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A slightly more cynical version: 1) Startup founder gets an idea and develops a legitimate product. 2) The company gains some customers, but the growth is tou

A slightly more cynical version: 1) Startup founder gets an idea and develops a legitimate product. 2) The company gains some customers, but the growth is tough, since competing products often sell below cost. 3) The founder gives up and goes to VCs. 4) VCs take away the controlling stake in exchange for an endless stream of cheap money, so the company can start selling dollars for 90 cents just like the competition. 5) The founder's vision is no longer a critical asset, the cheap VC capital is. The founder gets pushed out and replaced by the VCs' protégé. 6) If the stars align, the (still unprofitable) company exits. Numerous retail investors buy shares in something they've heard about but don't fully understand. VCs get 100x returns. The founder gets a letter of appreciation. The whole cycle is all about getting a bigger share of the endless stream of cheap money from the fed. VCs throw in a lump sum to buy visibility. Enough visibility guarantees that more people with extra freshly minted cash on hand will choose your shares over other speculative investment. Except all that recently printed cash is now competing for wheat and baby formula (hence inflation), so the fed has no choice but to backtrack and raise interest rates. And if this holds for sufficient time, the whole VC game may suddenly stop paying off.

bruce511 4y ago
I agree with the (cynical) view of founders, VCs, and equity. Founders who sell their business to VCs get what they deserve (an education.) Your digression into the link between stimulus cash, baby formula, and inflation seems somewhat less accurate. Firstly, baby formula (and wheat) are not luxuries. The amount of formula you need is 100% based on your baby, which neither knows no cares how much cash you have. My guess is its the first thing a mother buys, not the last. So excess cash, or lack thereof, has no impact on demand. If demand is stable, that means inflation is caused by constrained supply. Which is exactly what has happened year - close a factory producing significant % of supply, and supply drops. The same with wheat. No one is buying extra bread with their extra bread. But global wheat supply has been affected by the Russian invasion of Ukraine. Yes, extra cash can contribute to inflation, and no doubt that has had some effect, but between the war, and the pandemic the primary inflation seems to be caused by supply issues. And oil. The war drives up the oil price, and that knocks on to everything.
WheelsAtLarge 4y ago
"The whole cycle is all about getting a bigger share of the endless stream of cheap money from the fed. VCs throw in a lump sum to buy visibility. Enough visibility guarantees that more people with extra freshly minted cash on hand will choose your shares over other speculative investment." I would mostly say yes but keep in mind that money does make the world go around. Meaning that greed sparks ideas, products and services that keeps us from going back to a society that survives having or providing nothing to spare beyond the basic necessities. It's not pretty but it's what's kind off working now.

bruce511 4y ago

I agree with the (cynical) view of founders, VCs, and equity. Founders who sell their business to VCs get what they deserve (an education.) Your digression into the link between stimulus cash, baby formula, and inflation seems somewhat less accurate. Firstly, baby formula (and wheat) are not luxuries. The amount of formula you need is 100% based on your baby, which neither knows no cares how much cash you have. My guess is its the first thing a mother buys, not the last. So excess cash, or lack thereof, has no impact on demand. If demand is stable, that means inflation is caused by constrained supply. Which is exactly what has happened year - close a factory producing significant % of supply, and supply drops. The same with wheat. No one is buying extra bread with their extra bread. But global wheat supply has been affected by the Russian invasion of Ukraine. Yes, extra cash can contribute to inflation, and no doubt that has had some effect, but between the war, and the pandemic the primary inflation seems to be caused by supply issues. And oil. The war drives up the oil price, and that knocks on to everything.

WheelsAtLarge 4y ago

"The whole cycle is all about getting a bigger share of the endless stream of cheap money from the fed. VCs throw in a lump sum to buy visibility. Enough visibility guarantees that more people with extra freshly minted cash on hand will choose your shares over other speculative investment." I would mostly say yes but keep in mind that money does make the world go around. Meaning that greed sparks ideas, products and services that keeps us from going back to a society that survives having or providing nothing to spare beyond the basic necessities. It's not pretty but it's what's kind off working now.