I think that this is just the beginning. In my opinion, we're heading for a tech bust that's going to spread to the rest of the economy, and deflate additional bubbles (housing, for one). The government has been pushing cheap money for the better part of a decade in the name of creating the appearance of a 'recovery', but what they've really done is build a new house of cards. Make no mistake: the 'free' money that's been gushing into major institutions under the current administration is just as distortive and will be just as disastrous as the 'free' money that the last administration encouraged banks to put into the hands of sub-prime individuals.
Maintaining a near-zero interest rate creates artificial demand, and encourages investment of capital in inefficient enterprises. The thought process is "hey, I lose value with money in the bank. I'd be better off if I found something -- anything -- else to do with it!"
I think that once things take a turn, housing will also turn again, because in many areas the median house now costs enough that it's beyond the reach of the median person. That environment is unsustainable over a large time scale. Ultimately, we'll need a correction that sticks if we want to avoid repeating these events, and for that to happen we'd need a government willing to tolerate a politically unpalatable permanent reduction in asset prices.
(edit/note: I do find it odd that under a Democratic president, the major flows of borrowed cash (debt) have been directed to the big guys, while under a Republican president, they were directed to the little guys. Both were a terrible idea, but it seems backwards for what one would expect.)
I'll nail it down a little for you. I think it's going to be within two years, based purely on asset valuation : income ... which isn't a particularly sophisticated way to analyze it, but when people can't afford things anymore, they stop buying them, and that has predictable effects.
Shorting is very risky, since the downside risk is unlimited if you guess wrong. (Imagine shorting Microsoft based on the low quality of their code, sometime around MS-DOS 1.0.) It's better to buy businesses that will go up when the market goes down, or ones that are recession-proof in general, while avoiding cyclically sensitive businesses and, especially, any sectors that are about to have bubbles burst in them.
If the near future is the unicorn version of the dot-com bubble, its aftermath would be a good time for tech stocks you're interested in.
Options vs. shorting are just two different ways to risk all your capital on a bet... the "unlimited" downside of a short position has a practical limit--it's when your broker forces your account to cover with buys (the short squeeze) and you zero out.
No, I described the practical downside exposure of a short (or, the trader could put in a stop). It is no more "unlimited" than is the downside of buying a bunch of ultimately worthless options.
Agreed. I've done that in the past and done quite well, but when I got married I dumped all my non-retirement portfolio. 6% guaranteed return paying down student debt (plus getting rid of payments, which hadn't been something I'd dealt with before) beats playing games in the stock market for me. Plus, I like to make my bets while the market is already on the way down ... during the last recession I started buying on the way down (after prices had already dropped quite a way), and stopped when the market got back to where I'd started, which worked out quite well. I did most of this in my 401k and IRAs (to the limits allowed by the contribution rules), so I also scored tax benefits :). Biggest non-retirement bet was buying a house in early 2011, which also turned out to be a decent thing to have done in my market ... although I think that there is a significant possibility that the gains in value due to the market will be wiped out in the future.
wow.. didn't know such a site existed...will definitely point more people to the site when they keep making these types of predictions. That was such a fun read (looks like the site has been around for a long time)
If you strongly believe this, you could do something similar to what the guy did in 'The Big Short', short the relevant markets within your timeframe and you'll be recession proof.
In places like SV and Vancouver housing prices are not strongly connected to the economic reach of the median person.
China has a middle class as big as the entire US, and a huge number of millionaires in USD, and an unstable, opaque state-run economy, so huge numbers of rich Chinese are buying real estate abroad to protect their wealth and to give their kids a life in the US.
I would be happy to see a movement to keep Chinese money out of the U.S. housing market, at least in places like SV.
Why? If foreigners want to buy stuff, we call that exports. Just produce more of the stuff they want to buy. Ie build more apartments (= higher houses) in SV.
> because in many areas the median house now costs enough that it's beyond the reach of the median person. That environment is unsustainable over a large time scale.
"Too expensive" does not equal bubble. It has to be expensive because speculators are driving the price up, thinking they're all fooling each other. As soon as they get get scared that the other speculators might be thinking of selling the price suddenly collapses as they race to not be the last to divest.
If something is expensive because it's scarce, is actually being practically used, and there are no substitutes, then there is no way to make the price suddenly collapse other than flooding the market with new supply, and it would take many years to increase the supply of housing by a significant percent. If the price of housing drops a bit all of the homeowners aren't going to rush to sell their homes in a panic like you might see with a purely speculative asset.
In the 2008 crisis home prices dropped by like 10-15%. The housing market didn't collapse. It's not as if the "bubble burst" and housing was worthless after that.
That very much depends on where you live. It wasn't that bad in the Bay Area because there wasn't a building boom, but in places that there was a boom the prices climbed very quickly and indeed collapsed even more quickly. Las Vegas, Phoenix, Miami and other markets were all hit very hard (60% or so).
Housing markets are kinda weird in a way - when hearing bad news about the economy, people don't immediately get on the phone with a real estate broker and yell to "Sell! Sell! Sell!"
For primary residences most are driven by loss aversion ("I'll sell it when it comes back to the price I paid for it, I don't want to lock in my losses, and this is still a decent place to live").
You're right that some markets experienced steeper declines than others, and the ones that descended quicker were highly leveraged through 0% down, or interest-only (or both) loans. Post-2008 lending scene has been much more restrictive, I can't imagine a lot of people being highly leveraged at the moment.
Like other comments have pointed out, some markets did see much bigger collapses in prices. The markets that did had seen huge price increases driven largely by speculation in 2002-2007.
In the early to mid 00's the idea of "flipping" real estate became popular. The idea was that you would agree to buy a property, and then sell it very quickly, often setting up a deal to sell it before you even fully closed on it yourself. There were a lot of more-or-less amateur investor types who flocked to markets with cheap real estate and strong population growth - e.g. Las Vegas and Phoenix - and started flipping houses. This was pure speculation completely divorced from underlying demand.
I don't think there is anything like that happening today - at least not nearly on as large a scale. So, while I would disagree with the idea that "the market didn't collapse" - it did in some locations - I certainly do agree that it's not likely to collapse in quite as dramatic a way any time soon.
The trouble is that widespread leverage means that asset price falls detonate the entire system unless capital is backfilled somehow. That was why state credit was so widely extended to banks in trouble: the risk that collapsing bank A is in debt to bank B, which then collapses in turn taking out banks C, D, E, the payments settlement system, and the ability of people to get money out of ATMs.
It's not so much that any one entity is "too big to fail", but all the big entities are too interlinked so they cannot fail separately.
I predict the bust will happen because the HN/Silicon Valley hivemind so obviously wants it to and so we'll all bet on each other's failure until it is realized.
It really seems like if we all agreed to keep the music playing, the music would continue playing. But once we decide it's going to stop, it has to.
No. The people at the top providing the money for this circus are the ones with the power to stop the music, and they're stopping it because the companies they funded aren't performing.
You actually can't just keep dumping money into companies that are doing nothing but burning it.
But, yes, for the record, I do want the bubble to burst, because the world has real problems and I just got a cold recruiting email from someone building a GIF keyboard. "Silicon Valley" is a spectacular, world historical squandering of brain power and it needs to stop.
>"Silicon Valley" is a spectacular, world historical squandering of brain power and it needs to stop.
Are you implying that there are less-frivolous actors offering competitive salaries and getting ignored, or that SV is inflating the price of programming labor? Because if the latter, and you're hoping for a correction of programming salaries down to lower-middle-class clerical work that humanitarians can afford, won't those with brain power just "squander" it in some other better-paying field?
What? Where are people going to get the money to pay higher/equivalent salaries if not funding?
The non-tech sector seems perfectly content to pay engineers 60k under constant threat of outsourcing. In the absence of Silicon Valley competing for talent they'll get away with less, not more.
Google/Facebook/Apple/Microsoft/etc have been and will continue competing for talent. 2005 to 2009 was hardly a time of "easy money", yet the big tech companies still had to resort to collusion to combat demand for engineers.
I can say this much -- I have exactly one friend who also works as a software engineer. The rest of my friends are activists, students, service industry workers and non-tech entrepreneurs who are getting absolutely crushed by the cost of living in the Bay Area. A massive, "catastrophic" crash in the tech industry would, on balance, be great for all of them.
> who are getting absolutely crushed by the cost of living in the Bay Area
Outside the bubble, New York has always been like this, and it's not because of the tech industry.
Like the Bay Area, New York appeals to a lot of people, and with the appeal comes competition for housing. The Bay Area is a desirable place to live -- the weather is always excellent, there's plenty of stuff to do (try finding a mountain to ride your bike up in New York City), etc. People pay it because they like it. I don't think it's because tech is there.
I've only lived in the Bay Area for 6 years and I've watched it change dramatically for the worse. My friends who have been here since the 90s talk about it in biblical, apocalyptic terms. It isn't "just like that". Something fundamental has changed.
How will a bust all of a sudden make sure that all that brain talent starts working on something worthwhile? A bust just means that instead of improving their skills while working on something useless, they will instead be looking for work which will be equally useless and they won't be improving their skills.
Say what you will of all the bullshit we fund, every one of those represent projects where talent can improve their skills, and many of these will eventually stop working at a bullshit startup and get recruited by one of the companies actually building something valuable.
> in many areas the median house now costs enough that it's beyond the reach of the median person
I don't see it. Maybe bubbly areas like SJ will correct a bit, but at the end of the day real estate is a supply/demand calculation. YoY% increases don't look like they did in the last bubble.
The more people who want to live somewhere -- whether renters or buyers -- the higher the prices go, until sales start dropping off. Real estate is like anything else: it's worth whatever you can convince someone to pay.
EDIT: I am specifically referring to the "Price to Income" chart in my comment below, not the one that shows up by default. Sorry for the confusion.
--
Uncheck everything but the 'US' graph. Different data sources give different ratios, but they all show that it's still well above historical norms & headed up. Some data sources say that it's already approximately back to where it was in the peak (see a link further down, that chart is up-to-date), others like this one only show it ~1/2 way there (note tat this chart is two years out of date), but either way we're above what has been stable in the past.
Without numbers it's hard to tell, but it looks to me like the curve is even gentler than 99-03. It's almost always going to be going up and to the right until the population starts shrinking.
People are just stubborn and think that if they can't afford the type of house they want in the type of neighborhood they want in the city they want, then housing must be in a bubble and out of reach.
Assuming continuous inflation, the absolute price of housing will always increase. However, affordability decreases as the ratio of housing price : income increases. There is a limit above which a vast swath of the population can't afford houses, and somewhere just beneath that limit lies another at which the price of housing collapses. That's assuming that the effect of speculation never becomes large enough to outweigh a collapse of real demand.
>(edit/note: I do find it odd that under a Democratic president, the major flows of borrowed cash (debt) have been directed to the big guys, while under a Republican president, they were directed to the little guys. Both were a terrible idea, but it seems backwards for what one would expect.)
Both of them were chiefly monetary initiatives rather than fiscal. The Fed acts pretty much independently of who's President, which explains the "oddness".
Do you have data to support that a few unicorn valuations being corrected will spread to the rest of the economy, particularly housing and not just be largely limited to private markets and investors?
Yes and no. With regard to spreading, just prior observation that adjustments tend to spread. With regard to housing, the observation that the median home price : median income ratio is now above 5.2x, while at the last peak it was only at ~5x. The rate of growth is lower this time, but I don't think it matters because the ratio is still really bad.
During the last bust home prices went up not down. Because investment rotated from stocks to housing. Why won't that happen again, especially with ZIRP?
It's far more likely we're about to witness a significant new housing bubble courtesy of the Fed moving to negative interest rates. The tech bust is a joke compared to the size of the housing market, there's no "spreading" that can possibly go on from the tiny unicorn bubble to housing that is going to matter. Housing is $30 trillion, the unicorn bubble is the size of one Facebook (1% the size).
See: the results of Sweden's negative interest rate policy (ie a huge housing bubble).
"Ultimately, we'll need a correction that sticks if we want to avoid repeating these events, and for that to happen we'd need a government willing to tolerate a politically unpalatable permanent reduction in asset prices."
I was referring specifically to the cheap debt. Yes, the much of the spent money under Bush went to the Iraq war, and under Obama much of it went to 'stimulus', and both items hurt us all (through inefficient use of resources) while benefiting large enterprises.
Not really. The Iraq and Afghanistan wars together cost something on the order of $750 billion, which was less than one year of stimulus spending at the beginning of the current administration.
> Not really. The Iraq and Afghanistan wars together cost something on the order of $750 billion, which was less than one year of stimulus spending at the beginning of the current administration.
Ignore this person. They don't know what they are talking about.
The estimate cost of the Afghan + Iraq War is estimated to be $4-6 trillion when you account for long-term medical care and disability compensation for service members, veterans and families, military replenishment and social and economic costs.
Add another zero to that and you're closer to the real figure, which doesn't even include ongoing expenses like the ramping up of the domestic security apparatus and the surveillance industrial complex created in the wars' wake.
Has any HNer participated in such a secondary sale? I think it could be informative to describe the experience, whom you dealt with, how a price was agreed upon, how your company discussed secondary sales, etc.
I offered some of my exercised options for sale on SharesPost [1]. The SharesPost representative contacted me; she said that she had a potential buyer interested, but the bid was slightly lower than my initial ask and the volume they wanted to buy was a little lower than what I had offered to sell initially. We agreed on the deal.
I filled out some paperwork and sent proof that I was a legitimate seller. SharesPost representative got in touch with my employer. My employer had the right to first refusal which they waived. The process took few weeks with escrow etc, but was smooth.
SharesPost charged me a %ge fee. I also had to pay for the escrow service.
How did things work out from a tax perspective if you don't mind my asking? Also, what sort of communication did you have with your company before/during this transaction regarding it?
Is this the kind of thing employers might freak out about if they are blindsided by the request?
> How did things work out from a tax perspective if you don't mind my asking?
The proceeds I got from the sale were treated as long-term capital gains. I got a 1099-B from SharesPost.
> Also, what sort of communication did you have with your company before/during this transaction regarding it?
I mentioned my desire to sell some of my stock to my manager. I was directed to speak to the head of legal department. Here is what I learned that person. The company could not provide me with a buyer, or advice me to sell/hold etc. But once I found a buyer, the company was bound to agree to that sale or direct me to another buyer who was offering at least the same price.
Offtopic: Assuming your account is a throwaway you just created so as not to reveal your selling history, and you based the name on some variation of "throwaway", the month, the date and the year.... then you used the wrong year. ;)
Thanks for sharing this. The process does sound straight forward. It seems that you still retained some shares. Did you exercise with the intention of selling a portion on the secondary market?
I used some of my savings and a cash bonus I got at work to exercise some of my options. I held on to that stock for a year. The next year I sold a portion of that stock in the transaction described above. I used the proceeds from the sale to replenish my savings, which had taken a small hit due to the AMT from the previous tax year.
I'd just keep your LinkedIn profile up to date with a clear indication that you might have an interesting amount of stock (co-founder, executive, early employee, etc.) and that you're no longer with the company.
When secondary brokers have more buyers than sellers of a particular private stock, they come looking for you - and that's the time when you want to do your selling, not when people are freaking out and you're competing with others actively looking to unload their holdings.
EquityZen (https://equityzen.com) has conducted several transactions in private companies, including many Unicorns, and charges only one fee (and no escrow fee).
The last couple of years, everytime someone would ask the cliché 'is there a bubble?' Question to a VC, they all waved it away. The questions were legit because of the insane valuations that have been thrown around. How often in History have companies like MagicLeap for example, got to billion+ valuation before ever launching a product. Evernote is a legit business, yes but same story. Blown up by investors. The bubble is cracking.
It's almost entirely irrelevant to the rest of the economy. That is not an exaggeration.
During the dotcom bubble crash, Cisco all by itself destroyed more market cap from top to bottom than the entire unicorn bubble is worth combined (and that's before inflation adjusting for 15 years).
This current tiny mess? It's hardly even a single line sideshow to the rest of the US or global economy, what's going on in China, the commodity markets, negative interest rates in Europe or Japan, etc. A ~1% value drop in just the US residential housing market is worth as much as every unicorn combined.
I don't understand why magic leap has so much investment with nothing to show. Just in general I don't see how it could be worth that much. It's cool in a nerd way but doesn't seem to have real value. Like how is this going to make a meaningful impact on the world?
Their product comes out in 11 days. I guess the bull case is people buy the thing. They are being secretive but here's Scoble and others being upbeat in their promo vid https://youtu.be/XxwrXacMe6Y?t=25s
Didn't know they're coming out with something so soon. I guess we can all judge then. lol
I guess still to me virtual reality glasses seems like a very cool gimmick. If its a general purpose consumer product its success would be really dependent on a "killer app" and affordability. I guess we'll see... thats a lot of money invested.
Using a crowd sourced approach, a group of accredited investors (buyers) can participate in purchasing a block of shares as a fund. A win for the smaller individual investor who could not normally participate due to various constraints (ie buying power, transaction costs).
Likewise, its also a win for sellers and it applies to the Unicorn's of the world. It gives these shareholders access to a market they wouldn't normally access.
It seems that selling shares privately is becoming more common, any model that connects a larger group of accredited buyers to accredited sellers is good - IMHO.
I've been in the "its probably a unicorn bubble" camp and I think this is evidence of that, but does this really make a difference outside of those companies and their VCs?
What kind of situation could turn this into a systemic risk? Institutional investors getting involved? Is there any evidence of that happening? "Unicorn derivatives"? Is there any indication such a thing might exist?
Seems like it is possible that a unicorn crash could just leave a bunch of rich guys in Cali somewhat less rich than when they started.
And of course employees might be hurt by this I guess... especially the young ones who traded work for worthless stock. But you know what... I signed up for the army after 9/11 so I know what its like to get bamboozled in your 20's... it sucks but you get over it. If I was in their shoes though I would probably looking to cut my losses and liquidate too.
Lets get the mythical horse animals straight first. A mythical horse animal that can fly is called a Pegasi. A unicorn another mythical horse animal doesn't have wings. In startup terms there often mentions of runway and burn rate. Now the magical horses is running down the runway without wings. My guess is that there will be a whole lot of unicorns and very few Pegasi.
Tom Petty - Learnig to fly lyrics
"Well I started out down a dirty road
Started out all alone
And the sun went down as I crossed the hill
And the town lit up, the world got still
I'm learning to fly, but I ain't got wings
Coming down is the hardest thing
Well, the good ol' days may not return
And the rocks might melt and the sea may burn"
Semi related question: One has to be an accredited (i.e. wealthy) investor to invest in startups, but this does not apply to employees exercising options. Does that mean that employees who do not meet the wealth requirements to be accredited are only ever able to sell ownership, and only to accredited investors?
The dirty little secret is that most of those secondary market exchanges don't really verify accredited investor status. They just do the bare minimum to check off the boxes and ensure SEC compliance. Acquaintances of mine were able to purchase shares by simply lying about their incomes and assets.
That is correct, the reason for such regulation is depicted in the movie "Wolf of Wall Street", where Florida grandmas are being pitched some "incredible opportunities".
If you're a seller and you did not verify investor accreditation, you're opening yourself up to a lawsuit when things go bad with the investment - what if the buyer comes back and claims he was defrauded and duped into buying shaky securities?
The broker participating in such transaction, in theory, has a chance of having their license revoked due to participation in alleged fraud.
I think the point was that you don't necessary need wealth (assets) for which the threshold is $1 USD Million excluding the value of your primary residence.
You can instead have a high income (the $200k mentioned) and zero wealth. I suspect that many more people qualify as accredited under the income requirement than qualify under the asset requirement.
"Shaq is rich; the white man that signs his check is wealthy. Here you go Shaq, go buy yourself a bouncing car. Bling-Bling . . . . I ain’t talking bout Oprah, I’m talking about Bill Gates. OK!. If Bill Gates woke up tomorrow with Oprah’s money, he would jump out a …window. I’m not talking about rich, I’m talking about wealthy
Google says Oprah's net worth is $3G, and Shaq's is $350M. If neither is "wealthy", then I guess the word is reserved for Bill Gates (but not that "white man signing Shaq's check", in all likelihood.)
If he weren't a comedian, I'd say Chris Rock is so full of shit it's not even funny, but I guess they're two separate things (meaning that in this instance he's objectively full of shit, but that has nothing to do with him being subjectively not funny to me; there are other comedians who're just as full of shit, but I still find them funny.)
But puts you in the top 1.5% nationwide. So, 10x worse off percentage wise, I'd believe that doesn't feel wealthy or even rich. Bad-stats-wise, between 1 in 6 and 1 in 7 people you meet would earn more, compared to 1 in 65 or so elsewhere.
Sure, but "wealthy" doesn't just mean the top quintile. "Wealthy" is a more exclusive club than that. When I think "wealthy", I'm thinking top 1%.
But this is one of those words that should probably be set aside for the purposes of debate in favor of something more specific, because arguing over the definition of a term that doesn't actually have a standard definition isn't terribly productive.
If the company is private then employees exercising options generally (always?) have clauses that restrict them from selling that stock whether they are accredited investors or not. Not a lawyer, but I think there may be two reasons: 1) prevent covert takeover from the original founders 2) prevent a general market for private companies (before IPO). IPO involves a lot of regulatory overhead to confirm full disclosure. I think the restriction is to maintain control, but it may be a legal requirement before public market.
In other words you can't sell except as part of a board approved sale of the company or a public offering. I think opportunities to buy are based on new issuance of stock (for accredited investors) not based on trades of existing stock.
I too assumed this limitation was widespread. But if unicorns are high-valued private companies, and there is a secondary market for their stock, then surely some holders are not restricted this way.
Anyone know why / what triggers that? When is it typical for stock granted to employees to actually be resellable?
Depends on the terms under which the employee is issued stock. From a 2014 article[1]:
Two months ago, an early Uber employee thought that he had found a buyer for
his vested stock, at $200 per share. But when his agent tried to seal the deal,
Uber refused to sign off on the transfer. Instead, it offered to buy back the
shares for around $135 a piece, which is within the same price range that Google
Ventures and TPG Capital had paid to invest in Uber the previous July. Take it or
hold it.
The employee also learned that Uber had amended its bylaws more than a year
earlier, in order to restrict unapproved secondary sales. It was unclear if the
bylaw change actually applied to shareholders who had not been party to the vote —
lawyers seem to disagree on this point of Delaware law — but Uber threatened
litigation if he tried to proceed. So he held. The financial and reputational
hassles of a lawsuit would have just been too much, even if he had won.
> Does this generally piss off the employer? I wonder if the employee faced any sort of retaliation or anything from this.
No, it should not piss off any employer!
The equity that is offered to you to as part of your employment is remuneration for your efforts. The employer should not be upset at you for wanting to convert that to cash. It is true that the employer might not want their stock to go to outside parties. In that case, they should arrange for alternate arrangements (buybacks, employee-liquidity in funding rounds etc). But you are not doing anything inherently unethical to warrant any retaliation.
That's more to the point I was getting at. There's the legal situation, and then the political one. Selling shares in a private company could raise some red flags from management thinking an employee wants to cash out and bail, management worried about the perception of the company's health (internally and externally), management concerns about loss of control, etc.
All reasons why managers might make life difficult for said employee after the fact.
They generally don't want their cap table to explode with randos, and if there's access to sensitive information, they obviously don't want the cases where unscrupulous party buys shares just to feed that data to competitors.
With that said, it's obviously in their interest to provide some liquidity to avoid their long-time employees from defecting to GOOG or NFLX or FB, which reward with perfectly liquid stock grants, so in case of demand from the buy-side an employer would orchestrate a secondary market transaction. On the buy side in most cases you'd see an SPV managed by the VC who invested in previous rounds (which helps with keeping the cap table low).
Ironically, for smaller VCs entire economics of their firms are based on these SPVs (which sometimes charge upwards of 2% management fee on top of 20% carry - and that's for a chunk shares sitting quietly doing nothing).
More typically, the company has the "right of first refusal" -- when a stockholder has an outside offer, they are first required to let the company buy their stock back at the price that the outsider is offering before selling to an outsider.
This is both to maintain control and to avoid having more than 500 shareholders, which triggers all kinds of additional regulations.
1) prevent covert takeover from the original founders
Wouldn't this be more reliable to do by keeping control via different classes of stock and or limiting the total size of the employee option pool to some significantly less percentage than the founders have? What's the most common/recommended size of the employee option pool (I want to say I've heard it is like 5-15% depending on the age of the company)?
I predict in the future more people will declare bubbles until there is an actual bubble. Then, even after the bubble is fully deflated, those people will tell everybody about how they predicted this bubble ahead of everybody else. Then time will pass. People will then continue declaring bubbles, until one day they too they can become a true oracle of the bubble world. Then time will pass..
> Secondary sales totaled $47 billion in 2014, up 80 percent from the previous year, according to investment bank Evercore.
Still a relatively small volume of sales we are talking about here. Does anyone have any information on the structure of the secondary market - big players, regulation, etc. The article was light on details.
I worked for a company about 18 months ago and the CEO sent an email to everyone "prohibiting" selling your shares on the secondary market because he was worried about a hostile takeover.
None of this made sense to me. You're going to restrict your early employees from making money? No one owns more than .5% so why would one be worried at all? To me it just seemed like another example of a CEO believing their employees are second class citizens and that they don't deserve any money until the CEO is RICH.
Because the CEO holds less than a decision-making stake to himself? It wouldn't matter that everyone has a tiny percentage if an outside party is willing to spend enough money to buy them all.
>“In tech, when times are good, it’s about potential. When they aren’t, investors focus much more on fundamentals.”
That second part... why that isn't ALWAYS the focus is beyond me.
Edit: Adding a clarifying statement as my point wasn't specific enough. I'm very aware that early stage investments are VERY speculative, but when we're talking about a company moving into 1BN+ valuation territory, fundamentals should be in focus.
It's the difference between a sellers' and buyers' market (boom vs bust). To get a low entry point during a boom, you have to invest before there's hard evidence of success. Kind of like how a race car needs to turn before corner entry in order to avoid going too wide.
Why does this simplistic analysis permeate HN, of all places?
There are certain technologies and trends whose full potential is not presently obvious, or realizable, and the ability to exercise that potential could be capped or cut short if investors force a near-term focus on profits. It's the same reason why we ideally teach children any number of skills which have no direct application to their future vocations. Future options are sometimes more desirable than current profits.
you are confusing business and technology fundamentals.
Business fundamentals -- bottom-line numbers on the P&L statement -- are not furthered by increasing the number of active users alone, or by delighting users. Only ad revenue would increase the fundamentals being discussed here.
I disagree with the overall sentiment. Doing the right thing technology-wise and delighting users is what made google possible. Technology fundamentals != business fundamentals but the pre-not-bubble-but-maybe-bubble market did not have either one. Many companies were pure buzz with neither business nor technology figured out.
Then you're basically arguing semantics while agreeing with the sentiment in question here. You're saying that startups do best when they focus on delivering value to users first, and then figuring out a path to profit that preserves the first value. Which is a strategy that investors who make big bets on potential would also promote.
I figure it's baked into the name Venture Capital. A venture is about potential rather than fundamentals. The question for any particular venture is when fundamentals become a more important metric than potential.
Because that requires everyone involved to understand what the fundamentals are. Half the time investors just go wherever there is the most noise and buzzwords.
I use Evernote (paid plan), but it's been my impression that the level of intuitiveness of the UX has steadily declined, to the point where I have no idea what to click to make it do what I want.
Like Yahoo, some companies are very challenged when it comes to building intuitive UI/UX. It's too bad the market focuses on financial performance and market share rather than more fundamental aspects of competence.
Couple of years ago I was OneNote user (on Windows). Then I decided to switch to Mac, and moved all my notes to Evernote. I was happy at first, but then Evernote started declining in quality. Microsoft introduced OneNote on the web, on the phone, on the Mac, and last month I switched back. It's free, and it is, at least for me, superior user experience.
I switched from OneNote to Evernote when I got a Surface. The only things I like Evernote better for are its simple file format (OneNote will be harder to get my data out of if I leave) and its Clearly web clipper. Outside of that, OneNote is just better put together and much more intuitive.
Being able to draw with a pen is awesome, and the killer feature that makes it work is "Insert Space." You can pick a point and push everything below it down, like you would when making edits in a word processor. All the layout and diagram flexibility of handwritten notes, but without the usual limit that you run out of space or have to work in the margins if you want to go back and add anything in the middle.
Here comes the gold rush and anything else people believe they can secure their money and weather the storm.
The trick now is to work out where the bottom of the market crash is going to be, and cash in on the companies that will survive this next recession, but whose stock price is still being hammered.
I guess decrease. Fewer companies will be hiring, and some of the best people who went to unicorns for their prospect are now back in the market, outcompeting the ordinary ones waiting for a new/better job.
Maintaining a near-zero interest rate creates artificial demand, and encourages investment of capital in inefficient enterprises. The thought process is "hey, I lose value with money in the bank. I'd be better off if I found something -- anything -- else to do with it!"
I think that once things take a turn, housing will also turn again, because in many areas the median house now costs enough that it's beyond the reach of the median person. That environment is unsustainable over a large time scale. Ultimately, we'll need a correction that sticks if we want to avoid repeating these events, and for that to happen we'd need a government willing to tolerate a politically unpalatable permanent reduction in asset prices.
(edit/note: I do find it odd that under a Democratic president, the major flows of borrowed cash (debt) have been directed to the big guys, while under a Republican president, they were directed to the little guys. Both were a terrible idea, but it seems backwards for what one would expect.)