5 ms·

I don't see any signs that cheap money is over. What I'm seeing is the end of absurd valuations and easy money.

by parkingrift 4y ago

onlyrealcuzzo 4y ago
Absurd valuations = cheap money in the context of startup fundraising.
- parkingrift 4y ago
  Maybe so. I don't conflate cheap with easy.
  - lazide 4y ago
    Cheap money means lenders or investors will be more likely to compete for what they perceive to be a good deal. More of a ‘sellers market’ from that perspective. If the buyers are hesitant to invest/lend because they’re worried they’ll catch a falling knife, it makes it much harder to close at all and valuations tend to err on the risk adverse rather than the ‘please pick us!’ side.
  - ineedasername 4y ago
    My own distinction is: Cheap money == fewer strings attached & better $$ to equity ratio. [0] Easy money == ideas or MVP's with weaker plans or market fit get funding at all. [0] this has the side effect of raising valuation.
- jxf 4y ago
  The implication of the equality is backwards. Cheap money _drives_ absurd valuations.
  - danuker 4y ago
    Then again, a company flush with cash will spend more, making money go round and more available. So maybe absurd valuations also drive cheap money. All income is someone else's expense.
missedthecue 4y ago
Aren't high valuations the definition of cheap money? If you can only raise some money in exchange for a boatload of equity, money is expensive rather than cheap.
- 7speter 4y ago
  In economics, at least, cheap money means loans with a low interest rate. I guess high valuations come with being able to borrow money for cheap.
andsoitis 4y ago
> I don't see any signs that cheap money is over. interest rates are rising (i.e. cost of borrowing money) and at least on VC (i.e. provider of money) has also signaled publicly - https://avc.com/2022/05/how-this-ends-2/ https://avc.com/2022/05/how-this-ends-2/
foobiekr 4y ago
Er, cheap money and valuations are tied together. That said, what's really at issue is that funds will focus on their winners. So even if the money is still cheap and the valuations are still OK, the marginal and "come on, you can literally never be a profitable entity" companies are going to be sacrificed.

I don't see any signs that cheap money is over. What I'm seeing is the end of absurd valuations and easy money.

onlyrealcuzzo 4y ago

Absurd valuations = cheap money in the context of startup fundraising.

parkingrift 4y ago
Maybe so. I don't conflate cheap with easy.
- lazide 4y ago
  Cheap money means lenders or investors will be more likely to compete for what they perceive to be a good deal. More of a ‘sellers market’ from that perspective. If the buyers are hesitant to invest/lend because they’re worried they’ll catch a falling knife, it makes it much harder to close at all and valuations tend to err on the risk adverse rather than the ‘please pick us!’ side.
- ineedasername 4y ago
  My own distinction is: Cheap money == fewer strings attached & better $$ to equity ratio. [0] Easy money == ideas or MVP's with weaker plans or market fit get funding at all. [0] this has the side effect of raising valuation.
jxf 4y ago
The implication of the equality is backwards. Cheap money _drives_ absurd valuations.
- danuker 4y ago
  Then again, a company flush with cash will spend more, making money go round and more available. So maybe absurd valuations also drive cheap money. All income is someone else's expense.

missedthecue 4y ago

Aren't high valuations the definition of cheap money? If you can only raise some money in exchange for a boatload of equity, money is expensive rather than cheap.

7speter 4y ago
In economics, at least, cheap money means loans with a low interest rate. I guess high valuations come with being able to borrow money for cheap.

andsoitis 4y ago

> I don't see any signs that cheap money is over. interest rates are rising (i.e. cost of borrowing money) and at least on VC (i.e. provider of money) has also signaled publicly - https://avc.com/2022/05/how-this-ends-2/ https://avc.com/2022/05/how-this-ends-2/

foobiekr 4y ago

Er, cheap money and valuations are tied together. That said, what's really at issue is that funds will focus on their winners. So even if the money is still cheap and the valuations are still OK, the marginal and "come on, you can literally never be a profitable entity" companies are going to be sacrificed.