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>So why is that kind of deal not available to more founders? Why isn’t there a market for selling a minority stake of your profitable tech company to people who

by jasode 7y ago

>So why is that kind of deal not available to more founders? Why isn’t there a market for selling a minority stake of your profitable tech company to people who’d be happy to be paid back in distributions and dividends, rather than capital gains? It seems like a glaring gap in the market. [...] There’s got to be a way to make this work. It's not available because no smart investor has found a way to make it work ... yet. I'm not sure we can extrapolate Jeff Bezo's particular motives for investing in Basecamp into a widespread market solution. Back in 2006 when DHH said Bezos made the investment, Bezos was already worth ~4 billion.[0] In other words, being a multi-billionaire allows the luxury of making some investments "for fun" instead of worrying about being fired as a manager of a fund. In my 2 previous posts[1][2], I attempt to explain the logic of why VCs / hedge funds / private equity ... do what they do and why they care about "growth". So, one way to make it work is that you (the royal "you" as in the daring contrarian maverick investor) prove to the world that you can take some money and make it earn 8%+ returns by doing what DHH suggests. Nobody prominent has done that so nobody copies them and therefore, the "market solution" looks non-existent. Does everyone want a new alternative asset class that simply buys minority non-controlling stakes in smaller companies and just takes a slice of the dividends? Let's call it the SmallCoDividendsFund. Ok, show the world how you reliably return 8%+ every year from DHH's strategy and limited partners will be beating down your down door to give you more money! You don't have to write essays evangelizing the alternative investment thesis; instead, just invest real money in SmallCoDividendsFund, get awesome returns, and all the media outlets will provide publicity and encourage copycat investors. [0] https://en.wikipedia.org/wiki/Jeff_Bezos#Wealth https://en.wikipedia.org/wiki/Jeff_Bezos#Wealth [1] https://news.ycombinator.com/item?id=15728480 https://news.ycombinator.com/item?id=15728480 [2] https://news.ycombinator.com/item?id=21365966 https://news.ycombinator.com/item?id=21365966

toomuchtodo 7y ago
> Does everyone want a new alternative asset class that simply buys minority non-controlling stakes in smaller companies and just takes a slice of the dividends? Let's call it the SmallCoDividendsFund. Ok, show the world how you reliably return 8%+ every year from DHH's strategy and limited partners will be beating down your down door to give you more money! You don't have to write essays evangelizing the alternative investment thesis; instead, just invest real money in SmallCoDividendsFund, get awesome returns, and all the media outlets will provide publicity and encourage copycat investors. I own startup equity, index funds, real estate, even a stake in someone's poker winnings. I model SaaS company valuations for fun. I would consider myself a sophisticated investor. If you gave me access to a fund that acted sort of like Berkshire Hathaway, where someone went and picked out (with a careful eye) growth tech companies (that have also been derisked and had reached a point where they were profitable and self sufficient) that might not ever go public but would throw off cash, I would be interested in buying into such a fund, even if the shares were somewhat illiquid. You might even call it something catchy, like a "Continuity" fund. This is similar to how investors get exposure to SpaceX through a Fidelity fund that isn't publicly traded. Private markets are the new public markets, apologies to Matt Levine, without all of the hassle of being public (looking at you Tesla! 420 secured). A problem that might be encountered is that more money doesn't necessarily generate more growth (depending on the market space constraints), so LPs beating down your door is a hinderance. You want long term investors who are happy to collect their cut while you're busy executing, not obsessing short term over share value.

by jasode 7y ago

toomuchtodo 7y ago

> Does everyone want a new alternative asset class that simply buys minority non-controlling stakes in smaller companies and just takes a slice of the dividends? Let's call it the SmallCoDividendsFund. Ok, show the world how you reliably return 8%+ every year from DHH's strategy and limited partners will be beating down your down door to give you more money! You don't have to write essays evangelizing the alternative investment thesis; instead, just invest real money in SmallCoDividendsFund, get awesome returns, and all the media outlets will provide publicity and encourage copycat investors. I own startup equity, index funds, real estate, even a stake in someone's poker winnings. I model SaaS company valuations for fun. I would consider myself a sophisticated investor. If you gave me access to a fund that acted sort of like Berkshire Hathaway, where someone went and picked out (with a careful eye) growth tech companies (that have also been derisked and had reached a point where they were profitable and self sufficient) that might not ever go public but would throw off cash, I would be interested in buying into such a fund, even if the shares were somewhat illiquid. You might even call it something catchy, like a "Continuity" fund. This is similar to how investors get exposure to SpaceX through a Fidelity fund that isn't publicly traded. Private markets are the new public markets, apologies to Matt Levine, without all of the hassle of being public (looking at you Tesla! 420 secured). A problem that might be encountered is that more money doesn't necessarily generate more growth (depending on the market space constraints), so LPs beating down your door is a hinderance. You want long term investors who are happy to collect their cut while you're busy executing, not obsessing short term over share value.