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> As they retire that money is leaving the market I don't see how this piece follows. Why would career retirement stop rich people from investing (as LPs) in V

by rory 4y ago

> As they retire that money is leaving the market I don't see how this piece follows. Why would career retirement stop rich people from investing (as LPs) in VC funds?

lazide 4y ago
Think of rich people as the thin layer on top of a larger tide. They won’t stop, but the level they are at will change, and it won’t be higher than it was. Many of them will be changing strategies too.
- rory 4y ago
  That's still not a logical or empirical explanation, it's just an assertion. What evidence do you see that points to a net decrease in early-stage tech investment at retirement?
  - lazide 4y ago
    It’s an observation, and one I don’t care to spend a lot of time defending. Take that for what you will. My note was that the macro-economics of going net withdrawal from net contribution with what is currently the largest, wealthiest economic segment in the United States is not likely to increase the size of money seeking to invest, which would, I expect, correspondingly decrease the pool looking for that particular outlet. And on further reflection, especially since VC, being a fundamentally high risk, high variance of return business, is probably less attractive to those trying to avoid losing money in a bear market, with other, now higher interest earning investments available (due to less easy money). Hell, if you’re looking for a gamble, even Junk bonds are probably going to be a good play soon. I’ve only been through 4 (maybe 5?) downturns/market crises so far though personally, so add however much salt you want.
    - rory 4y ago
      This response conflates the current cyclical trend with the secular assertion I questioned, so I'm going to skip over the cyclical commentary. > Going net withdrawal from net contribution with what is currently the largest, wealthiest economic segment in the United States is not likely to increase the size of money seeking to invest From anecdotal observation, VC and PE investors are at a point in their financial life where their earned income is much smaller than their investment income, so I'm not sure this distinction is as relevant for that class. Perhaps a thinning of multiples in the wider market from the 9-5ers withdrawing their 401k investments will pull money out of riskier investments. But it's unclear that your average VC LP has ever acted rationally (since median returns more or less match the public stock market, but with a decade lock-up). I think the more interesting inflection point will be in another decade or so when the baby boom generation approaches peak die-off. How much of that money will go to wannabe tycoons a la MBS? How much will go to non-profit endowment funds? IMO there's a reasonable argument we'll get right back to another dumb-money peak like the one we just exited.
      - lazide 4y ago
        My point is that they are (probably) not operating completely independently of the overall market, which is influenced by these macro-economic events. Including what options start to become more interesting for them over others due to changes in the level of competition in the space and available options. They aren’t constrained in the same way as someone with a 401k, but they are part of the same market and influenced by it, even if in a contrarian way.

by rory 4y ago

> As they retire that money is leaving the market I don't see how this piece follows. Why would career retirement stop rich people from investing (as LPs) in VC funds?

lazide 4y ago

Think of rich people as the thin layer on top of a larger tide. They won’t stop, but the level they are at will change, and it won’t be higher than it was. Many of them will be changing strategies too.

rory 4y ago
That's still not a logical or empirical explanation, it's just an assertion. What evidence do you see that points to a net decrease in early-stage tech investment at retirement?
- lazide 4y ago
  It’s an observation, and one I don’t care to spend a lot of time defending. Take that for what you will. My note was that the macro-economics of going net withdrawal from net contribution with what is currently the largest, wealthiest economic segment in the United States is not likely to increase the size of money seeking to invest, which would, I expect, correspondingly decrease the pool looking for that particular outlet. And on further reflection, especially since VC, being a fundamentally high risk, high variance of return business, is probably less attractive to those trying to avoid losing money in a bear market, with other, now higher interest earning investments available (due to less easy money). Hell, if you’re looking for a gamble, even Junk bonds are probably going to be a good play soon. I’ve only been through 4 (maybe 5?) downturns/market crises so far though personally, so add however much salt you want.
  - rory 4y ago
    This response conflates the current cyclical trend with the secular assertion I questioned, so I'm going to skip over the cyclical commentary. > Going net withdrawal from net contribution with what is currently the largest, wealthiest economic segment in the United States is not likely to increase the size of money seeking to invest From anecdotal observation, VC and PE investors are at a point in their financial life where their earned income is much smaller than their investment income, so I'm not sure this distinction is as relevant for that class. Perhaps a thinning of multiples in the wider market from the 9-5ers withdrawing their 401k investments will pull money out of riskier investments. But it's unclear that your average VC LP has ever acted rationally (since median returns more or less match the public stock market, but with a decade lock-up). I think the more interesting inflection point will be in another decade or so when the baby boom generation approaches peak die-off. How much of that money will go to wannabe tycoons a la MBS? How much will go to non-profit endowment funds? IMO there's a reasonable argument we'll get right back to another dumb-money peak like the one we just exited.
    - lazide 4y ago
      My point is that they are (probably) not operating completely independently of the overall market, which is influenced by these macro-economic events. Including what options start to become more interesting for them over others due to changes in the level of competition in the space and available options. They aren’t constrained in the same way as someone with a 401k, but they are part of the same market and influenced by it, even if in a contrarian way.