Startups are usually short "establishment beta," i.e. if there is a profitable cash-cow company serving a particular set of customers, the typical startup wants

Startups are usually short "establishment beta," i.e. if there is a profitable cash-cow company serving a particular set of customers, the typical startup wants those customers to be paying less money--to somebody else. Human needs are limited, and meeting almost all of them can be facilitated through a financial transaction. The "beta" of finding funding or an acquirer is a funny kind of beta--it's highly unlikely that a great company will not get their first $1mm in funding because the VC world has just been deprived of $1b in assets allocated. The cheapest way to short a startup is to bet on whatever establishment they're taking on. You could have shorted MSFT before they were public by buying IBM; if Big Iron kept on winning, you'd keep on getting your dividend checks. But startups are more akin to, e.g., long-shot CDS trades: the people betting against them get a predictable, incremental profit, or a massive, sudden loss.