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Venture capital isn't just a few rich people funding all the startups. There are massive funds for regular working class people like California's teachers that

Venture capital isn't just a few rich people funding all the startups. There are massive funds for regular working class people like California's teachers that invest in these things. VC grew because it got mature and turned out to work well (for recent history) and it provided a way to avoid the stresses of public market oversight while a fledgling startup is pivoting every few months and making no money. It doesn't appear to have anything to do with wealth inequality and you didn't really provide any evidence to back up that assertion. Maybe when all you have is a hammer everything looks like a nail?

tyu100 9y ago
This point is really important. The biggest private equity players are invariably pension plans. Canada has been particularly good at letting quality managers run their public pensions and they have outsize importance now.
xevb3k 9y ago
Most VCs raise from institutional funds (like banks) don’t they? VCs overall, perform quite poorly. But they’re useful for banks, they need somewhere to put money as a hedge against more traditional investments (and currency devaluations in general I guess). For them it’s just a different risk class, and therefore useful for diversifying their risk.
- tptacek 9y ago
  No, raising money from banks is called debt financing.
  - CPLX 9y ago
    No it's not necessarily. Debt and equity are distinct asset classes. Banks invest portions of their balance sheet in both.
crdoconnor 9y ago
>There are massive funds for regular working class people like California's teachers that invest in these things. CALPERS "textbook example of the principal-agent problem" being all over VC is very bad for teachers: https://www.nakedcapitalism.com/2018/02/calpers-chief-investment-office-ted-eliopoulos-now-touting-venture-capital-even-though-cant-improve-returns.html https://www.nakedcapitalism.com/2018/02/calpers-chief-invest... "Companies staying private longer is bad for investors. Eliopoulos described the motivation as “more companies staying private.” But that doesn’t mean this behavior creates an investment opportunity. In fact, it prevents the monetization that investors need to realize returns. It might be different if these VC backed companies were growing up to throw off tons of free cash flow, but as far as we can tell, that is seldom if ever the case. As we wrote regarding Uber, a prime example of this behavior: Kalanick had maintained he wanted Uber to stay private as long as possible. That may be a fad with some unicorns, but it’s not the way for a shareholder to maximize his net worth, so it’s a preference that raises questions about the founders’ ulterior motives. Needless to say, that desire put him at odds with his investors." The reason late stage VC investments historically were attractive was that certain marquee investors would help validate the venture shortly before a planned IPO. The limited time between the investment and the IPO (and the investors’ reputation helping assure the IPO would be priced at a healthy premium to the last pre-IPO round) meant the odds of a healthy quick profit were high. With more companies staying private longer, these conditions aren’t operative.
rotskoff 9y ago
If you read my assertion carefully, I said "control" not "fund". I understand that large public institutions are heavily invested in both VC and PE. My point is simply that public markets are less attractive because wealth is controlled by a small number of hands. Are the teachers themselves deciding where to put their money? Suggesting that the real beneficiaries of venture capital and private equity are the "regular working people" sounds like a fairly obvious canard. Also, I did provide evidence---in fact the thrust of the article I cited is that diminishing numbers of IPOs are making wealth inequality more acute. Furthermore, it's presumptuous of you to assume that "wealth inequality" is my hammer of choice---I cited a piece from the Cato Institute! Here's a good source: http://wir2018.wid.world/part-3.html http://wir2018.wid.world/part-3.html
- hueving 9y ago
  >If you read my assertion carefully, I said "control" not "fund". So then your association with income inequality makes even less sense. If you're just referring to the centralization of the control of funds that happens with anyone who puts their money in a pool that has a manager. It has nothing to do with inequality because teachers make very little and so does their chosen pension leader and yet the latter has investment control over massive sums of money. >sounds like a fairly obvious canard. Yawn. An appeal to obviousness is tiresome to respond to. If you think you have a point to make, elucidate it. From where I sit, as long as pensions are involved in private equity, it benefits working people too. >in fact the thrust of the article I cited is that diminishing numbers of IPOs are making wealth inequality more acute So then it's not a symptom, it's a cause. To explain the difference: Lack of IPOs are not caused by income inequality but the lack of IPOs lead to more income equality.

tyu100 9y ago

This point is really important. The biggest private equity players are invariably pension plans. Canada has been particularly good at letting quality managers run their public pensions and they have outsize importance now.

xevb3k 9y ago

Most VCs raise from institutional funds (like banks) don’t they? VCs overall, perform quite poorly. But they’re useful for banks, they need somewhere to put money as a hedge against more traditional investments (and currency devaluations in general I guess). For them it’s just a different risk class, and therefore useful for diversifying their risk.

tptacek 9y ago
No, raising money from banks is called debt financing.
- CPLX 9y ago
  No it's not necessarily. Debt and equity are distinct asset classes. Banks invest portions of their balance sheet in both.

crdoconnor 9y ago

>There are massive funds for regular working class people like California's teachers that invest in these things. CALPERS "textbook example of the principal-agent problem" being all over VC is very bad for teachers: https://www.nakedcapitalism.com/2018/02/calpers-chief-investment-office-ted-eliopoulos-now-touting-venture-capital-even-though-cant-improve-returns.html https://www.nakedcapitalism.com/2018/02/calpers-chief-invest... "Companies staying private longer is bad for investors. Eliopoulos described the motivation as “more companies staying private.” But that doesn’t mean this behavior creates an investment opportunity. In fact, it prevents the monetization that investors need to realize returns. It might be different if these VC backed companies were growing up to throw off tons of free cash flow, but as far as we can tell, that is seldom if ever the case. As we wrote regarding Uber, a prime example of this behavior: Kalanick had maintained he wanted Uber to stay private as long as possible. That may be a fad with some unicorns, but it’s not the way for a shareholder to maximize his net worth, so it’s a preference that raises questions about the founders’ ulterior motives. Needless to say, that desire put him at odds with his investors." The reason late stage VC investments historically were attractive was that certain marquee investors would help validate the venture shortly before a planned IPO. The limited time between the investment and the IPO (and the investors’ reputation helping assure the IPO would be priced at a healthy premium to the last pre-IPO round) meant the odds of a healthy quick profit were high. With more companies staying private longer, these conditions aren’t operative.

rotskoff 9y ago

If you read my assertion carefully, I said "control" not "fund". I understand that large public institutions are heavily invested in both VC and PE. My point is simply that public markets are less attractive because wealth is controlled by a small number of hands. Are the teachers themselves deciding where to put their money? Suggesting that the real beneficiaries of venture capital and private equity are the "regular working people" sounds like a fairly obvious canard. Also, I did provide evidence---in fact the thrust of the article I cited is that diminishing numbers of IPOs are making wealth inequality more acute. Furthermore, it's presumptuous of you to assume that "wealth inequality" is my hammer of choice---I cited a piece from the Cato Institute! Here's a good source: http://wir2018.wid.world/part-3.html http://wir2018.wid.world/part-3.html

hueving 9y ago
>If you read my assertion carefully, I said "control" not "fund". So then your association with income inequality makes even less sense. If you're just referring to the centralization of the control of funds that happens with anyone who puts their money in a pool that has a manager. It has nothing to do with inequality because teachers make very little and so does their chosen pension leader and yet the latter has investment control over massive sums of money. >sounds like a fairly obvious canard. Yawn. An appeal to obviousness is tiresome to respond to. If you think you have a point to make, elucidate it. From where I sit, as long as pensions are involved in private equity, it benefits working people too. >in fact the thrust of the article I cited is that diminishing numbers of IPOs are making wealth inequality more acute So then it's not a symptom, it's a cause. To explain the difference: Lack of IPOs are not caused by income inequality but the lack of IPOs lead to more income equality.