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fund·rais·ing ac·cel·er·a·tion (vc-speak) the act of investing in a company at an exorbitant valuation today that it might or might not be able to justify at s

fund·rais·ing ac·cel·er·a·tion (vc-speak) the act of investing in a company at an exorbitant valuation today that it might or might not be able to justify at some unknown point in the future example usage: Marc didn't want to wait until Slack had enough revenue to support a billion-dollar valuation, so he used fundraising acceleration to lock in an investment at a billion-dollar valuation today see also: insanity, investment bubble, greater fool theory, simulated time travel

IBM 12y ago
I really want to know what a16z's IRRs are and how they're going to do in a down market. Do any public pension funds have to disclose that data?
bubblemachine3k 12y ago
In the same tone, there's a stock XYZ at $1. I think it will go to $10 in the next year, so instead of buying in at $1, I buy at $8? Wow. On Wall street, this is called "dumb money".
- nostrademons 12y ago
  This is also called the "efficient market hypothesis", and is a cornerstone of basic equity valuation. The idea is that if you have information that a company's stock is sure to rise in the future, it is rational for you to pay any amount up to the point at which you believe it will be valued in the future to acquire it now. And so the stock price will instantly reflect all public information about the future prospects of the stock. You may call it "dumb money", but if so, then all money is dumb.
  - hawkice 12y ago
    Grandparent mentions "greater fool theory", which is perhaps a clearer counterpoint to your (quite correct) point. It's also worth saying that upside risk is typically coupled with downside risk (which is something you're hinting at) -- the wider market has the probability of failure built into its current pricing. So, somewhat perversely, even if you don't think it'll have a billion dollar valuation with probability exceeding that of the market, it can become a better investment simply by increasing the probability of > $0 outcomes (by reducing that downside risk). Demonstrating that with a pivot seems like actually good evidence. I wouldn't make the same investment, but there are a couple angles to discuss here.
- vasilipupkin 12y ago
  there is a lot of uncertainty in valuing a startup. Conditional on this uncertainty, if I think it is worth 10, then absolutely, I should buy every share I can at 10 or below. The question is, is my valuation method correct. On average, since it is known that VC underperform the market, especially, the larger funds - the answer is probably, not quite :)

IBM 12y ago

I really want to know what a16z's IRRs are and how they're going to do in a down market. Do any public pension funds have to disclose that data?

bubblemachine3k 12y ago

In the same tone, there's a stock XYZ at $1. I think it will go to $10 in the next year, so instead of buying in at $1, I buy at $8? Wow. On Wall street, this is called "dumb money".

nostrademons 12y ago
This is also called the "efficient market hypothesis", and is a cornerstone of basic equity valuation. The idea is that if you have information that a company's stock is sure to rise in the future, it is rational for you to pay any amount up to the point at which you believe it will be valued in the future to acquire it now. And so the stock price will instantly reflect all public information about the future prospects of the stock. You may call it "dumb money", but if so, then all money is dumb.
- hawkice 12y ago
  Grandparent mentions "greater fool theory", which is perhaps a clearer counterpoint to your (quite correct) point. It's also worth saying that upside risk is typically coupled with downside risk (which is something you're hinting at) -- the wider market has the probability of failure built into its current pricing. So, somewhat perversely, even if you don't think it'll have a billion dollar valuation with probability exceeding that of the market, it can become a better investment simply by increasing the probability of > $0 outcomes (by reducing that downside risk). Demonstrating that with a pivot seems like actually good evidence. I wouldn't make the same investment, but there are a couple angles to discuss here.
vasilipupkin 12y ago
there is a lot of uncertainty in valuing a startup. Conditional on this uncertainty, if I think it is worth 10, then absolutely, I should buy every share I can at 10 or below. The question is, is my valuation method correct. On average, since it is known that VC underperform the market, especially, the larger funds - the answer is probably, not quite :)