3 ms·

Yes its a huge value loss but isn't this part of the VC model - invest in some companies knowing most will probably whither away in one way or another but a few

by jarym 3y ago

Yes its a huge value loss but isn't this part of the VC model - invest in some companies knowing most will probably whither away in one way or another but a few will hit it out the park? The article mentions Benchmark and Insight have done ok in their other investments. Softbank though is a bit of an outlier - maybe it was a one-hit-wonder with Alibaba. They don't appear to have invested like other VCs at any rate.

lettergram 3y ago
VCs largely get out before these events. They are likely up tbh
polygamous_bat 3y ago
One new theory is that the new VC model, as postulated in Venture Predation [0] is to create the illusion of potential to success so that you can dump your shares on the market at a sky high price. After that, VCs don't care if the company loses $50B in value, they already had their exit. [0] https://news.ycombinator.com/item?id=36003096 https://news.ycombinator.com/item?id=36003096
- Mistletoe 3y ago
  I don’t even think that is new, it is the oldest play in the book. We see it in crypto and stock IPOs constantly. Sell early tiers of shares to insiders at very discounted rates, dump on the plebs when it is listed on exchanges at several multiples of the price you bought in at that think they are getting a good deal early. You bought shares at 0.25 and it launches at $10 and keeps going down to $5, $2 but you just don’t care because even at the lows you are 4x’ing your money. People say no value was lost with WeWork but that is very untrue. Hard working, misguided people and funds bought WeWork stock from the SPAC and let Adam Neumann turn lies and smokescreens into real cash. He’s no different than Elizabeth Holmes from Theranos except her lies involved something that can be proved was incorrect since it was medical testing. His real estate ideas were equally wrong and impossible. His net worth is now 2.2 billion.
  - bombcar 3y ago
    The bogleheads ideal of investing in massive index funds helps somewhat avoiding these, but it just means you have to be a big enough scam to get on the index.
- reaperducer 3y ago
  I was once associated with a company that did this exact thing. The scam ran for about two years. Company is long gone. Founders and select investors for rich. Everyone else was left wondering how to feed their families.
- dougSF70 3y ago
  This is exactly what some VC firms do. They are interested in generating returns for their investors, if the company trades to zero after an IPO they will have already generated a significant return.
philip1209 3y ago
Benchmark was reported to have done secondary sales back in the Softbank days that made their Wework investment successful: https://news.crunchbase.com/startups/report-adam-neumann-benchmark-unloaded-676-5m-in-wework-shares-before-failed-ipo/ https://news.crunchbase.com/startups/report-adam-neumann-ben...

by jarym 3y ago

lettergram 3y ago

VCs largely get out before these events. They are likely up tbh

polygamous_bat 3y ago

One new theory is that the new VC model, as postulated in Venture Predation [0] is to create the illusion of potential to success so that you can dump your shares on the market at a sky high price. After that, VCs don't care if the company loses $50B in value, they already had their exit. [0] https://news.ycombinator.com/item?id=36003096 https://news.ycombinator.com/item?id=36003096

Mistletoe 3y ago
I don’t even think that is new, it is the oldest play in the book. We see it in crypto and stock IPOs constantly. Sell early tiers of shares to insiders at very discounted rates, dump on the plebs when it is listed on exchanges at several multiples of the price you bought in at that think they are getting a good deal early. You bought shares at 0.25 and it launches at $10 and keeps going down to $5, $2 but you just don’t care because even at the lows you are 4x’ing your money. People say no value was lost with WeWork but that is very untrue. Hard working, misguided people and funds bought WeWork stock from the SPAC and let Adam Neumann turn lies and smokescreens into real cash. He’s no different than Elizabeth Holmes from Theranos except her lies involved something that can be proved was incorrect since it was medical testing. His real estate ideas were equally wrong and impossible. His net worth is now 2.2 billion.
- bombcar 3y ago
  The bogleheads ideal of investing in massive index funds helps somewhat avoiding these, but it just means you have to be a big enough scam to get on the index.
reaperducer 3y ago
I was once associated with a company that did this exact thing. The scam ran for about two years. Company is long gone. Founders and select investors for rich. Everyone else was left wondering how to feed their families.
dougSF70 3y ago
This is exactly what some VC firms do. They are interested in generating returns for their investors, if the company trades to zero after an IPO they will have already generated a significant return.

philip1209 3y ago

Benchmark was reported to have done secondary sales back in the Softbank days that made their Wework investment successful: https://news.crunchbase.com/startups/report-adam-neumann-benchmark-unloaded-676-5m-in-wework-shares-before-failed-ipo/ https://news.crunchbase.com/startups/report-adam-neumann-ben...