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The point of investing in startups is not to get better returns, it’s to get different returns. If you already have a ton of money invested in stocks, diversify
by matte_black 9y ago
The point of investing in startups is not to get better returns, it’s to get different returns. If you already have a ton of money invested in stocks, diversifying a bit by throwing some capital into startups is not a bad idea in case the market tanks.
- quickthrower2 9y agoThey are related, in that you are hoping your startup will become a future stock. So if stock prices are down, so is your E(V) at startups.
- matte_black 9y agoBecoming a stock is only one way to exit. The startup could also get acquired for a ton of money by a bigger company.
- quickthrower2 9y agoLike NASDAQ: GOOGL or NASDAQ: FB?
- hendzen 9y agoWhat actually changes hands in a typical startup acquisition? Hint: it's usually not cash.
- vadimberman 9y agoWhere do you think the venture money comes from? Mostly from investment banks and faceless funds, not a bunch of rich guys. These funds have diversified portfolio. They are paid to produce good returns, so a small part goes into "alternative investments" and such, which is potentially high-risk, high-yield. The article does a good analysis but they forget to mention another factor: cryptocurrencies. It's clearly the biggest bubble right now, which means it'll draw the money used to gamble.
- nostrademons 9y agoCryptocurrencies are also used to directly invest in startups via ICOs. The ICO market is reportedly bigger than the venture capital market as of a couple months ago; the numbers in this article are completely consistent with a shift in early-stage fundraising from seed funds to ICOs. https://www.cnbc.com/2017/08/09/initial-coin-offerings-surpass-early-stage-venture-capital-funding.html https://www.cnbc.com/2017/08/09/initial-coin-offerings-surpa...
- api 9y agoIs the quality of seed stage ventures as bad as the quality of nearly all these ICOs? If so wowza.
- nostrademons 9y agoIf you take as your universe the set of all ventures that pitch to seed stage, probably yeah. Most of them are weeded out by investors. I suspect a good many ICOs are weeded out by "investors" as well, but if you pitch to enough people, there's always someone willing to suspend disbelief. (This goes for seed stage ventures as well...some truly idiotic business models have gotten funded.)
- jgh 9y agoMost seed-stage companies aren't trying to raise $150mm. And you actually have to tell people who you are.
- vadimberman 9y agoYes, but ICOs as a class are not counted as seed investment, at least not of the traditional variety that is known to be legal.