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When / if the bubble bursts, it will be as bad or worse than the dotcom and subprime bubbles. Tech and vc is not an insulated think like maybe it once was, it's

When / if the bubble bursts, it will be as bad or worse than the dotcom and subprime bubbles. Tech and vc is not an insulated think like maybe it once was, it's the current equivalent of the 80s junk bonds, it's a ponzi scheme that could unravel hard. That will be really bad for a lot of people. I added the "if" because I'm not convinced it will play out that way because we're in some weird post-capitalist mode now where money is infinite. I think we're more likely to just slip further into sort of neo-feudilism where there is always VC money to reward the right kinds of people and behaviors and the actual business matters even less. I don't know if that's better than a big collapse, I just think that's what will happen

mupuff1234 5y ago
I'm not sure I see it. Yes, it will hurt a few thousands currently working in overvalued growth startups, but profitable companies will continue to chug along just fine as they have hoards of cash and very low debt. Basically a return to a state where a "Unicorn startup" is actually somewhat rare.
- version_five 5y ago
  My view is based on the amount of notional money that exists due to the high valuations. Once that disappears, it's going to trigger a much bigger collapse, same as the mortgages did. It's not about the employees that are directly involved (though they will be hurt too), it's the relationship with the whole financial system.
  - boringg 5y ago
    I disagree I can't see this taking down the whole financial system. Is VC way more intertwined in the whole financial community? Yes - however a lot of LP money can take a cut to their returns and still be fine. Endowments/sovereign funds/oligarchs not getting > 5-15% a year isn't a country wide economic crisis. Also for VC's/start ups to unwind can be much more controlled compared to say mortgage backed securities. Timelines vary and are opaque to the investment community. It would be an unwind compared to a collapse if it even went there
    - Kye 5y ago
      Possible scenario: tech crash->rent price crash in overheated markets->all the national and international firms that bought up all the houses to rent them out crash. It just depends on how much those firms depend on markets that depend on tech/finance money to cover their loan, tax, insurance, etc payments. All it takes is a few to try and dump their stock of houses and apartments to pay bills.
  - tomatocracy 5y ago
    Mortgages were a large part of the credit bubble prior to 2008, but very far from the only part. It also extended to consumer credit, leveraged loans, bank and insurer funding, more or less every credit market. And mortgages are and were a much larger part of the economy too than VC is now. This isn't to say VC hasn't experienced a bubble over the past few years or that there won't be a broader downturn, just that I'm pretty sure VC won't be something which causes contagion like that.
  - flyinglizard 5y ago
    Startups usually don’t leverage their valuations (unlike real estate etc) and don’t do significant debt raising, so other than a few banks margin calling high flying founders who took personal loans against equity, the notional hit shouldn’t have much ripple effects.
BeFlatXIII 5y ago
Full collapse ahead, let's go go go!

mupuff1234 5y ago

I'm not sure I see it. Yes, it will hurt a few thousands currently working in overvalued growth startups, but profitable companies will continue to chug along just fine as they have hoards of cash and very low debt. Basically a return to a state where a "Unicorn startup" is actually somewhat rare.

version_five 5y ago
My view is based on the amount of notional money that exists due to the high valuations. Once that disappears, it's going to trigger a much bigger collapse, same as the mortgages did. It's not about the employees that are directly involved (though they will be hurt too), it's the relationship with the whole financial system.
- boringg 5y ago
  I disagree I can't see this taking down the whole financial system. Is VC way more intertwined in the whole financial community? Yes - however a lot of LP money can take a cut to their returns and still be fine. Endowments/sovereign funds/oligarchs not getting > 5-15% a year isn't a country wide economic crisis. Also for VC's/start ups to unwind can be much more controlled compared to say mortgage backed securities. Timelines vary and are opaque to the investment community. It would be an unwind compared to a collapse if it even went there
  - Kye 5y ago
    Possible scenario: tech crash->rent price crash in overheated markets->all the national and international firms that bought up all the houses to rent them out crash. It just depends on how much those firms depend on markets that depend on tech/finance money to cover their loan, tax, insurance, etc payments. All it takes is a few to try and dump their stock of houses and apartments to pay bills.
- tomatocracy 5y ago
  Mortgages were a large part of the credit bubble prior to 2008, but very far from the only part. It also extended to consumer credit, leveraged loans, bank and insurer funding, more or less every credit market. And mortgages are and were a much larger part of the economy too than VC is now. This isn't to say VC hasn't experienced a bubble over the past few years or that there won't be a broader downturn, just that I'm pretty sure VC won't be something which causes contagion like that.
- flyinglizard 5y ago
  Startups usually don’t leverage their valuations (unlike real estate etc) and don’t do significant debt raising, so other than a few banks margin calling high flying founders who took personal loans against equity, the notional hit shouldn’t have much ripple effects.

BeFlatXIII 5y ago

Full collapse ahead, let's go go go!