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>It was one of the most spectacular business failures of the last few decades, losing $4.5 billion in value. How quaint. In 2019, tech companies burn through

>It was one of the most spectacular business failures of the last few decades, losing $4.5 billion in value. How quaint. In 2019, tech companies burn through billions of dollars of capital every single year, and we call them business "successes".

throwaway66920 7y ago
While there’s lots to complain about this practice, those aren’t really the same thing. Tech firms are losing cash but generally gaining value towards an IPO. Whereas the investments were simply losing value.
- Supermancho 7y ago
  > It was one of the most spectacular business failures of the last few decades, losing $4.5 billion in value. > Tech firms are losing cash but generally gaining value towards an IPO. ...but they don't always. This makes the original statement sensationalist nonsense as it's happened multiple times (over the time period mentioned). Valuation is screwed up in both "types" of businesses, but the methodology is irrelevant to the claim when it's apples to apples for the market.
georgeecollins 7y ago
But the government hasn't yet needed to bail out a VC, a Unicorn or a stockholder. Each may lose money, but that happens all the time. In the case of LTCM the government needed to bail out LTCM positions. That is why it is different.
- roenxi 7y ago
  Although true, the money that the tech companies are burning through is probably related to the bail-out money that the trading firms are getting. The banks keep dealing with high levels of leverage. It keeps predictably blowing up in their faces. The government/Federal Reserve is responding by making it easier to borrow money and then VC/Unicorns etc borrow. The links aren't perfectly causal, but I bet that under normal conditions (if interest rates were allowed to rise into the 2-6% band in a sustained way and the government stopped handing out free money) then suddenly the unicorns would be subjected to market logic such as a need to make money to receive a high valuation.
- MR4D 7y ago
  That’s incorrect. I quote, “ Technically, the Fed didn't bail out LTCM. It used no federal funds. It merely brokered a better deal than the one Buffett offered.” From https://www.thebalance.com/long-term-capital-crisis-3306240 https://www.thebalance.com/long-term-capital-crisis-3306240

throwaway66920 7y ago

While there’s lots to complain about this practice, those aren’t really the same thing. Tech firms are losing cash but generally gaining value towards an IPO. Whereas the investments were simply losing value.

Supermancho 7y ago
> It was one of the most spectacular business failures of the last few decades, losing $4.5 billion in value. > Tech firms are losing cash but generally gaining value towards an IPO. ...but they don't always. This makes the original statement sensationalist nonsense as it's happened multiple times (over the time period mentioned). Valuation is screwed up in both "types" of businesses, but the methodology is irrelevant to the claim when it's apples to apples for the market.

georgeecollins 7y ago

But the government hasn't yet needed to bail out a VC, a Unicorn or a stockholder. Each may lose money, but that happens all the time. In the case of LTCM the government needed to bail out LTCM positions. That is why it is different.

roenxi 7y ago
Although true, the money that the tech companies are burning through is probably related to the bail-out money that the trading firms are getting. The banks keep dealing with high levels of leverage. It keeps predictably blowing up in their faces. The government/Federal Reserve is responding by making it easier to borrow money and then VC/Unicorns etc borrow. The links aren't perfectly causal, but I bet that under normal conditions (if interest rates were allowed to rise into the 2-6% band in a sustained way and the government stopped handing out free money) then suddenly the unicorns would be subjected to market logic such as a need to make money to receive a high valuation.
MR4D 7y ago
That’s incorrect. I quote, “ Technically, the Fed didn't bail out LTCM. It used no federal funds. It merely brokered a better deal than the one Buffett offered.” From https://www.thebalance.com/long-term-capital-crisis-3306240 https://www.thebalance.com/long-term-capital-crisis-3306240