7 ms·

Mark Suster: Raise Money Now So When The Party’s Over You’re Sitting Pretty

72 points by websirnik 15y ago

firefox 15y ago
At least this time we know when the bubble is coming.
- olivercameron 15y ago
  This time? A bubble was widely reported back in the late 90's too. It's not like it came out of nowhere.
  - mtoddh 15y ago
    No doubt - even Greenspan's "irrational exuberance" comment was back in 96, well before things peaked.
- ojbyrne 15y ago
  Just as we did in 2008? http://techcrunch.com/2008/10/10/sequoia-capitals-56-slide-powerpoint-presentation-of-doom/ http://techcrunch.com/2008/10/10/sequoia-capitals-56-slide-p...
blumentopf 15y ago
I think this bubble is primarily fueled by central banks making money available to primary dealers basically for free. This is unlike the New Economy bubble where the money came from peons who invested in stocks. As soon as the central banks (the Fed in particular) step on the brake, it's over. Thus, lots of truth in what this guy says.
- steveplace 15y ago
  Brought to you by zerohedge (c)
  - jswinghammer 15y ago
    This analysis is a fairly straightforward Austrian perspective. I would only qualify it to say that this would apply to publicly traded stocks. It's been observed throughout the 19th/20th/21 century versions of the business cycle that stocks tend to rise along with the boom only to seriously correct in the bust. The funding prior to this latest IPO spree is largely the result of capital not having a lot of good homes in the US economy these days. This is partially the result of low interest rates but also having a heavy regulatory burden on new industry which doesn't exist in IT.
    - MaysonL 15y ago
      Also of course, the fact that we're in the 4th or 5th year of the Little Depression, and national income is still down from its peak.
- hollerith 15y ago
  That cannot be the whole story because even if they get the money interest-free, investors are not going to invest in start-ups or venture funds unless they believe they can a better return there than they can in other investments.
  - jswinghammer 15y ago
    If you knew that if you lost more than 10% then it wouldn't matter to you because a bailout would be required you'd probably do a lot of things that don't seem rational from your current perspective.
  - TheSkeptic 15y ago
    When the central banks pump money into economies, it has a cascading effect that influences the behavior of investors directly and indirectly. Take a wealthy individual who is a limited partner in several VC funds. Like most wealthy individuals, he has investments across numerous asset classes. Many of those asset classes (equities, commodities, etc.) are heavily impacted by the Fed's policies. Needless to say, this individual is far more likely to feel comfortable pouring some money into a new VC fund he has been pitched when his other investments are doing well courtesy of Helicopter Ben's printing press. Without willing investors, VC firms can't raise new funds and certainly, had there not been a massive pumping of cheap money into the global economy from the central banks, many of the massive VC funds, more than a few of which are being used to buy up shares in companies like Facebook and Zynga, would not exist.
    - timr 15y ago
      "Take a wealthy individual who is a limited partner in several VC funds. Like most wealthy individuals, he has investments across numerous asset classes. Many of those asset classes (equities, commodities, etc.) are heavily impacted by the Fed's policies. Needless to say, this individual is far more likely to feel comfortable pouring some money into a new VC fund he has been pitched when his other investments are doing well courtesy of Helicopter Ben's printing press." That's just exactly wrong. "Helicopter Ben", as you oh-so-blithely put it, is injecting money into the economy (as was Greenspan -- a famous conservative -- who started the process). This tends to lower interest rates across all sorts of different asset classes. It's a big part of the reason that savings accounts are returning <<1%, and why people have been taking their chances on ever-riskier investments for the better part of two decades. They can't get returns in safer asset classes. People aren't investing in VC funds because they "feel comfortable" -- they're investing in VC funds because they can't match the inflation rate in anything better. Nobody invests in a high-risk asset if they can get great returns in a low-risk asset, no matter how "comfortable" they may feel.
- j_baker 15y ago
  Am I the only one who gets tired of hearing the exact same token Austrian economics complaints about the Fed lowering interest rates every time a story that remotely deals with the economy come up?
  - ojbyrne 15y ago
    No, you're not. But in this case, the parent has a point. Or at least half a point. And you get the other half. In most countries, governments largely pander to the middle and lower classes, because that's where the votes are. As a result, the election cycles usually involve large government outlays leading up to elections. The media also tends to pander to the middle/lower class. In the United States, governments largely pander to the top 1% of incomes because a. the billionaire class has figured out how to craft a message to the middle/lower classes where they think they're being screwed by the government, and the proper response is to reduce the size of government. b. the government keeps growing, but their focus is entirely on making the tax system more regressive. c. the billionaire class has more control over the government, and ensures that more dollars go to them, and less to the middle lower class. d. the media does the exact same thing as the government. e. because the government is actually screwing the middle class, we can go back to (a) and repeat the cycle. If you doubt what I'm saying, you really need to read the writings of the most important member of the Austrian school of economics... Grover Norquist: http://en.wikipedia.org/wiki/Starve_the_beast http://en.wikipedia.org/wiki/Starve_the_beast
    - MaysonL 15y ago
      If you doubt what I'm saying, you really need to read the writings of the most important member of the Austrian school of economics... Grover Norquist: while remembering that Mr. Norquist is one of the more zealous servants of the billionaire class.
    - berntb 15y ago
      Fascinating theory about why the US is different from the rest of the western world. How does the UK relate, it seems to have some of the same differences?
spenvo 15y ago
Except that as soon as this becomes conversational wisdom the market has reacted. The moment for a land grab pitch has passed. Let's be real and make some money.
sdfwefwe 15y ago
ONLINE STORE : ==== ( http://dv.gd/24993 http://dv.gd/24993 )===== Christan Audigier bikini $23 Ed Hardy Bikini $23 Smful short_t-shirt_woman $15 ed hardy short_tank_woman $16 Sandal $32 christian louboutin $80 Sunglass $15 COACH_Necklace $27 handbag $33 AF tank woman $17 puma slipper woman $30 ====( http://dv.gd/24993 http://dv.gd/24993 )===== ~ ¤ ╭⌒╮ ╭⌒╮ ~ ¤ ╭⌒╮ ╭⌒╮ ╭⌒╭⌒╮╭⌒╮～╭⌒╮ ,））））,''）~~ ,''~） ╱◥█◣ ╱◥█◣ ｜田｜田｜｜田｜田｜ ╬╬╬╬╬╬╬╬╬╬╬╬╬╬
jvandenbroeck 15y ago
Anyone an idea how long it will take before things are back to normal - if there is a bubble? Months? Years?
- noelchurchill 15y ago
  Well I suspect this bubble (if it is indeed a bubble) is somehow related to the recent stimulus efforts, so I suppose it depends what the Fed does after ending QE2 at the end of this month, if they eventually begin a new round of QE (in one form or another), and how long they maintain exceptionally low interest rates.
- netcan 15y ago
  March 13 2012
rjurney 15y ago
Kinda makes me want to get a job, and raise money with a really strong team of bubble pop refugees once this bubble is over. Who is it that said the best companies tend to get founded after the bubble, and grow a lot/monetize during them? Kinda makes me wanna do that. But not really.
jamesgagan 15y ago
The ones whowill be sitting pretty will be then ones who don't need market money.
becomevocal 15y ago
I agree. Raise money. OK. Lets all do it - everyone in! Mark is a smart guy, and obviously right on the mark. But please lets focus on businesses with a real business. Those will continue through the ups and downs.
maxklein 15y ago
The money is not free. This guy has an interest in you raising money, because it means that he owns a part of your company.

72 points by websirnik 15y ago

firefox 15y ago

At least this time we know when the bubble is coming.

olivercameron 15y ago
This time? A bubble was widely reported back in the late 90's too. It's not like it came out of nowhere.
- mtoddh 15y ago
  No doubt - even Greenspan's "irrational exuberance" comment was back in 96, well before things peaked.
ojbyrne 15y ago
Just as we did in 2008? http://techcrunch.com/2008/10/10/sequoia-capitals-56-slide-powerpoint-presentation-of-doom/ http://techcrunch.com/2008/10/10/sequoia-capitals-56-slide-p...

blumentopf 15y ago

I think this bubble is primarily fueled by central banks making money available to primary dealers basically for free. This is unlike the New Economy bubble where the money came from peons who invested in stocks. As soon as the central banks (the Fed in particular) step on the brake, it's over. Thus, lots of truth in what this guy says.

steveplace 15y ago
Brought to you by zerohedge (c)
- jswinghammer 15y ago
  This analysis is a fairly straightforward Austrian perspective. I would only qualify it to say that this would apply to publicly traded stocks. It's been observed throughout the 19th/20th/21 century versions of the business cycle that stocks tend to rise along with the boom only to seriously correct in the bust. The funding prior to this latest IPO spree is largely the result of capital not having a lot of good homes in the US economy these days. This is partially the result of low interest rates but also having a heavy regulatory burden on new industry which doesn't exist in IT.
  - MaysonL 15y ago
    Also of course, the fact that we're in the 4th or 5th year of the Little Depression, and national income is still down from its peak.
hollerith 15y ago
That cannot be the whole story because even if they get the money interest-free, investors are not going to invest in start-ups or venture funds unless they believe they can a better return there than they can in other investments.
- jswinghammer 15y ago
  If you knew that if you lost more than 10% then it wouldn't matter to you because a bailout would be required you'd probably do a lot of things that don't seem rational from your current perspective.
- TheSkeptic 15y ago
  When the central banks pump money into economies, it has a cascading effect that influences the behavior of investors directly and indirectly. Take a wealthy individual who is a limited partner in several VC funds. Like most wealthy individuals, he has investments across numerous asset classes. Many of those asset classes (equities, commodities, etc.) are heavily impacted by the Fed's policies. Needless to say, this individual is far more likely to feel comfortable pouring some money into a new VC fund he has been pitched when his other investments are doing well courtesy of Helicopter Ben's printing press. Without willing investors, VC firms can't raise new funds and certainly, had there not been a massive pumping of cheap money into the global economy from the central banks, many of the massive VC funds, more than a few of which are being used to buy up shares in companies like Facebook and Zynga, would not exist.
  - timr 15y ago
    "Take a wealthy individual who is a limited partner in several VC funds. Like most wealthy individuals, he has investments across numerous asset classes. Many of those asset classes (equities, commodities, etc.) are heavily impacted by the Fed's policies. Needless to say, this individual is far more likely to feel comfortable pouring some money into a new VC fund he has been pitched when his other investments are doing well courtesy of Helicopter Ben's printing press." That's just exactly wrong. "Helicopter Ben", as you oh-so-blithely put it, is injecting money into the economy (as was Greenspan -- a famous conservative -- who started the process). This tends to lower interest rates across all sorts of different asset classes. It's a big part of the reason that savings accounts are returning <<1%, and why people have been taking their chances on ever-riskier investments for the better part of two decades. They can't get returns in safer asset classes. People aren't investing in VC funds because they "feel comfortable" -- they're investing in VC funds because they can't match the inflation rate in anything better. Nobody invests in a high-risk asset if they can get great returns in a low-risk asset, no matter how "comfortable" they may feel.
j_baker 15y ago
Am I the only one who gets tired of hearing the exact same token Austrian economics complaints about the Fed lowering interest rates every time a story that remotely deals with the economy come up?
- ojbyrne 15y ago
  No, you're not. But in this case, the parent has a point. Or at least half a point. And you get the other half. In most countries, governments largely pander to the middle and lower classes, because that's where the votes are. As a result, the election cycles usually involve large government outlays leading up to elections. The media also tends to pander to the middle/lower class. In the United States, governments largely pander to the top 1% of incomes because a. the billionaire class has figured out how to craft a message to the middle/lower classes where they think they're being screwed by the government, and the proper response is to reduce the size of government. b. the government keeps growing, but their focus is entirely on making the tax system more regressive. c. the billionaire class has more control over the government, and ensures that more dollars go to them, and less to the middle lower class. d. the media does the exact same thing as the government. e. because the government is actually screwing the middle class, we can go back to (a) and repeat the cycle. If you doubt what I'm saying, you really need to read the writings of the most important member of the Austrian school of economics... Grover Norquist: http://en.wikipedia.org/wiki/Starve_the_beast http://en.wikipedia.org/wiki/Starve_the_beast
  - MaysonL 15y ago
    If you doubt what I'm saying, you really need to read the writings of the most important member of the Austrian school of economics... Grover Norquist: while remembering that Mr. Norquist is one of the more zealous servants of the billionaire class.
  - berntb 15y ago
    Fascinating theory about why the US is different from the rest of the western world. How does the UK relate, it seems to have some of the same differences?

spenvo 15y ago

Except that as soon as this becomes conversational wisdom the market has reacted. The moment for a land grab pitch has passed. Let's be real and make some money.

sdfwefwe 15y ago

ONLINE STORE : ==== ( http://dv.gd/24993 http://dv.gd/24993 )===== Christan Audigier bikini $23 Ed Hardy Bikini $23 Smful short_t-shirt_woman $15 ed hardy short_tank_woman $16 Sandal $32 christian louboutin $80 Sunglass $15 COACH_Necklace $27 handbag $33 AF tank woman $17 puma slipper woman $30 ====( http://dv.gd/24993 http://dv.gd/24993 )===== ~ ¤ ╭⌒╮ ╭⌒╮ ~ ¤ ╭⌒╮ ╭⌒╮ ╭⌒╭⌒╮╭⌒╮～╭⌒╮ ,））））,''）~~ ,''~） ╱◥█◣ ╱◥█◣ ｜田｜田｜｜田｜田｜ ╬╬╬╬╬╬╬╬╬╬╬╬╬╬

jvandenbroeck 15y ago

Anyone an idea how long it will take before things are back to normal - if there is a bubble? Months? Years?

noelchurchill 15y ago
Well I suspect this bubble (if it is indeed a bubble) is somehow related to the recent stimulus efforts, so I suppose it depends what the Fed does after ending QE2 at the end of this month, if they eventually begin a new round of QE (in one form or another), and how long they maintain exceptionally low interest rates.
netcan 15y ago
March 13 2012

rjurney 15y ago

Kinda makes me want to get a job, and raise money with a really strong team of bubble pop refugees once this bubble is over. Who is it that said the best companies tend to get founded after the bubble, and grow a lot/monetize during them? Kinda makes me wanna do that. But not really.

jamesgagan 15y ago

The ones whowill be sitting pretty will be then ones who don't need market money.

becomevocal 15y ago

I agree. Raise money. OK. Lets all do it - everyone in! Mark is a smart guy, and obviously right on the mark. But please lets focus on businesses with a real business. Those will continue through the ups and downs.

maxklein 15y ago

The money is not free. This guy has an interest in you raising money, because it means that he owns a part of your company.