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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, sam

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.

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.