3 ms·

Look, don't be so alarmist. This article is spot on. It's not saying the sky is falling. Venture funding isn't going to dry up. It's going to tighten up. In t

by bravura 15y ago

Look, don't be so alarmist. This article is spot on. It's not saying the sky is falling. Venture funding isn't going to dry up. It's going to tighten up. In three to six months. That's the thesis of this article. I believe it's plausible that the venture market will cool down soon. Here's why: A lot of companies have been getting funded now with very company-friendly terms and valuations. This is because the investment market is hot right now. An entrepreneur told me, in January, that this is one of the best financing seasons he's seen in a while, and that anyone looking to raise money should do it immediately. He predicted the market would stay hot until the summer, but was cautious about predicting after that. It seems inevitable that the market will cool down at some point. VC funding keeps lagging general economic trends by a quarter or two, the article notes. The economy is currently down. The author extrapolates that VC will be down soon too. Seems like a reasonable inference. This article predicts that in three to six months, that it will be more difficult to raise money. Not impossible, just more difficult. Companies with sound fundamentals (i.e. proven business model) will still get funded. They just won't have money being stuffed in their hands. Terms won't be as favorable to entrepreneurs.

chailatte 15y ago
The sky is falling. From the article: "The door may be slammed shut to all new deals." Translation: Frigid winter. Why? Because we're in a global economic depression. Because the government cannot print money anymore. Because anymore printing will most likely induce hyperinflation. (That's why there was no QE3 announced last month. That's why Germany/Finland do not want to expand EFSF from $400 billion to $2 trillion. That's why China is clamping down on lending, and will most likely earn a 0% growth next year) And so all the debts will come due. From the $700 trillion derivatives worldwide held by the banks to the tens of trillions of debt held by the government. Sure, there will be individual investors spreading money around willy nilly (think Dave McClure). But for most, it will be time to prepare for winter. A long 10-15 year winter.
- cynicalkane 15y ago
  Why? Because we're in a global economic depression. Because the government cannot print money anymore. Because anymore printing will most likely induce hyperinflation. This is common Internet Wisdom, but there's no reason to believe it's actually true. The TIPS spread--the spread between ordinary government bonds and inflation-protected bonds--is very low. Under 2%. The TIPS spread also tends to overestimate inflation, because the long-tail risk of inflation is higher than that of deflation. The Fed is dominated by inflation hawks with substantial political will to fight inflation and very little to implement monetary expansion. Very few economists seem to expect the risk of hyperinflation. This kind of inflationary alarmism is infectious. It's infected our politics, skewing the GOP primaries towards severe economic ignorance. Nominal GDP is still limp. Inflation is still low. Unemployment is still high. Borrowing is still tight. The recovery is stalling. Stop. Please.

by bravura 15y ago

chailatte 15y ago

The sky is falling. From the article: "The door may be slammed shut to all new deals." Translation: Frigid winter. Why? Because we're in a global economic depression. Because the government cannot print money anymore. Because anymore printing will most likely induce hyperinflation. (That's why there was no QE3 announced last month. That's why Germany/Finland do not want to expand EFSF from $400 billion to $2 trillion. That's why China is clamping down on lending, and will most likely earn a 0% growth next year) And so all the debts will come due. From the $700 trillion derivatives worldwide held by the banks to the tens of trillions of debt held by the government. Sure, there will be individual investors spreading money around willy nilly (think Dave McClure). But for most, it will be time to prepare for winter. A long 10-15 year winter.

cynicalkane 15y ago
Why? Because we're in a global economic depression. Because the government cannot print money anymore. Because anymore printing will most likely induce hyperinflation. This is common Internet Wisdom, but there's no reason to believe it's actually true. The TIPS spread--the spread between ordinary government bonds and inflation-protected bonds--is very low. Under 2%. The TIPS spread also tends to overestimate inflation, because the long-tail risk of inflation is higher than that of deflation. The Fed is dominated by inflation hawks with substantial political will to fight inflation and very little to implement monetary expansion. Very few economists seem to expect the risk of hyperinflation. This kind of inflationary alarmism is infectious. It's infected our politics, skewing the GOP primaries towards severe economic ignorance. Nominal GDP is still limp. Inflation is still low. Unemployment is still high. Borrowing is still tight. The recovery is stalling. Stop. Please.