[HN Gopher] A Minsky moment for venture capital?
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A Minsky moment for venture capital?
Author : simonebrunozzi
Score : 50 points
Date : 2022-05-14 17:57 UTC (3 days ago)
(HTM) web link (www.ft.com)
(TXT) w3m dump (www.ft.com)
| gumby wrote:
| This is just a summary of the substack post, which was discussed
| on HN at the time: https://news.ycombinator.com/item?id=30413865
| ldayley wrote:
| I'm re-reading this post now and Wow(!) does that Tiger Capital
| link resonate differently today (it lost $20 Billion, nearly
| half it's value, from Dec-Mar 2022)
| diordiderot wrote:
| The substack post was a great read. I feel like it must be
| around two years old now
| georgeecollins wrote:
| 85 days. I can't tell if you didn't remember or you are
| saying it felt like longer because so much has happened. The
| IPO window has been closed for more than 85 days for sure.
| gumby wrote:
| There are still companies preparing listings.
| neonate wrote:
| https://archive.ph/5hdew
| TameAntelope wrote:
| Womp. Guess I'll be looking for a job in a few months!
|
| A shame, we had a decent idea, but haven't found our fit quite
| yet, and with sales cycles in our area being relatively long, not
| really a lot of opportunity to turn things around and self-
| sustain in time to react to the sudden market shift.
|
| Kind of funny, really, how all this ended up. One crazy guy in
| Russia and now I have to look for a job.
| marcosdumay wrote:
| The raised US lending interest rates are only partially caused
| by the crazy guy in Russia. And would probably happen anyway
| without his help.
| datalopers wrote:
| This bubble popped in November. The aspect that devs are
| broadly overlooking still is the abundance of high-paying easy
| to attain jobs. Those are going to disappear, too. It'll take a
| year though.
| randomopining wrote:
| Why?
| jdmoreira wrote:
| I highly doubt this is Putin's fault. This is a sentiment
| problem. The tide has changed basically. Positive feedback
| loops get replaced by negative feedback loops. From mania to
| depression.
|
| It's a tale as old as the markets.
| jeffreyrogers wrote:
| The rise in energy prices was obviously going to happen in
| 2020 (when it was clear lockdowns were leading to reduced oil
| production). Couple that with recent policy in the US and
| Europe disincentivizing oil/gas exploration and Russia's
| actions in Ukraine and you've got a recipe for making a bad
| situation worse.
| kache_ wrote:
| No alpha left in making asymmetric bets. Mostly because a lot of
| people can make those asymmetric bets, because everyone has
| money, which makes it lose its asymmetry
|
| https://www.urbandictionary.com/define.php?term=Alpha%20left
| brockwhittaker wrote:
| +1, lest we forget the original premise behind VC returns was
| that seed checks had huge returns because most people weren't
| willing to take on the risk, timeline or probability
| distribution of funding startups. Now everyone is willing to,
| so that arb is gone.
| searchableguy wrote:
| Are VCs taking risk though?
|
| At least in India, most of the venture capital startups are
| copies of existing products but with discounts and rewards
| attached through VC investments.
|
| The timeframe for return on investments is too low for any
| risky bets. You aren't going to end up cashing out deep tech
| in few years.
| cmrdporcupine wrote:
| Related, maybe tangentially; I'm seeing lots and lots of
| startups whose basis seems to be "we build X <tool/SDK/API>
| technology as a service." Data management or transformation
| stuff. Packages for doing X in the cloud. Analytical
| libraries. Not products, but infrastructure.
|
| On one level I'm very pleased to see this stuff funded,
| because it wasn't really 10-15 years ago.
|
| On the other hand, what worries me here is that this stuff
| is entirely secondary and subservient to other services,
| its potential revenue completely depends on the success of
| businesses further up the food chain. And if things start
| to really slow down, I worry these will be the first to
| suffer and a lot of these startups (which seem to be hiring
| for a lot of the interesting work) will shutdown.
| blip54321 wrote:
| Personally, I feel like there are too many dollars and
| startups in this space now.
|
| I feel like the risk profile is such that I'd never buy
| most of the products being built. I don't want core
| business infrastructure sitting in the cloud of a startup
| which might not exist tomorrow due to missing a VC round
| or an agile pivot. I also don't want an integration of 50
| different cloud services.
|
| I'm glad to use established open-source technologies.
| I'll also use AWS or similar big players if open source
| doesn't exist. However, most of the niche proprietary
| startups just don't make much sense here to me. I'd
| invest a lot of money and take on a lot of risk.
|
| I do feel like there is big money in value-adds: hosting
| open-source solutions, consulting, etc. A lot of non-tech
| companies are struggling with data, ML, and
| visualizations.
|
| There's a feedback loop here. Once these startups start
| shutting down, the above problem will be recognized,
| cascading their collapse.
| cmrdporcupine wrote:
| Yeah I think there's wisdom to what you're saying.
|
| I do think there was a deficit before that this wave of
| stuff is working to remedy. In the mid-2000s, companies
| like Google and Amazon had a competitive advantage
| because they had the inhouse talent and $$ to build e.g.
| Bigtable, MapReduce, Dremel, Borg, etc. before anybody
| else had those tools. Then there was an awkward few years
| (early - mid 2010s) where everyone and their dog was
| trying to clone those in the open source space. And now
| we're in a situation where there's startups whose whole
| business model is structured around providing "big data"
| or "data transformation" etc. tools etc. They look like
| compelling places to work, on account of the interesting
| work they do, but I worry about their viability.
| anm89 wrote:
| I don't really care about this but:
|
| I've got this friend, he's a really good guy, a stupidly hard
| worker, maybe a little naive from my opinion in that he doesn't
| question mainstream narratives a lot but obviously very
| intelligent. He has busted his ass for years. He has a PhD in
| Genetics, and an Mba and finally in his late 30s is stepping out
| from making 35k a year as a post doc to go work at a Bio tech
| focused VC.
|
| I think he's going to get beat down the first time he sticks his
| neck out and it sucks to watch.
|
| No idea why I'm saying this. Maybe the takeaway is that this
| stuff affects people you wouldn't expect.
| mattwest wrote:
| This article focuses on returns of VC investment. Nothing wrong
| with that except it doesn't mean VC is going to tank. The nature
| of VC generally means a hyper focus of thematic investment. The
| market has everchanging needs and demands. I expect the direction
| of VC is changing its focus (already is) toward climate, food,
| and lifestyle health. VC firms may be cutting back on tech-tech,
| but they are increasing their contributions toward the topics I
| listed above.
| jeffreyrogers wrote:
| VC returns to software were high because software has high
| fixed costs, low marginal costs. So the tradeoff was fund a
| team long enough to get profitable and grow fast and then you
| get a big return. That's not true of climate, food, or
| lifestyle health in general (specific companies/business models
| may be exceptions).
| mattwest wrote:
| Thanks, that's a good point. I agree with climate and
| lifestyle health, especially considering marginal costs. I
| think food and ag tech will surprise us though. Besides, VC
| firms have been rapidly increasing funds toward food and ag
| tech for the past few years, so they decided one way or
| another that it is worth it.
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