3 ms·
Could you elaborate a bit on the cycle part. Why is it a cycle at all assuming money gets invested all the time instead of once-a-x-years?
by theflyinghorse 7y ago
Could you elaborate a bit on the cycle part. Why is it a cycle at all assuming money gets invested all the time instead of once-a-x-years?
- jimbob45 7y agoNot that dude but ~11 years ago was the recession so I'm guessing he's alluding to the fact that lots of investment money comes out of hibernation all at once when recessions begin to recede.
- pmart123 7y agoThe best place to learn about this is to check out the memos Howard Marks has written over the years.
- mbesto 7y agoWhen a VC raises a fund, they usually try to return the money in 7~10 years after they start deploying the capital to startups. In other words, they want to exit their position no later than 10 years and usually shoot for 5~7.
- mdorazio 7y agoSimplifying a lot, but... VC companies themselves raise money from investors to create a fund, which is then used to invest in startups. Generally, funds are raised with a specific timeline pitch for returns to the investors - often 7-10 years. In order to return money to investors, the investments in the fund have to actually pay money back to the VC firm - the best way to do this is via IPO (although acquisition is also an option). Due to overall market conditions, a glut of investment happened in the VC space 7-8 years ago (i.e. a bunch of funds were started), and those funds now need to get money back to the investors to prove a nice ROI, so there's a push to get the startups that were funded by the fund to exit one way or another.