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Unicorns are setting up their own venture capital funds

119 points by monsieurpng 8y ago

tehlike 8y ago
I didnt think much into this until the start up of a friend(yc backed, if i am not mistaken) failed. They did have their own venture fund to boost up the drone companies, but eventually they shut down. Good thing to look out for.
AndrewKemendo 8y ago
From an operations perspective, this is for Business Intelligence and creating a funnel for acquisitions. Venture is one of the best ways to spot trends in your own market(s), and lead run any future competition with an acquisition, new product or product changes. This is one of the major things that distinguishes major 21st century companies today from major companies in the past. If you know all of the up and coming competitors, or an entire new market that could threaten you, you can't be disrupted.
- amasad 8y ago
  Also it makes sense if you're a platform, or you're an infrastructure company. You're motivated to help startups building on your platform succeed, or help prove an entirely new category you're building infrastructure for. See Stripe and Coinbase doing that now.
- beagle3 8y ago
  Microsoft knew all about Google Yahoo knew everything about Google Google knew everything about Facebook Intel knew everything about ARM Yet disruption ensued. “Can’t be disrupted” is foolish.
  - AndrewKemendo 8y ago
    This theory basically assumes that firms cannot get smarter over time. It assumes corporations will never get better at evaluating the market and their place in it, or have better information than previous generations. That's a dangerous assumption, and doesn't seem to jibe with what we see in practice.
    - mattnewport 8y ago
      Here's something we see in practice: "- In 1965, the average tenure of companies on the S&P 500 was 33 years. By 1990, it was 20 years. It's forecast to shrink to 14 years by 2026. - About 50 percent of the S&P 500 will be replaced over the next 10 years, if Innosight's forecasted churn rate holds. " https://www.inc.com/ilan-mochari/innosight-sp-500-new-companies.html https://www.inc.com/ilan-mochari/innosight-sp-500-new-compan... What are you seeing in practice that makes you think the truth is the opposite of what this data suggests?
      - AndrewKemendo 8y ago
        Pretty simple, Consolidation. Companies that have information advantage will continue to push into new markets and absorb or kill incumbents. These are complimentary phenomenon actually.
        mattnewport 8y ago
        So what is your claim here? That most companies haven't learned these lessons but those that have will assimilate or destroy the ones that don't? What would that look like in the statistics? Are there particular companies that you think are doing this successfully? The post you originally replied to mentioned Google and Facebook neither of which look like companies that have learned this lesson well enough to beat the trend. They both look to me like they have passed their peaks in many areas: - Innovation - Developer, public and political good will - Creating (rather than buying at great expense) successful new products - Self awareness
        AndrewKemendo 8y ago
        That most companies haven't learned these lessons but those that have will assimilate or destroy the ones that don't? Precisely What would that look like in the statistics? Something like this: https://www.investopedia.com/news/5-companies-amazon-killing/ https://www.investopedia.com/news/5-companies-amazon-killing... Are there particular companies that you think are doing this successfully? FAANG are the examples here. Look at the top 10 most used apps[1]. 5/10 are Google owned 3/10 are Facebook owned 1 is owned by Apple Amazon in clearly leading here as it has 49% of the ecommerce market share. Microsoft has the vast majority of the IT ecosystem. Facebook the company is doing well in this area. Google is also doing well here. Creating (rather than buying at great expense) successful new products I'm not sure why "buying at great expense" is relevant here. At the end of the day it comes down to longevity. The longest lasting companies are ones which have bought themselves into relevancy. That's the whole point. They have the market capacity to buy out or crush their competition. Facebook used Instagram to crush Snapchat in pretty much every dimension because Snap wouldn't sell to them. All your other metrics are kind of random and I'm not sure if there is anything that says those things lead to longevity. The few companies who were good at this in the past (Standard Oil, Bell, Railroads) eventually got broken up by the government. [1] https://www.businessinsider.com/most-used-smartphone-apps-2017-8 https://www.businessinsider.com/most-used-smartphone-apps-20...
  - hobofan 8y ago
    Facebook knew everything about Snapchat, and they are currently crushing them. Microsoft at their core also wasn't disrupted by Google. Google at their core also wasn't disrupted by Facebook. They're all tech giants in the same (broad) industry, but they have widely varying products. Competitive BI certainly has its merits if you are trying to stay at the top of your field.
    - deleted 8y ago
      [deleted]
    - beagle3 8y ago
      Off the top of my head, Facebook is, indeed, the only giant I can think of that has not yet been disrupted; snap is indeed being crushed. And, wrt the article, it’s not VC that gave Facebook the BI they needed to know it is happening, but rather Onavo - a BI/Spying startup masquerading as a vpn/compression suite, which Facebook purchased and which gave them insight into what their mobile users do on the internet other then facebook It’s not illegal, but it should have been.
      - hobofan 8y ago
        > Facebook is, indeed, the only giant I can think of that has not yet been disrupted It's also still the youngest one of them, but yes, for a company in the social networking space they've showed a lot of staying power (they could've already fallen to what could've become out of independent WhatsApp & Instagram). Facebook (and Google) only exist as they do today because an acquisition by Yahoo didn't happen, and I think they've internalized that.
    - Xixi 8y ago
      Microsoft was definitely disrupted by Google: by Android. Everyone used to have a Windows PC on their desk, now everyone has an Android smartphone in their pocket. Discounting the affluent minority of Mac and iOS users of course... Windows used to be at the very heart of Microsoft strategy. They seem to have successfully managed to pivot away from it, but I still call that being disrupted.
  - Aloha 8y ago
    Google (still) doesn't really compete with Microsoft - they're in related but different verticals, Google and Microsoft have different core businesses - while yes, they compete on the periphery, they're not in head to head competition, Microsofts successful business model soldiers on - no disruption really seen. Facebook and Google don't really compete either - again, related, but different verticals, Googles existing business model wasnt really disrupted by Facebook appearing on the scene. The majority of mobile processors prior to arm, wasn't Intel (it was 68k actually), again, no real disruption to the Intel Business Model. In almost every case you've presented, you act as if a major player was displaced from a market within which they were the incumbent leader - but in every case but yahoo - it was a new line of business opening up, due to changes in the market place - where a major player in a related marketplace failed to achieve dominance - in the case of Intel, it was quite by choice - Intel saw early on that it couldn't make the margins needed to sustain itself in the mobile processor world - and while there keeps being talk about ARM coming to the non-mobile marketplace, there has been little to no actual incursion there. The exception here is yahoo - Yahoo was pushed out of its core markets by the rise of google, where they competed head to head.
    - beagle3 8y ago
      g-suite ate a huge chunk of Exchange's lunch, and a non-trivial part of the office lunch. ChromeOS ate a nontrivial part of Microsoft's OS business. Android completely obliterated any chance of a market MS had for phones. Chrome (and Firefox, which was effectively funded by Google for a long time) dethroned IE(and edge), almost to the point of irrelevance. It did not disrupt Microsoft's business model - but it ate huge chunks of it. Where Google didn't venture (e.g. database & server software), Microsoft is still extracting monopoly rent. Where it did (mobile OS), no one wanted Microsoft's offering, regardless of getting free money with it. Facebook and Google totally, completely, compete with each other. If you have on-line advertising spend, you decice on the facebook/google split. They are in exactly the same vertical - extremely directed and trackable on line advertising. Don't confuse "users" with "customers". Intel's business model was expensive high margin CPUs to all. They still do for servers. It was most definitely disrupted in the consumer space because phones exist - many people for which it would have been unthinkable a few years ago to have no PC/Laptop today, only have a phone, or have a very loe end laptop (which Intel makes very little on). > it was a new line of business opening up, due to changes in the market place - where a major player in a related marketplace failed to achieve dominance You have just given the usual definition of disruption. I agree existing markets were not overtaken. Mobile phones disrupted the land line business, even though that one is still alive. Linux disrupted the proprietary OS bbusines, even though that one is still alive. Amazon disrupted commerce. Facebook killed myspace, and yahoo participated in its own killing. And there's definitely disruption all over.
- deleted 8y ago
  [deleted]
- sonnyblarney 8y ago
  Theoretically what you say makes sense, but I think in practice, it doesn't work as nicely. Corporate M&A can do many of those things already. They have cash. They don't need 'a fund' to do that ... and yet most corporate M&A is a disaster. I wouldn't believe it until I saw it at a large company and then it all clicked and it actually makes sense. M&A & VC teams are considerably more removed from the strategic impetus of companies than you might imagine - these are human organizations with a lot of individual self interest. M&A teams like making deals. They are opportunistic I find more than strategic ... which can be ok, but they find something cool and want to make a big thing out of it - but the product people in the company may not want them on board. So company A acquires company B. Now what? Aside from new branding and T-shirts ... it takes a lot of effort to integrate these things. A new product that fits well into a product line, that does not need to be integrated technically, this might work. Sometimes companies get bought because the CEO saw the website or met the CEO and 'liked him' and the product kind of makes sense. The head of M&A wants to please the CEO and goes gangbusters to make it work. Legal, IP and financial due diligence are all the least important kinds of due diligence! Product and cultural due diligence are what matters, and they are weirdly not on the checklist - or not as intensely as they should be. I think instead of VC, these companies should be focused in rigorous, objective oriented, well-managed M&A activity. I don't even know who a good example would be - it used to be Cisco, I'm not sure anymore.
  - JumpCrisscross 8y ago
    > They don't need 'a fund' to do that Having dealt with both, there is a difference. Corporate M&A is corporate finance. Their teams come from investment banking backgrounds and are not equipped to evaluate early-stage investments. They therefore don’t get pitched them. Corporate VCs, on the other hand, exist to evaluate young companies and write small checks. The market know that, and therefore shows them early-stage deal flow. (Whether this be founders pitching directly, competitors mentioning them, or investors or their LPs or lawyers getting chatty.) This flow provides different investment and intelligence opportunities from the corporate finance flow. Practical example: if you’re pitching corporate M&A, it tends to start with an NDA and a data room full of financial models. If you’re pitching a corporate VC, a one-pager and high-level deal terms can kick directly into negotiations.
- andy_ppp 8y ago
  In my opinion this is why Microsoft bought github - lots of private repositories of now successful companies to mine when they were startups. Imagine being able to match private repos on Github with successful companies and make early purchases...
  - mycall 8y ago
    This is brilliant idea.
    - andy_ppp 8y ago
      Buy MSFT...
- burtonator 8y ago
  The amount of intel VCs know about the industry is really shocking. I'm super jealous!
etaioinshrdlu 8y ago
A lot of blockchain tech startups raise money and then turn around and invest in other startups. I think we're gonna look back at this in 5 years and collectively say, what were we thinking?
- arcanus 8y ago
  > we're gonna look back at this in 5 years and collectively say, what were we thinking? We did that after the housing bubble in 2008 (low down payments, flexible credit ratings, etc.) The big question is: could this also be a systemic risk to the economy? No one liked bailing out the banks, but it was necessary to save the economy. It is not clear tech or crypto are similarly critical.
  - toomuchtodo 8y ago
    Tech? Probably not. But there is a lot of novice (polite term) money in crypto now.
  - hobofan 8y ago
    I think it's already pretty clear that crypto doesn't need bailouts. The total cryptocurrency market size is at 1/4th of what it was at the beginning of the year, and there haven't been any significant results because of that. I would wager that the remaining 1/4th could be wiped out and it's still pretty much the same. Crypto projects were always very removed from the real world, both in valuation and usage (so if crypto vanishes it doesn't impact other companies). The biggest result of the crypto market correcting will probably be software engineer salaries becoming a bit lower again (outside of SF).
- asaph 8y ago
  Protocol Labs (best known for developing FileCoin & IPFS) launched a $5M crypto grant program.[0] [0]https://www.coindesk.com/blockchain-startup-protocol-labs-announces-grant-program https://www.coindesk.com/blockchain-startup-protocol-labs-an...
  - hobofan 8y ago
skywhopper 8y ago
No better evidence you’re in a bubble market if the billions flowing into self-driving cars and blockchain didn’t convince you. If investors are willing for their startups to use their capital in this way then there really is just way too much money floating around.
- thoughtexplorer 8y ago
  Blockchain sure, but why do you think self-driving is a bubble?
  - wpietri 8y ago
    Exactly my question. I have yet to see real use cases for blockchains beyond speculation and some light crime. And I think true self-driving cars (SAE Level 5 in specific) are 10-30 years out. But I think there's enough value to be had in lower, more achieveable levels that I expect some of the companies investing in those technologies now will be long-term financial winners.
    - golergka 8y ago
      Light crime, as in buying drugs, is one hell of a market. I don't have solid data, but it seems that 90-95% of all drug-related transactions go through bitcoin nowdays, at least on the consumer level.
      - ImADemocRat 8y ago
        You are so wrong that it is hilarious. Billy Joe buying heroin most likely has never owned any cryptocurrency. What part of your ass did you even pull this from?
      - detaro 8y ago
        I'd assume a large part of drug consumers still buys from their dealer in person, and why would you use Bitcoin then?
asaph 8y ago
What happens to the unicorn's equity stake in a unicorn-backed company if the unicorn itself goes out of business? Does that equity get re-distributed to the unicorn's investors?
- sjtgraham 8y ago
  Seems like an asset that would be liquidated to pay failed co's creditors, preferred stockholders per liq prefs, and common if anything is left.
  - atlasunshrugged 8y ago
    I think sometimes they get spun into their own legal entity, I'm thinking about Yahoo's and Naspers. In Naspers case their investment in Tencent is worth so much that actually Tencent's value is what drives most of Naspers stock price https://en.wikipedia.org/wiki/Naspers https://en.wikipedia.org/wiki/Naspers
gigatexal 8y ago
So Silicon Valley’s version of the CDO or better yet and the even worse — synthetic CDO
- JumpCrisscross 8y ago
  > So Silicon Valley’s version of the CDO Not really. If by “CDO” you mean “multiple assets in another asset,” then every company is a CDO. If by CDO you mean “tranching,” then pref stacks create (or for that matter, any company that issues debt is) a CDO. CDOs are differentiated by the kind of debt they buy and their tendency for having a tiny senior tranche and leveraged buyers of their riskiest tranches. That doesn’t apply here. (The latter might apply, since the loss-making unicorns buying start-ups’ equity need to raise new money to stay alive, but that’s just classic leveraged buying.)
milesf 8y ago
"When beggars and shoeshine boys, barbers and beauticians can tell you how to get rich it is time to remind yourself that there is no more dangerous illusion than the belief that one can get something for nothing." - Bernard Baruch
eriktrautman 8y ago
This makes sense when your business strategy requires that you create a vibrant business ecosystem and the current support for these businesses is broken or inadequate. Focus and domain expertise become a competitive advantage and you can reap value from both the fund and the main business by creating value in the ecosystem.
motohagiography 8y ago
So they've got cash and no ideas? If I were an investor I would be livid. How is this different from blowing your funding round at a blackjack table?
gammateam 8y ago
As long as the money keeps flowing.
goldfeld 8y ago
And people still say dolphins are the second most intelligent species on Earth.
gaius 8y ago
If you are a VC and one of your investments is doing this then next time why wouldn’t your investors cut out the middleman (i.e. you) and go straight to them?
ajcodez 8y ago
Big tech companies will do anything to avoid paying out more dividends.

119 points by monsieurpng 8y ago

I didnt think much into this until the start up of a friend(yc backed, if i am not mistaken) failed. They did have their own venture fund to boost up the drone companies, but eventually they shut down. Good thing to look out for.

AndrewKemendo 8y ago

From an operations perspective, this is for Business Intelligence and creating a funnel for acquisitions. Venture is one of the best ways to spot trends in your own market(s), and lead run any future competition with an acquisition, new product or product changes. This is one of the major things that distinguishes major 21st century companies today from major companies in the past. If you know all of the up and coming competitors, or an entire new market that could threaten you, you can't be disrupted.

amasad 8y ago
Also it makes sense if you're a platform, or you're an infrastructure company. You're motivated to help startups building on your platform succeed, or help prove an entirely new category you're building infrastructure for. See Stripe and Coinbase doing that now.
beagle3 8y ago
Microsoft knew all about Google Yahoo knew everything about Google Google knew everything about Facebook Intel knew everything about ARM Yet disruption ensued. “Can’t be disrupted” is foolish.
- AndrewKemendo 8y ago
  This theory basically assumes that firms cannot get smarter over time. It assumes corporations will never get better at evaluating the market and their place in it, or have better information than previous generations. That's a dangerous assumption, and doesn't seem to jibe with what we see in practice.
  - mattnewport 8y ago
    Here's something we see in practice: "- In 1965, the average tenure of companies on the S&P 500 was 33 years. By 1990, it was 20 years. It's forecast to shrink to 14 years by 2026. - About 50 percent of the S&P 500 will be replaced over the next 10 years, if Innosight's forecasted churn rate holds. " https://www.inc.com/ilan-mochari/innosight-sp-500-new-companies.html https://www.inc.com/ilan-mochari/innosight-sp-500-new-compan... What are you seeing in practice that makes you think the truth is the opposite of what this data suggests?
    - AndrewKemendo 8y ago
      Pretty simple, Consolidation. Companies that have information advantage will continue to push into new markets and absorb or kill incumbents. These are complimentary phenomenon actually.
      - mattnewport 8y ago
        So what is your claim here? That most companies haven't learned these lessons but those that have will assimilate or destroy the ones that don't? What would that look like in the statistics? Are there particular companies that you think are doing this successfully? The post you originally replied to mentioned Google and Facebook neither of which look like companies that have learned this lesson well enough to beat the trend. They both look to me like they have passed their peaks in many areas: - Innovation - Developer, public and political good will - Creating (rather than buying at great expense) successful new products - Self awareness
        AndrewKemendo 8y ago
        That most companies haven't learned these lessons but those that have will assimilate or destroy the ones that don't? Precisely What would that look like in the statistics? Something like this: https://www.investopedia.com/news/5-companies-amazon-killing/ https://www.investopedia.com/news/5-companies-amazon-killing... Are there particular companies that you think are doing this successfully? FAANG are the examples here. Look at the top 10 most used apps[1]. 5/10 are Google owned 3/10 are Facebook owned 1 is owned by Apple Amazon in clearly leading here as it has 49% of the ecommerce market share. Microsoft has the vast majority of the IT ecosystem. Facebook the company is doing well in this area. Google is also doing well here. Creating (rather than buying at great expense) successful new products I'm not sure why "buying at great expense" is relevant here. At the end of the day it comes down to longevity. The longest lasting companies are ones which have bought themselves into relevancy. That's the whole point. They have the market capacity to buy out or crush their competition. Facebook used Instagram to crush Snapchat in pretty much every dimension because Snap wouldn't sell to them. All your other metrics are kind of random and I'm not sure if there is anything that says those things lead to longevity. The few companies who were good at this in the past (Standard Oil, Bell, Railroads) eventually got broken up by the government. [1] https://www.businessinsider.com/most-used-smartphone-apps-2017-8 https://www.businessinsider.com/most-used-smartphone-apps-20...
- hobofan 8y ago
  Facebook knew everything about Snapchat, and they are currently crushing them. Microsoft at their core also wasn't disrupted by Google. Google at their core also wasn't disrupted by Facebook. They're all tech giants in the same (broad) industry, but they have widely varying products. Competitive BI certainly has its merits if you are trying to stay at the top of your field.
  - deleted 8y ago
    [deleted]
  - beagle3 8y ago
    Off the top of my head, Facebook is, indeed, the only giant I can think of that has not yet been disrupted; snap is indeed being crushed. And, wrt the article, it’s not VC that gave Facebook the BI they needed to know it is happening, but rather Onavo - a BI/Spying startup masquerading as a vpn/compression suite, which Facebook purchased and which gave them insight into what their mobile users do on the internet other then facebook It’s not illegal, but it should have been.
    - hobofan 8y ago
      > Facebook is, indeed, the only giant I can think of that has not yet been disrupted It's also still the youngest one of them, but yes, for a company in the social networking space they've showed a lot of staying power (they could've already fallen to what could've become out of independent WhatsApp & Instagram). Facebook (and Google) only exist as they do today because an acquisition by Yahoo didn't happen, and I think they've internalized that.
  - Xixi 8y ago
    Microsoft was definitely disrupted by Google: by Android. Everyone used to have a Windows PC on their desk, now everyone has an Android smartphone in their pocket. Discounting the affluent minority of Mac and iOS users of course... Windows used to be at the very heart of Microsoft strategy. They seem to have successfully managed to pivot away from it, but I still call that being disrupted.
- Aloha 8y ago
  Google (still) doesn't really compete with Microsoft - they're in related but different verticals, Google and Microsoft have different core businesses - while yes, they compete on the periphery, they're not in head to head competition, Microsofts successful business model soldiers on - no disruption really seen. Facebook and Google don't really compete either - again, related, but different verticals, Googles existing business model wasnt really disrupted by Facebook appearing on the scene. The majority of mobile processors prior to arm, wasn't Intel (it was 68k actually), again, no real disruption to the Intel Business Model. In almost every case you've presented, you act as if a major player was displaced from a market within which they were the incumbent leader - but in every case but yahoo - it was a new line of business opening up, due to changes in the market place - where a major player in a related marketplace failed to achieve dominance - in the case of Intel, it was quite by choice - Intel saw early on that it couldn't make the margins needed to sustain itself in the mobile processor world - and while there keeps being talk about ARM coming to the non-mobile marketplace, there has been little to no actual incursion there. The exception here is yahoo - Yahoo was pushed out of its core markets by the rise of google, where they competed head to head.
  - beagle3 8y ago
    g-suite ate a huge chunk of Exchange's lunch, and a non-trivial part of the office lunch. ChromeOS ate a nontrivial part of Microsoft's OS business. Android completely obliterated any chance of a market MS had for phones. Chrome (and Firefox, which was effectively funded by Google for a long time) dethroned IE(and edge), almost to the point of irrelevance. It did not disrupt Microsoft's business model - but it ate huge chunks of it. Where Google didn't venture (e.g. database & server software), Microsoft is still extracting monopoly rent. Where it did (mobile OS), no one wanted Microsoft's offering, regardless of getting free money with it. Facebook and Google totally, completely, compete with each other. If you have on-line advertising spend, you decice on the facebook/google split. They are in exactly the same vertical - extremely directed and trackable on line advertising. Don't confuse "users" with "customers". Intel's business model was expensive high margin CPUs to all. They still do for servers. It was most definitely disrupted in the consumer space because phones exist - many people for which it would have been unthinkable a few years ago to have no PC/Laptop today, only have a phone, or have a very loe end laptop (which Intel makes very little on). > it was a new line of business opening up, due to changes in the market place - where a major player in a related marketplace failed to achieve dominance You have just given the usual definition of disruption. I agree existing markets were not overtaken. Mobile phones disrupted the land line business, even though that one is still alive. Linux disrupted the proprietary OS bbusines, even though that one is still alive. Amazon disrupted commerce. Facebook killed myspace, and yahoo participated in its own killing. And there's definitely disruption all over.
deleted 8y ago
[deleted]
sonnyblarney 8y ago
Theoretically what you say makes sense, but I think in practice, it doesn't work as nicely. Corporate M&A can do many of those things already. They have cash. They don't need 'a fund' to do that ... and yet most corporate M&A is a disaster. I wouldn't believe it until I saw it at a large company and then it all clicked and it actually makes sense. M&A & VC teams are considerably more removed from the strategic impetus of companies than you might imagine - these are human organizations with a lot of individual self interest. M&A teams like making deals. They are opportunistic I find more than strategic ... which can be ok, but they find something cool and want to make a big thing out of it - but the product people in the company may not want them on board. So company A acquires company B. Now what? Aside from new branding and T-shirts ... it takes a lot of effort to integrate these things. A new product that fits well into a product line, that does not need to be integrated technically, this might work. Sometimes companies get bought because the CEO saw the website or met the CEO and 'liked him' and the product kind of makes sense. The head of M&A wants to please the CEO and goes gangbusters to make it work. Legal, IP and financial due diligence are all the least important kinds of due diligence! Product and cultural due diligence are what matters, and they are weirdly not on the checklist - or not as intensely as they should be. I think instead of VC, these companies should be focused in rigorous, objective oriented, well-managed M&A activity. I don't even know who a good example would be - it used to be Cisco, I'm not sure anymore.
- JumpCrisscross 8y ago
  > They don't need 'a fund' to do that Having dealt with both, there is a difference. Corporate M&A is corporate finance. Their teams come from investment banking backgrounds and are not equipped to evaluate early-stage investments. They therefore don’t get pitched them. Corporate VCs, on the other hand, exist to evaluate young companies and write small checks. The market know that, and therefore shows them early-stage deal flow. (Whether this be founders pitching directly, competitors mentioning them, or investors or their LPs or lawyers getting chatty.) This flow provides different investment and intelligence opportunities from the corporate finance flow. Practical example: if you’re pitching corporate M&A, it tends to start with an NDA and a data room full of financial models. If you’re pitching a corporate VC, a one-pager and high-level deal terms can kick directly into negotiations.
andy_ppp 8y ago
In my opinion this is why Microsoft bought github - lots of private repositories of now successful companies to mine when they were startups. Imagine being able to match private repos on Github with successful companies and make early purchases...
- mycall 8y ago
  This is brilliant idea.
  - andy_ppp 8y ago
    Buy MSFT...
burtonator 8y ago
The amount of intel VCs know about the industry is really shocking. I'm super jealous!

etaioinshrdlu 8y ago

A lot of blockchain tech startups raise money and then turn around and invest in other startups. I think we're gonna look back at this in 5 years and collectively say, what were we thinking?

arcanus 8y ago
> we're gonna look back at this in 5 years and collectively say, what were we thinking? We did that after the housing bubble in 2008 (low down payments, flexible credit ratings, etc.) The big question is: could this also be a systemic risk to the economy? No one liked bailing out the banks, but it was necessary to save the economy. It is not clear tech or crypto are similarly critical.
- toomuchtodo 8y ago
  Tech? Probably not. But there is a lot of novice (polite term) money in crypto now.
- hobofan 8y ago
  I think it's already pretty clear that crypto doesn't need bailouts. The total cryptocurrency market size is at 1/4th of what it was at the beginning of the year, and there haven't been any significant results because of that. I would wager that the remaining 1/4th could be wiped out and it's still pretty much the same. Crypto projects were always very removed from the real world, both in valuation and usage (so if crypto vanishes it doesn't impact other companies). The biggest result of the crypto market correcting will probably be software engineer salaries becoming a bit lower again (outside of SF).
asaph 8y ago
Protocol Labs (best known for developing FileCoin & IPFS) launched a $5M crypto grant program.[0] [0]https://www.coindesk.com/blockchain-startup-protocol-labs-announces-grant-program https://www.coindesk.com/blockchain-startup-protocol-labs-an...
- hobofan 8y ago

skywhopper 8y ago

No better evidence you’re in a bubble market if the billions flowing into self-driving cars and blockchain didn’t convince you. If investors are willing for their startups to use their capital in this way then there really is just way too much money floating around.

thoughtexplorer 8y ago
Blockchain sure, but why do you think self-driving is a bubble?
- wpietri 8y ago
  Exactly my question. I have yet to see real use cases for blockchains beyond speculation and some light crime. And I think true self-driving cars (SAE Level 5 in specific) are 10-30 years out. But I think there's enough value to be had in lower, more achieveable levels that I expect some of the companies investing in those technologies now will be long-term financial winners.
  - golergka 8y ago
    Light crime, as in buying drugs, is one hell of a market. I don't have solid data, but it seems that 90-95% of all drug-related transactions go through bitcoin nowdays, at least on the consumer level.
    - ImADemocRat 8y ago
      You are so wrong that it is hilarious. Billy Joe buying heroin most likely has never owned any cryptocurrency. What part of your ass did you even pull this from?
    - detaro 8y ago
      I'd assume a large part of drug consumers still buys from their dealer in person, and why would you use Bitcoin then?

asaph 8y ago

What happens to the unicorn's equity stake in a unicorn-backed company if the unicorn itself goes out of business? Does that equity get re-distributed to the unicorn's investors?

sjtgraham 8y ago
Seems like an asset that would be liquidated to pay failed co's creditors, preferred stockholders per liq prefs, and common if anything is left.
- atlasunshrugged 8y ago
  I think sometimes they get spun into their own legal entity, I'm thinking about Yahoo's and Naspers. In Naspers case their investment in Tencent is worth so much that actually Tencent's value is what drives most of Naspers stock price https://en.wikipedia.org/wiki/Naspers https://en.wikipedia.org/wiki/Naspers

gigatexal 8y ago

So Silicon Valley’s version of the CDO or better yet and the even worse — synthetic CDO

JumpCrisscross 8y ago
> So Silicon Valley’s version of the CDO Not really. If by “CDO” you mean “multiple assets in another asset,” then every company is a CDO. If by CDO you mean “tranching,” then pref stacks create (or for that matter, any company that issues debt is) a CDO. CDOs are differentiated by the kind of debt they buy and their tendency for having a tiny senior tranche and leveraged buyers of their riskiest tranches. That doesn’t apply here. (The latter might apply, since the loss-making unicorns buying start-ups’ equity need to raise new money to stay alive, but that’s just classic leveraged buying.)

milesf 8y ago

"When beggars and shoeshine boys, barbers and beauticians can tell you how to get rich it is time to remind yourself that there is no more dangerous illusion than the belief that one can get something for nothing." - Bernard Baruch

eriktrautman 8y ago

This makes sense when your business strategy requires that you create a vibrant business ecosystem and the current support for these businesses is broken or inadequate. Focus and domain expertise become a competitive advantage and you can reap value from both the fund and the main business by creating value in the ecosystem.

motohagiography 8y ago

So they've got cash and no ideas? If I were an investor I would be livid. How is this different from blowing your funding round at a blackjack table?

gammateam 8y ago

As long as the money keeps flowing.

goldfeld 8y ago

And people still say dolphins are the second most intelligent species on Earth.

gaius 8y ago

If you are a VC and one of your investments is doing this then next time why wouldn’t your investors cut out the middleman (i.e. you) and go straight to them?

ajcodez 8y ago

Big tech companies will do anything to avoid paying out more dividends.