell some of it to someone. I imagine that going public, simply by creating a lot of new shares, is also an effective way to raise additional capital, which could be used to grow the company more, similar to a private fundraising round but larger in scale.
hkmurakami 10y ago
Where do you draw the line though? If you could short every series A or B company, you'd make a killing doing so. As far as I can tell, the companies themselves owe it to no one other than their investors and employees to consider going public. If going public doesn't further their position, and private funding is available, the responsible thing (as perverse as that is) is to pursue private funding, no? So who's the one ultimately responsible for the current situation, the companies or the investors enabling them?
- RhodesianHunter 10y ago
  "If you could short every series A or B company, you'd make a killing doing so." That's not really how shorting works. You'd have to find someone willing to let you sell their shares, you'd have to incentivize them to do so, you'd have to find a willing buyer, and you'd have almost unlimited loss potential.
- bogomipz 10y ago
  >"If you could short every series A or B company, you'd make a killing doing so." To short a stock you generally borrow that stock(on margin) from a broker. How do you do that with a pre-IPO company?
  - hkmurakami 10y ago
    You can bet against anything with a derivative instrument as long you can find a counterparty for your bet.
    - rjtavares 10y ago
      That's not shorting though. The difference being that a short sale has an effect on the market while a bet is invisible (so you can bet the whole market cap of the company without moving the market)
uptownfunk 10y ago
Interesting POV. Didn't think the public markets would provide a stricter level of accountability than the private market. I feel like Snapchat is what all the younger kids are using, at least so I've noticed. I'm 30 but old school. I don't see them using it past a certain age (say.. college most likely). Everyone who uses Snapchat will probably gravitate to or concurrently use Instagram and Facebook. Facebook will persist into old age, perhaps Instagram as well. There's a notion of active vs. passive engagement in each of these. Snapchat requires more active engagement to be interesting. There's the story aspect but not sure it's compelling enough. Facebook is nice because as soon as you turn it on you have this sort of mini magazine like feed that tells you what all your 'friends' are doing, you don't really need to do much to get involved, and it becomes easy to boop the like button to engage / like things. What I think snap does have, that could be quite cool from a technology standpoint is its ability to create these "masks/goggles" that react when you say stick out your tongue or raise your eyebrows. I think that sort of what I would term reactive AI is something that carries a lot of potential. I don't know how much I see it becoming an ad-revenue generator, like FB/Insta/Twit that have more of this passive magazine like structure that still somehow fosters engagement. Also curious to see what happens when rates go up
- krakensden 10y ago
  I see my friends leaking out of Facebook, mostly into Snap. It is free from the dead weight of the past problem that plagues Facebook.
  - nift 10y ago
    Care to elaborate? :)
  - uptownfunk 10y ago
    what is the problem?
lmm 10y ago
I don't think you can blame companies for taking free money at high valuation when it's offered to them. Who's investing? Either it's a good investment or it isn't; if the latter, whoever's investing won't have their money much longer.
- idiot_stick 10y ago
  I'd hardly consider an ownership stake in your company to be "free", with or without voting rights.
  - lmm 10y ago
    Depends if your company is worth anything. But you're right, I meant "cheap" rather than "free".
wslh 10y ago
While their financials could not be solid they can use the capital to try new things, including acquiring other companies. Since Google and Facebook we are seeing a new kind of companies which are more flexible on trying new ventures and being relatively successful comparing to companies like Xerox or IBM that were/are not able to integrate innovations in their business.
soVeryTired 10y ago
Shorting a company that doesn't have a large free float can actually be quite expensive. You have to borrow the stock from someone, and pay them for the privilege.

jedberg 10y ago

I saw this and thought I was going crazy. I could have sworn I just read it. And I was right! https://news.ycombinator.com/item?id=13672675 https://news.ycombinator.com/item?id=13672675 You made the same comment on the Mulesoft IPO announcement. :)

nodesocket 10y ago
Hah, caught me copying from myself a bit ;-). Still my comment applies.
- jedberg 10y ago
  Yeah, it's totally relevant to this discussion. It just threw me off. I happend to be looking at that 17 day old thread earlier to see what people said about the Mulesoft IPO to see if it was worth participating in.
- cwilkes 10y ago
  Also regarding twitter :) https://news.ycombinator.com/item?id=13620748 https://news.ycombinator.com/item?id=13620748 Wall Street calls bullshit when they see it, and smart people short these types of companies. Silicon Valley doesn't provide a way to short these propped-up companies, they just continue to self-promote themselves on private equity and foreign investment.
- aedron 10y ago
  I don't often get caught copying myself. But when I do, it's by jedberg.

wapz 10y ago

I don't understand what the advantage of companies going public is. If they are public don't they have to essentially "force" profits for their shareholders? Wouldn't a company that has a sustainable income that doesn't want to grow be better off staying private where they can be "themselves?"

xapata 10y ago
Not exactly. There's benefit to staying private, but it's more about the time-value of money than the need to grow. Private companies can generally optimize for longer timeframes than public companies. Except for Amazon, whose shareholders seem cool with the idea of plowing all free cash flow into growth. Shareholders are often much more conservative than private owners and won't allow drastic changes. Private owners are more comfortable with variation. Growth is necessary for all companies, public or private. If you're not growing, you're dying. That's not always true, but it's true enough -- not just in economics, but for all organisms, literal and metaphorical. It's less about absolute growth than relative growth. If your competitor is growing faster, eventually they will crowd you out of the market.
- ClassyJacket 10y ago
  >Growth is necessary for all companies, public or private. Well, no. Only public ones have that pressure. If the owners of a private company agree, they can sit at any size and make a steady profit.
CobrastanJorji 10y ago
I'm no startup expert, but I imagine part of it is that the company's owners (founder, VCs, etc) would like to reap some rewards of their successful endeavor and diversify their riches into other businesses. That means finding buyers, which is presumably most easily accomplished by going public. It's great to build a billion dollar business, but it might as well not exist until you sell some of it to someone. I imagine that going public, simply by creating a lot of new shares, is also an effective way to raise additional capital, which could be used to grow the company more, similar to a private fundraising round but larger in scale.

hkmurakami 10y ago

Where do you draw the line though? If you could short every series A or B company, you'd make a killing doing so. As far as I can tell, the companies themselves owe it to no one other than their investors and employees to consider going public. If going public doesn't further their position, and private funding is available, the responsible thing (as perverse as that is) is to pursue private funding, no? So who's the one ultimately responsible for the current situation, the companies or the investors enabling them?

RhodesianHunter 10y ago
"If you could short every series A or B company, you'd make a killing doing so." That's not really how shorting works. You'd have to find someone willing to let you sell their shares, you'd have to incentivize them to do so, you'd have to find a willing buyer, and you'd have almost unlimited loss potential.
bogomipz 10y ago
>"If you could short every series A or B company, you'd make a killing doing so." To short a stock you generally borrow that stock(on margin) from a broker. How do you do that with a pre-IPO company?
- hkmurakami 10y ago
  You can bet against anything with a derivative instrument as long you can find a counterparty for your bet.
  - rjtavares 10y ago
    That's not shorting though. The difference being that a short sale has an effect on the market while a bet is invisible (so you can bet the whole market cap of the company without moving the market)

uptownfunk 10y ago

Interesting POV. Didn't think the public markets would provide a stricter level of accountability than the private market. I feel like Snapchat is what all the younger kids are using, at least so I've noticed. I'm 30 but old school. I don't see them using it past a certain age (say.. college most likely). Everyone who uses Snapchat will probably gravitate to or concurrently use Instagram and Facebook. Facebook will persist into old age, perhaps Instagram as well. There's a notion of active vs. passive engagement in each of these. Snapchat requires more active engagement to be interesting. There's the story aspect but not sure it's compelling enough. Facebook is nice because as soon as you turn it on you have this sort of mini magazine like feed that tells you what all your 'friends' are doing, you don't really need to do much to get involved, and it becomes easy to boop the like button to engage / like things. What I think snap does have, that could be quite cool from a technology standpoint is its ability to create these "masks/goggles" that react when you say stick out your tongue or raise your eyebrows. I think that sort of what I would term reactive AI is something that carries a lot of potential. I don't know how much I see it becoming an ad-revenue generator, like FB/Insta/Twit that have more of this passive magazine like structure that still somehow fosters engagement. Also curious to see what happens when rates go up

krakensden 10y ago
I see my friends leaking out of Facebook, mostly into Snap. It is free from the dead weight of the past problem that plagues Facebook.
- nift 10y ago
  Care to elaborate? :)
- uptownfunk 10y ago
  what is the problem?

lmm 10y ago

I don't think you can blame companies for taking free money at high valuation when it's offered to them. Who's investing? Either it's a good investment or it isn't; if the latter, whoever's investing won't have their money much longer.

idiot_stick 10y ago
I'd hardly consider an ownership stake in your company to be "free", with or without voting rights.
- lmm 10y ago
  Depends if your company is worth anything. But you're right, I meant "cheap" rather than "free".

wslh 10y ago

While their financials could not be solid they can use the capital to try new things, including acquiring other companies. Since Google and Facebook we are seeing a new kind of companies which are more flexible on trying new ventures and being relatively successful comparing to companies like Xerox or IBM that were/are not able to integrate innovations in their business.

soVeryTired 10y ago

Shorting a company that doesn't have a large free float can actually be quite expensive. You have to borrow the stock from someone, and pay them for the privilege.