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I thought the plan was Dumping https://en.wikipedia.org/wiki/Dumping_(pricing_policy) https://en.wikipedia.org/wiki/Dumping_(pricing_policy) Step 1) Use VC mon
by TAForObvReasons 7y ago
I thought the plan was Dumping https://en.wikipedia.org/wiki/Dumping_(pricing_policy) https://en.wikipedia.org/wiki/Dumping_(pricing_policy)
Step 1) Use VC money to subsidize the price so that the market price is below cost
Step 2) Continue to use VC money to subsidize while competitors, who don't have the same cash, lose customers and eventually contract or die off
Step 3) Once you are the only real player, use your dominant position to raise prices
- abandonliberty 7y agoIn many cases they may find the price cannot be raised enough to generate profitability, and the service can really only exist in a speculative VC-funded bubble.
- baddox 7y agoDoes the strategy even go that far? I thought it was more like 1) VCs invest money in companies hoping that some of them grow very fast 2) some of them do grow fast, so more VCs invest more money 3) the really really big companies IPO and the VCs make a lot of money All of this can happen way before your step 3.
- kohtatsu 7y agoBoth of you are right from my perspective. IPOs haven't had much to do with current profit.
- Reedx 7y agoHere's another version: 1) Invest in startups and show/push fast growth 2) Leverage FOMO to get more investors 3) Collect management fees Once in a while get lucky with a unicorn. Bonus.
- ganeshkrishnan 7y agoStep 3 is to IPO and sell the shares back to public. Most of these pump and dump startups just IPO and their shares are brought via funds and such. I bet income inequality gradually rising due to these VC funded startups
- rchaud 7y agoDon't forget Step 0: - borrow ungodly sums of money at near-zero rates for a decade, and splash it on anything that moves. Moral hazard? never heard of it!