4 ms·

Khosla is simply stating the fact that some quality investors shy away from "hot/overhyped" investment opportunities. You can't argue with fact. However, som

Khosla is simply stating the fact that some quality investors shy away from "hot/overhyped" investment opportunities. You can't argue with fact. However, some quality investors are also attracted to "hot/overhyped" startups. Which effect dominates?

pg 14y ago
It's not true though that quality investors shy away from high valuations. The difference between a high and low valuation for a given startup might be 3x at most, whereas the kind of startup they're hoping to fund could return 300x. The enormous multiples generated by successful startups mean there is no "value investing" in the startup business. There are no successful investors who systematically seek out underpriced startups. The successful investors are simply the ones that pick the winners, regardless of price.
- hotpockets 14y ago
  We're just arguing different things. You're saying value investing for startups is a suboptimal strategy. (I understand your point and read swan farming and found it highly interesting.) I'm saying that may be true but that doesn't stop investors from trying. Khosla is one of these people. He appears to have just stated he was. Now maybe there are ulterior motives at play, and Khosla is lying about his aversion to superhyped startups. Basically I'm saying investors have a distribution of frugality coefficients, and was asking: what does it look like if you plot "frugality" versus "investor quality". I would guess there might be a small relationship. Even if frugality is strongly negatively associated with quality, it is still true that high valuations will turn-off some quality investors. However, the important question is not whether you turn off some good investors, but, how many good investors do you attract, period. Thus hype may still be good.

4 ms·

Khosla is simply stating the fact that some quality investors shy away from "hot/overhyped" investment opportunities. You can't argue with fact. However, som

by hotpockets 14y ago

pg 14y ago
It's not true though that quality investors shy away from high valuations. The difference between a high and low valuation for a given startup might be 3x at most, whereas the kind of startup they're hoping to fund could return 300x. The enormous multiples generated by successful startups mean there is no "value investing" in the startup business. There are no successful investors who systematically seek out underpriced startups. The successful investors are simply the ones that pick the winners, regardless of price.
- hotpockets 14y ago
  We're just arguing different things. You're saying value investing for startups is a suboptimal strategy. (I understand your point and read swan farming and found it highly interesting.) I'm saying that may be true but that doesn't stop investors from trying. Khosla is one of these people. He appears to have just stated he was. Now maybe there are ulterior motives at play, and Khosla is lying about his aversion to superhyped startups. Basically I'm saying investors have a distribution of frugality coefficients, and was asking: what does it look like if you plot "frugality" versus "investor quality". I would guess there might be a small relationship. Even if frugality is strongly negatively associated with quality, it is still true that high valuations will turn-off some quality investors. However, the important question is not whether you turn off some good investors, but, how many good investors do you attract, period. Thus hype may still be good.