3 ms·

Venture capitalists are in the “buy low, sell high” business. Their motivation is not “is this thing I’m buying going to be useful to someone?” (although that’

by pavlov 5y ago

Venture capitalists are in the “buy low, sell high” business. Their motivation is not “is this thing I’m buying going to be useful to someone?” (although that’s a nice side effect that gives them something to talk about at parties.) Rather it’s: “Can I offload this thing I bought with exclusive access to someone else in a reasonable time horizon?” Tokens and other crypto investments have been attractive to VCs because there was a steadily rising level of interest and a regular cycle of hype booms that make for great exit opportunities. (See the timing of Coinbase IPO.) If there’s a good chance of exit in 3-5 years, it makes absolutely no difference if the project never ships anything.

dweekly 5y ago
I think you may have confused venture capital with hedge funds. The overwhelming majority of VC funds are set up with a 10y time horizon and option to extend to 15y. They make their investments in the first 2-3y of the fund and then hope to earn their carry by "returning the fund". For a typical mid-sized $200m fund this means turning one of their $5-10m Series A checks into a liquidity event far above $200m (valuing the company in turn at over a billion to return this amount to the firm), in other words counting on a >>20-40x return for the lucky breakout in their portfolio and taking the others mostly as a (relative) loss. While some secondary activity exists, it is rare for a regular fund to manage to achieve these kinds of multiples in a secondary sale versus an IPO or acquisition. And an acquisition that exits after 3-5 years is extremely unlikely to have this kind of multiple -- and consequently those are not deals in which the partners will earn carry. (And going from Series A to IPO in 3-5 years is extremely unusual - median time to IPO is 9-11 years, though SPACs may have at least temporarily changed some of the calculus on this.) So no, I don't know of any VCs who target companies that hope to be bought in 3-5 years and don't care if the company ships anything.
rvz 5y ago
> Tokens and other crypto investments have been attractive to VCs because there was a steadily rising level of interest and a regular cycle of hype booms that make for great exit opportunities. (See the timing of Coinbase IPO.) It was not really an IPO, its was actually a direct listing and it was planned when BTC price action was breaking another all time high. Upon listing day, it is the same cycle of the VCs selling at the top with the retail investors bag holding $375 - $425 which I continuously warned against buying into the hype. [0] It has never recovered over those prices and is sitting at around $225 - $228. When everyone and their goldfishes and the media are hyping everything at the same time during the build up to an angel or VC funded project they will unload a large amount of their investment onto the retail trader at expensive prices. You lose nothing by ignoring the hype. This is how the VCs always keep winning. [0] https://news.ycombinator.com/item?id=26826826 https://news.ycombinator.com/item?id=26826826

by pavlov 5y ago

dweekly 5y ago

I think you may have confused venture capital with hedge funds. The overwhelming majority of VC funds are set up with a 10y time horizon and option to extend to 15y. They make their investments in the first 2-3y of the fund and then hope to earn their carry by "returning the fund". For a typical mid-sized $200m fund this means turning one of their $5-10m Series A checks into a liquidity event far above $200m (valuing the company in turn at over a billion to return this amount to the firm), in other words counting on a >>20-40x return for the lucky breakout in their portfolio and taking the others mostly as a (relative) loss. While some secondary activity exists, it is rare for a regular fund to manage to achieve these kinds of multiples in a secondary sale versus an IPO or acquisition. And an acquisition that exits after 3-5 years is extremely unlikely to have this kind of multiple -- and consequently those are not deals in which the partners will earn carry. (And going from Series A to IPO in 3-5 years is extremely unusual - median time to IPO is 9-11 years, though SPACs may have at least temporarily changed some of the calculus on this.) So no, I don't know of any VCs who target companies that hope to be bought in 3-5 years and don't care if the company ships anything.

rvz 5y ago

> Tokens and other crypto investments have been attractive to VCs because there was a steadily rising level of interest and a regular cycle of hype booms that make for great exit opportunities. (See the timing of Coinbase IPO.) It was not really an IPO, its was actually a direct listing and it was planned when BTC price action was breaking another all time high. Upon listing day, it is the same cycle of the VCs selling at the top with the retail investors bag holding $375 - $425 which I continuously warned against buying into the hype. [0] It has never recovered over those prices and is sitting at around $225 - $228. When everyone and their goldfishes and the media are hyping everything at the same time during the build up to an angel or VC funded project they will unload a large amount of their investment onto the retail trader at expensive prices. You lose nothing by ignoring the hype. This is how the VCs always keep winning. [0] https://news.ycombinator.com/item?id=26826826 https://news.ycombinator.com/item?id=26826826