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Vulture capital firms don’t like boutique companies to stay boutique after acquisition. Got to get them to IPO asap

by xyst 3y ago

TremendousJudge 3y ago
Isn't reddit on venture capital since pretty much the start?
- Melting_Harps 3y ago
  Yes, 2005 [0]. But the point remains, that regardless of it's thin veneer of being the funding source of disrupters what VC really seeks is to use the stock market chicanery that major banks who underwrite FB do in order to rig the game in the favour for an obscene profitable exit: hence why they were allowed to buy pre-market in the case of FB. Or my favorite from the pandemic: Doordash. wherein Softbank incurred so much loss after several years to consuldate market share in this stupid race to the bottom and had to cash in on the market being flooded with cheap money during COVID and getting that IPO to get maximum ROI from an otherwise terrible business model whose understanding of last mile logistics was incredibly poor to say the least, and had no problem exploiting its contractor model labour force or taking a large sum from it's restaurant owner partners. Seriously can we just admit VC is mainly just banksters trying to do what they always done in New York or in London in the Valley, and other tech cities? 0: https://www.crunchbase.com/funding_round/reddit-series-unknown--efe1e2d6 https://www.crunchbase.com/funding_round/reddit-series-unkno...
johannes1234321 3y ago
The question is: Does it have to be sexy to get this funding? Why can't it be more sexy to run a sustainable small business? - I think they could run reddit profitable with less staff, which focuses on the core functionality instead of trying to grow into new markets and segments. Sure, there is a risk that some new platform disrupts that segment they are serving, but even then there is enough of a longtail to prepare an alternative and hardly those bets on expanding reach works. Let's look at Twitter as a sample case: the features which were successful, were the ones where they followed what users were doing and supported that (adding @-mentions, adding retweets, adding quote retweets, some degree of threading support, etc. all came after users used those things) most things where they added stuff their PMs invented is mostly forgotten already, but building all that cost resources.
- kemayo 3y ago
  That's why the venture capital industry exists, though -- to get reasonably-quick returns on their investment, at a higher rate than just putting their money into an index fund. If you're not going to potentially give them back 10x their investment in one big lump sum, you're not worth it to them. It's also why VC deals are generally structured as stock purchases, rather than loans that expect repayment. They're genuinely not in it for slowly raking in small returns over the next 50 years. (And then, of course, they spread their investments out so that the one big success that gives them 1000x their money back pays for all the companies that flamed out chasing inadvisable growth.)
- ilyt 3y ago
  > Why can't it be more sexy to run a sustainable small business? - I think they could run reddit profitable with less staff, which focuses on the core functionality instead of trying to grow into new markets and segments. Investor returns, obviously. The whole funding model is throw money, make it big, monetize, sell out. I do think it would maybe be possible to make company like Reddit "just" be profitable and keep on chugging but that's not what the investors throwing millions at it want. The funding model is antithesis to "just a sustainable company in their niche"
  - johannes1234321 3y ago
    Yes, but how can we change society to make the small shop more sexy? I'm all for the founders having a good life and having fun, but they shouldn't have to try hyperscaling.
    - ilyt 3y ago
      What fucking society ? Society has nothing to do with that. Businesses like that exist just fine. Problems like that are entirely the creation of venture capital and stock market. The wider society have very little effect on that. And partially allows them to outcompete "healthily growing one" by allowing companies to run on negative income for years, even decades. Investor mentality is what spawns that. The ability for people not caring about the company or the niche it is in to force the direction or buy out the competition. And I don't think that can easily go away any time soon, and it is very double-edged sword as obviously some good had come from "someone with good idea getting money from investors to realize it"
LorenPechtel 3y ago
I don't think it's so much a matter of getting them to IPO than in getting the maximum price at the IPO. Effectively, a pump and dump scheme except it's not considered such by the SEC. The third party clients hurt ad revenue, kill them. Once the stock is out the door the problems that result aren't going to hurt them, just the suckers who fell for it.
roncesvalles 3y ago
Exactly. VCism is always done with the goal of getting more from the next sucker. The final sucker being the public.

Vulture capital firms don’t like boutique companies to stay boutique after acquisition. Got to get them to IPO asap

by xyst 3y ago

Vulture capital firms don’t like boutique companies to stay boutique after acquisition. Got to get them to IPO asap

TremendousJudge 3y ago

Isn't reddit on venture capital since pretty much the start?

Melting_Harps 3y ago
Yes, 2005 [0]. But the point remains, that regardless of it's thin veneer of being the funding source of disrupters what VC really seeks is to use the stock market chicanery that major banks who underwrite FB do in order to rig the game in the favour for an obscene profitable exit: hence why they were allowed to buy pre-market in the case of FB. Or my favorite from the pandemic: Doordash. wherein Softbank incurred so much loss after several years to consuldate market share in this stupid race to the bottom and had to cash in on the market being flooded with cheap money during COVID and getting that IPO to get maximum ROI from an otherwise terrible business model whose understanding of last mile logistics was incredibly poor to say the least, and had no problem exploiting its contractor model labour force or taking a large sum from it's restaurant owner partners. Seriously can we just admit VC is mainly just banksters trying to do what they always done in New York or in London in the Valley, and other tech cities? 0: https://www.crunchbase.com/funding_round/reddit-series-unknown--efe1e2d6 https://www.crunchbase.com/funding_round/reddit-series-unkno...

johannes1234321 3y ago

The question is: Does it have to be sexy to get this funding? Why can't it be more sexy to run a sustainable small business? - I think they could run reddit profitable with less staff, which focuses on the core functionality instead of trying to grow into new markets and segments. Sure, there is a risk that some new platform disrupts that segment they are serving, but even then there is enough of a longtail to prepare an alternative and hardly those bets on expanding reach works. Let's look at Twitter as a sample case: the features which were successful, were the ones where they followed what users were doing and supported that (adding @-mentions, adding retweets, adding quote retweets, some degree of threading support, etc. all came after users used those things) most things where they added stuff their PMs invented is mostly forgotten already, but building all that cost resources.

kemayo 3y ago
That's why the venture capital industry exists, though -- to get reasonably-quick returns on their investment, at a higher rate than just putting their money into an index fund. If you're not going to potentially give them back 10x their investment in one big lump sum, you're not worth it to them. It's also why VC deals are generally structured as stock purchases, rather than loans that expect repayment. They're genuinely not in it for slowly raking in small returns over the next 50 years. (And then, of course, they spread their investments out so that the one big success that gives them 1000x their money back pays for all the companies that flamed out chasing inadvisable growth.)
ilyt 3y ago
> Why can't it be more sexy to run a sustainable small business? - I think they could run reddit profitable with less staff, which focuses on the core functionality instead of trying to grow into new markets and segments. Investor returns, obviously. The whole funding model is throw money, make it big, monetize, sell out. I do think it would maybe be possible to make company like Reddit "just" be profitable and keep on chugging but that's not what the investors throwing millions at it want. The funding model is antithesis to "just a sustainable company in their niche"
- johannes1234321 3y ago
  Yes, but how can we change society to make the small shop more sexy? I'm all for the founders having a good life and having fun, but they shouldn't have to try hyperscaling.
  - ilyt 3y ago
    What fucking society ? Society has nothing to do with that. Businesses like that exist just fine. Problems like that are entirely the creation of venture capital and stock market. The wider society have very little effect on that. And partially allows them to outcompete "healthily growing one" by allowing companies to run on negative income for years, even decades. Investor mentality is what spawns that. The ability for people not caring about the company or the niche it is in to force the direction or buy out the competition. And I don't think that can easily go away any time soon, and it is very double-edged sword as obviously some good had come from "someone with good idea getting money from investors to realize it"

LorenPechtel 3y ago

I don't think it's so much a matter of getting them to IPO than in getting the maximum price at the IPO. Effectively, a pump and dump scheme except it's not considered such by the SEC. The third party clients hurt ad revenue, kill them. Once the stock is out the door the problems that result aren't going to hurt them, just the suckers who fell for it.

roncesvalles 3y ago

Exactly. VCism is always done with the goal of getting more from the next sucker. The final sucker being the public.