3 ms·

The arbitrage is that the same amount of dollars to pay engineers goes further in the midwest than on the coasts which extends the runway of a company with the

The arbitrage is that the same amount of dollars to pay engineers goes further in the midwest than on the coasts which extends the runway of a company with the same amount of funding because of reduced burn rate. Drive Capital (ex-Sequoia) is a good example. You might be surprised how uncommon this idea still is today.

badfrog 7y ago
Arbitrage is about buying something that you can immediately sell somewhere else for a higher price with no risk. What you're describing just sounds like getting a good deal. If you could buy 10% of a company for $1mm in Chicago and sell that 10% for $1.5mm in SF the next day, that would be a form of arbitrage. From wikipedia: > the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a (imagined, hypothetical, thought experiment) transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs https://en.wikipedia.org/wiki/Arbitrage https://en.wikipedia.org/wiki/Arbitrage
- tedmiston 7y ago
  In the theoretical sense, yes. The usage in the here is much softer and less strict, not like in finance. I wouldn't get too caught up on the casual usage. The way I've seen the word used in startups is more akin to "Tim Ferriss style" geo-arbitrage. https://www.physicianonfire.com/geographicarbitrage/ https://www.physicianonfire.com/geographicarbitrage/
  - tw1010 7y ago
    In what sense is geo-arbitrage associated to Tim Ferriss for you? Genuinely curious. I've listened to a lot of his podcasts but can't recall that ever really coming up.
    - tedmiston 7y ago
      This isn't particular to me, but he's frequently cited for popularizing the term. You can see on Google Trends that it took off in 2007-2008 after the publication of 4HWW, and that there are virtually no results for it prior to the book's publication.

badfrog 7y ago

Arbitrage is about buying something that you can immediately sell somewhere else for a higher price with no risk. What you're describing just sounds like getting a good deal. If you could buy 10% of a company for $1mm in Chicago and sell that 10% for $1.5mm in SF the next day, that would be a form of arbitrage. From wikipedia: > the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a (imagined, hypothetical, thought experiment) transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs https://en.wikipedia.org/wiki/Arbitrage https://en.wikipedia.org/wiki/Arbitrage

tedmiston 7y ago
In the theoretical sense, yes. The usage in the here is much softer and less strict, not like in finance. I wouldn't get too caught up on the casual usage. The way I've seen the word used in startups is more akin to "Tim Ferriss style" geo-arbitrage. https://www.physicianonfire.com/geographicarbitrage/ https://www.physicianonfire.com/geographicarbitrage/
- tw1010 7y ago
  In what sense is geo-arbitrage associated to Tim Ferriss for you? Genuinely curious. I've listened to a lot of his podcasts but can't recall that ever really coming up.
  - tedmiston 7y ago
    This isn't particular to me, but he's frequently cited for popularizing the term. You can see on Google Trends that it took off in 2007-2008 after the publication of 4HWW, and that there are virtually no results for it prior to the book's publication.