"And the tech IPO is basically dead. The tech IPO market is at early 1980's volumes. For most of the 90's the majority of tech funding was public. This has reversed. It used to be routine to hit $20 million in revenues and go public. Not anymore."
It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley. Before an engineer might vest after four or five years, just as the company is going public at a modest valuation. But if the company stays private, the employees are forced to go double or nothing. Either the company continues to grow, and there is a Google or Facebook like outcome with hundreds of employees getting rich. Or the company goes sideways and the stock ends up diluted to nothing. Furthermore the general public would have shared in the growth in the 1980's, but now most of the value has accrued by the time the company goes public. So for the few that make it, all the wins go to the founders and VC's, rather than having the general public get in early.
"It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley."
No, it's a consequence of low interest rates. "Private equity" is mostly borrowed money. Think "leveraged buyout", not "all-cash deal". Here's a list of the top 10 private equity lenders for 2011.[1] #1 is Bank of America.
Back in 2000, 1-year Treasury bills were paying around 5.11%. Today they're around 0.26%. Debt financing looks much more attractive with today's low, low rates.
I don't think this is accurate. All the companies I know would rather go public in order to enable investors/employees/shareholders to get some liquidity (and for the company to gain credibility). The secondary market, while fulfilling this desire to some extent, is still not even close to what you get in an IPO. The onerous regulations are still clearly depressing the IPO market.
I work for a company that has deferred its IPO from plan, and from what I understand the SOX regulatory burden has very little, if anything to do with it.
Credibility and providing liquidity for investors and shareholders are certainly important reasons why companies decide to go public. But there are also downsides to going public -- most notably the myopic time horizon of the public markets, which is a huge barrier to the kind of long-term product and user acquisition investments pursued by tech companies in particular.
You can weigh these factors against one another, but ultimately the fundamental reason a company IPOs is to raise a large sum of money at an attractive valuation. Given that investors are lining up to help private companies meet this goal, the ancillary drivers you mention just aren't enough to push companies over the edge into the public markets.
The big payday isn't from an IPO any more, but rather from selling out to a larger company. Big tech companies have more money than they know what to do with.
One benefit of this to founders is that a M&A deal provides instant liquidity (barring earn outs), whereas an IPO largely prohibits you from selling off a large percentage of your stock.
Yeah. The founder of one of our vendors sold his company for eight figures recently. His only obligation after the sale was to stay on for six months (at an exorbitant salary) while the management structure was integrated into the new parent company.
Seems like an IPO is riddled with all sorts of waiting periods and notifications and paperwork people will want to sue you over if they lose money. I'd definitely go the buyout route if the price was right.
Sorry to dig on such a small part of your comment, but could you elaborate on the credibility comment? I'm just wondering, if you're pulling uber sized rounds and valuations - who are you lacking credibility from that matters? Can't going public damage credibility too if the pricing is wrong?
That sounds right to me. Why sell off equity when you can borrow the money you need? There's a hell of a lot of money out there willing to take risks for what used to be considered a mediocre rate of return.
This isn't really applicable for high-growth venture backed companies because generally, they aren't leverageable. It's almost impossible to lever a minority equity investment in a private company. It's true equity capital going into late stage VC / growth equity.
However, for mature tech businesses that have real cash flow, LBO valuations are driven by a levered cash flow yield. Valuations in this world are increased with higher debt availability and low interest rates.
The primary mechanism by which low interest rates influence late stage VC / growth equity valuations is in the amount of capital the LP community / institutional investor base allocates to those asset classes. Right now, that allocation is quite large driven by the need to move into riskier asset classes to drive investment yield.
Those who dedicated their life to capital allocation, yes, they are allowed to borrow cheaply and profit. I thought about going into this in university, but there is something very soul draining about it. Too bad I discovered warren buffet later in life. More power to these folks. In fact, we shouldn't even be taxing them. We should just start taxing things like mansions, yachts, and super cars by 5x.
There's no logical reason not to tax investors. They aren't unique butterflies that make the economy flourish. Investment is just one component of a functioning economy. So is education, saving, consumption, etc. Too much focus on one is not a good thing. This is one of the reasons we have so many investor bubbles. Also, the wealthy have no other options than to invest their money. What else would they do with it, put it under their mattress? The ROI is the only incentive they need. All this does is increase income inequality.
"No other options" than investing one's savings? Go to Russia to find out some of those other options, or any other place where people don't count on their wealth not to be confiscated at an unpredictable moment. Basically the other option is "doing expensive stupid shit" and you'd be surprised how many variations of this one can come up with. Certainly society as a whole ends up waaaay less wealthy if "the wealthy" (or those with any sort of surplus, really) end up strongly preferring spending to investment.
Hence taxing yachts sounds to me like it could be smarter than taxing investment. (Not 100% sure, as usual with these things, just looks sensible at first glance.)
Imagine you're on a lonely island. Would you rather eat all you can or conserve food to the extent possible?
Earth is humanity's lonely island. (I realize it's more complicated than that because billions of men on Earth do not make decisions in the same way that a lonely man on an island does. All I'm saying is that it is still more desirable to invest than save when we can, at least past some point. The extent to which society depends on consumption, perhaps excessive consumption, today, and "how to get from here to there" I don't know. I am however certain that flogging savers badly enough with high taxes will result in people burning their savings in what "from humanity's point of view" are very wasteful ways; also in people saving less in the first place by working less in the first place, also not that great - "imagine you have a business, would you rather have a worker who wants to make as much as he can and save it, or work as little as needed to survive because he can't save?")
I dont distinguish between billionaires and middle class folks in this respect. Overconsumption by the middle class us likely much more environmentally damaging. Does it drive the economy? Perhaps; if so, it's a problem. And certainly the Russian middle class consumes more of what it makes than European or American because lacking reliable property rights they do not trust investments to pay off.
Seems to me like an argument for sustainable manufacturing, rather than anti-consumption
Curbing consumption is immediately damaging to the economy. The better solution would be to heavily tax unsustainable business practices, rather than try to curb consumption. If you go after consumption you give more power to the super rich, while simultaneously doing nothing to discourage environmentally unsound business practices.
Why is it better to continue producing products in an environmentally unfriendly way with lower consumption of goods, rather than lowering the production of environmentally damaging products, while raising consumption rates of sustainable products?
On the contrary, there is no logical reason to tax investors/savers. I strongly recommend this article by Scott Sumner, who works through the details carefully.
The key point is that taxes on investments create distortions while taxes on consumption don't. It's even worse if you tax different investments differently (e.g., interest vs cap gains, short term vs long term cap gains).
That article has too many flaws to go into, but the whole idea of all investments growing the economy are just false. Most of the investment dollars go to areas with little to no benefit. The (secondary) stock market, derivatives, commodity speculation, forex, etc. These produce almost no jobs, produce no goods/services, and do very little (aside from marginal liquidity) for the economy. An economy build on financial magic and imaginary money isn't sound.
Such a cute - yet content-free - dismissal. It's also pretty clear from your "critique" that you didn't even read the article - while Sumner's examples do use a positive rate of return, his argument is independent of it.
> Suppose we want to raise revenue with a present value of $20,000...We could have a wage tax of 20%, and raise $20,000 right now.
OK, sure.
> In contrast, an income tax doubles taxes the money saved, once as wages, and again as capital income . So now it’s $40,000 consumption this year, and only $72,000 in 20 years ($80,000 minus 20% tax on the $40,000 in investment income), an effective tax rate of 28% on future consumption
So the line of reasoning is:
1. The government wishes to raise $20k NPV in taxes
2. A 20% wage tax or VAT will accomplish this exactly, but a 20% income tax will raise $24k NPV, which means it is an effectively higher tax
3. Therefore income taxes are worse than wage taxes or VAT.
But that doesn't follow at all. The correct conclusion is that an income tax raises the same revenue with a lower nominal rate. That doesn't by itself make an income tax better or worse.
The issue is that an income tax (which applies to both capital and wage income) taxes savers at a higher rate than spendthrifts.
I.e., if Steve blows all his money on hookers, he pays a 20% tax. However, if Sally judiciously saves her money for a rainy day or unexpected expense, she will be paying a 28% tax rate.
Since I sense (from the phrase "the rich") that you mean it as something bad: it's not. Just imagine whom would you rather lend your hard-earned money to: a wealthy investor with a proven track record, or a regular Joe. Well, that's exactly what the bank you keep your money it is doing.
Is the money the Fed lends out "hard-earned" or is it manufactured as a side-effect of fiscal policy (e.g. quantitative easing)? Does it seem right that public policy should so clearly benefit the wealthy by forcing money into the economy through private allocation experts?
There should be a way for entrepreneurs to tap into that money directly, avoiding the wealthy, gate-keeping middle-men. I resent those people, because the irony is that such people make money as money flows through them, thanks to fees, so even their wealth doesn't necessarily mean they are any good at allocation. Even if you take into account returns, in a growing economy when most bets are good bets. Money should flow through people who know how to make real things, not just make decisions.
To entrepreneurs, of course. Money doesn't beget money by magic; it needs to flow to someone who actually makes things and works, or the rate of return drops for everyone.
Which, by the way, is the entire point of the Fed reducing interest rates - to stimulate growth by encouraging increased spending (including investment) of cheaply-borrowed money.
And the oft quoted "inflation adjusted" valuation of companies proves to be misleading, which it does in the mentioned presentation. With the current climate of Feds still pumping money and keeping rates low, inflation hasn't taken off.
I'd also add that until the public validation of an IPO and some time trading on the markets, tech companies have just become investment "tokens" that hold arbitrary amounts of wealth as "valuations" that make no meaningful sense. M&A efforts are simply capturing this fanciful valuation and hoping they can sell this token off in some way for more to somebody else.
It's like putting $1 in a sock and under your mattress, claim it's worth $1million and never letting up on that claim by trying to sell your "money sock 1.0" on the open market. You might even be able to get somebody to buy your "million dollar" sock and they'll go and claim to everybody that it's worth this ridiculous amount (or even more ridiculous they'll trade you their "million dollar" hat for your sock so you can both claim private market validation). Then if the hype lives long enough, they can then sell it for $1.2million to another private buyer, or tear it up and sell it off in threads for even more "buy a genuine thread from the million dollar sock! only $1,000!".
I'm not sure public markets are a unique way of getting "real" prices. Private-equity sales are a real market with real money; if Google buys a company for $50m, that's an actual market transaction that valued the company at $50m. Is the idea that public markets provide better price discovery than private sales do? If so, is there empirical evidence that publicly traded companies really are more accurately valued than privately held companies are? (Genuine question; it's possible there is such evidence, but I haven't found a good article on the subject.)
It's a fair hypothesis to me: the public market has a larger amount of people, so more information; it also has mechanisms such as securities that benefit highly and rapidly information bearers.
But the idea that private investors' valuation is not "real" somehow sounds silly to me. The companies are still getting sold. The companies/investors that buy them have real value and expect to generate enough revenue from the acquisitions amounting at least to the acquired value.
The question then (and I think is a good one), is why private investment is getting more prevalent if public markets have more efficient valuation mechanisms. I think the answer is that private investors are more willing to 'kickstart' so to speak the early stages of startups, and from then have grown to dominate the investment market to their great benefit.
Public markets investors typically have far less information about companies than do private investors. For most technology companies, the probability of success / profit is driven more by specific company factors rather than larger industry and macro trends. Most public tech companies are understandably worried about disclosing detailed sales metrics / technology roadmap to all investors for competitive reasons; however, as part of any PE / VC backed investment process, private investors are typically given access to all of this detailed information.
Ah yes so private investors have more specific information while public market investors focus on overall market trends. But is there no way to public investors to get a glimpse of the internals of the companies without disclosure of competitive information? Maybe through some kind of report by a consultancy under NDA, or a small group of investors under NDA giving an investment report?
Under the SEC's Reg FD, public companies are required to disclose all material information to all investors at the same time. So, what you propose is not really workable under the current regulatory regime. Sometimes public companies will give extra disclosure to help investors (e.g., product line revenue, numbers of employees within each function, etc.), but often that information is not enough to truly diligence an investment thesis.
As a result, there is a slight information asymmetry penalty in the valuation; however, this penalty is dwarfed by the liquidity premium you get as a public company.
In private sales people take big chunks and have incentives to investigate the companies deeply - much of the public market is about small chunks where people don't do as deep investigations, because it would cost them more than the potential benefit. Of course in the public market there would also be some big chunks buyers that would do those deep investigations - but it is not guaranteed how big influence they would have on the price.
> Is the idea that public markets provide better price discovery than private sales do?
I think that public companies can reveal true market value quicker than private investments.
For example, VCs invest in company xyz at a valuation of $100m, they don't actually know if that valuation is "real" until the company sells. Until then, it's made up numbers. That gap between investment and sell date might be 5-10 years and until then then there's no market proving of that valuation. We've seen it time and time again that private companies can exist with no revenue or at least no profit for years or until their private fund runs dry, but can still claim a "valuation" in huge numbers, even while the market provable "value" of the company is $0.
Public stock markets tend to suss out valuation much quicker, a company might be "valued" on the market with a market cap of $100m, but miss a couple quarters or some big sales and stock holders will dump and run and the market cap can drop quickly over even a matter of days or weeks. Public investors eventually start to want the fundamentals of their companies to be good even if they start as fantasies. Reportable revenue, eventual profit (or continued revenue growth that's quickly convertible to profit in the even of market saturation)...eventually these things all have to exist, and I'd wager that an analysis of stock market prices on a company over the long run has a strong correlation to these fundamentals. I can't go and buy 1 share of Tesla at $500 and suddenly claim the company is "valued" at $60b.
But you can do that with private companies because of the information asymmetry available to private companies. There's all kinds of wonderful ways to game "valuation", but that's fundamentally different than market "value".
There's an idea that publicly traded, but unprofitable, fast-growth companies, like Tesla, with big inflated stock prices are the same as overvalued privately funded companies, but there's some fundamental differences in those valuations. If Tesla's revenue growth curve turned downwards next quarter or two, their stock price would plummet and their valuation/marketcap would arithmetic its way downward as a consequence. But a private company's "valuation" would stay the same until the next funding round/corporate sales activity, a lag time that could be years away. Thus a private valuation is more likely to be divorced from any business fundamentals than a public one, and that's simply because private company valuations are more closely tied to investor activity not business activity.
I don't see how this hype game you describe would be characteristic of private sales more than of public offerings. It is the mechanism that drives all bubbles.
In fact root of the often criticized short termism of publicly traded companies is exactly this hype game - the company management paints the sock impressively to fuel the hype.
You just described the stock market. Public tech companies that make no profit (and/or issues no yields) trade at 30 times earnings. No connection to fundamentals, but everybody just agrees that is what it should cost.
Let me guess the end game: after a number of trades, ending up with pension funds having a large count of both both the money sock and money hat threads.
You get enough people to preach it is worth $1m and you'll find many individuals really to buy 1/1000 for $900.
Done on a small scale, this would be fraud and would be illegal. But remember, it is illegal because it does work. On the large scale, you just have to wine and dine enough pension fund managers who are in way over their head.
By telling the investors that while it may look like a sock now, later it'll be a sock puppet and you can sell tickets to the show due to the network effects.
I think there's a lot of truth to that, but the one thing it leaves out of the analysis is the opportunity to exit via acquisition.
I don't have a sense of what proportion of companies that might previously have had an IPO would in recent times get acquired instead. I'd be surprised if it fully made up for the effect you describe. But I also imagine acquisition is more possible now than in the past since you now have a lot more big tech incumbents with cash to buy other companies with (e.g., who would have bought Instagram in 2000?).
Many highly valued tech companies do secondary offerings to allow average employees to get some liquidity.
Sure, the general public may not "get in early" but M&A is far less risky for both VCs and general investors. If mostly "sure things" make it to IPO, it's far less likely for the general public to be exposed to the meltdowns that made the headlines circa 2000-2001. The flipside is that until the startups IPO, the VCs and founders are exposed to most of the risk.
Yeah, but as I understand it, employees can usually only sell about 20% or so in secondary offerings. Six months after the IPO, they can liquidate 100%.
We'll never be rid of it. Like copyright law, It's crystallized into a self-perpetuating incentive structure. Everyone knows it's stupid, no individual has much incentive to try and change things. The ability to restore to a previous state is essential in the design of institutions, one lacking in our current governments. This is a very hard problem, but I'm hopeful prediction markets may be able to help with this in future governmental structures.
Yeah, but prediction markets are basically illegal, because---again---government regulation.
Prediction markets are so vastly powerful, both as a financial tool (hedging) and an information tool, that people would be screaming bloody murder if we already had them and then they were taken away.
They are illegal - because it is impossible to limit the participants to just betting on the outcome instead of trying actively to get the outcome. Imagine for example a prediction market for Obama dying this year - if the price is big enough it would become an assassination market.
I hope so. I am a big fan of bitcoin and I see it as the way to do prediction markets.
The problem is, people won't be able to use it seriously (i.e. with non-trivial amounts of money), because once you convert your earnings into fiat money, it goes into a bank, so you have to pay taxes on it, and you can't put something illegal on your taxes (well, maybe you can, people say "the IRS doesn't care," and I'm no expert, but I doubt it).
I agree, the way American government is now, I don't think there is much hope for the legalization of prediction markets. But new governments are formed from time to time and there are quite a few nations in the world so hopefully someone else legalizes them.
When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.
Frankly, we ended up with the cure AND the disease. Special purpose entities were used by Enron to muddy up its accounting so nobody could tell that it was doing stupid deals to hit its quarterly numbers and wasn't really making any money, and then they were used again during the real estate bubble on an even wider scale to mask the risks of the mortgage origination machine (with convenient help from the bone-headedness of the ratings agencies). So the "cure" really didn't seem to help the disease very much.
Instead of dumping a bunch of new reporting requirements on everybody, it should be pretty simple: increase the amount of equity capital that needs to be held against debt (i.e. force a decrease in leverage) and change the accounting rules so shit that could blow up the company by some mechanism has to show up on the balance sheet. However, the current system creates a lot more work for lawyers, accountants and bureaucrats so it seems unlikely to be simplified anytime soon.
i think your proposed requirements would be on top of existing regulations, so they would also create a lot of additional work for lawyers and accountants.
it might be that what stands behind Enron and other bubbles is a decrease in the rates of profit : and so it goes that people put stuff into more and more risky schemes in order to maintain expected growth targets; in order to do so they have to hack/find ways around existing regulations, but we know that you can hack any system of rules ;-)
All that might also be true for internet businesses : we had a big growth in tech business over the previous decades, but now it might get increasingly difficult to achieve the same rates of return (or not).
I see it as the cost of forming a startup is much lower now so they can stay private longer. Combined with VC companies and angel investors flush with money, they are keeping the companies private longer to capture more of the gains. Then there are established companies who want to stay relevant who throw money at startups with no profit in sight but cool technologies.
My guess is that in the end, problems will come when the established companies slow down in acquisitions and the VC companies and angel investors get tired of startups which can't show profit.
I see it as the cost of forming a startup is much lower now so they can stay private longer.
I don't think that is true. Sales and marketing is still very expensive. SaaS needs a lot more cash investment than traditional software, since you are only making the money back gradually. Many of these unicorn software companies are raising a half dozen rounds.
Also, the easier it becomes to write software the for the internet, the more a startup has to do. Yahoo! could get to a breakout stage just by having an HTML page full of links. That's not going to cut it these days. So I'm not sure overall if starting a company is much cheaper, even at the early stage.
I don't agree. Lots of startups don't have sales and marketing in the early stages. The grow through word of mouth or iterate/pivot to find something that becomes a hit. Somebody like Yahoo would need to buy and maintain a lot of servers to scale up but now with cloud computing, you can grow quite a bit with Amazon AWS until you implement your own infrastructure.
Obviously it varies quite a bit. Some consumer companies can spend very little on sales and marketing. But many consumer companies and nearly all B2B companies spend an enormous amount. Look at a company like New Relic. They took four rounds of venture, plus two rounds of private equity. They were spending 70% of their operating budget on sales and marketing. It was expensive the whole way. It costs a lot of money to develop a product to the point where it is better than the status quo, and then a lot more money to market it.
would love to hear examples of successful startups that did not do any marketing. especially ones that are tech/Internet startups.
also - while AWS can make infrastructure convenient to scale up, rarely is it cheaper. It certainly can feel cheaper in the beginning as its pay-as-you-go, but averaged out over N years it's not. AWS also has reserved pricing to aid with this, but most startups are not in a position to commit to either real hardware or 3 year contracts up front.
Zenefits and zenpayroll have easy to spot ads running on google right now.
Most startup's spend an enormous amount on marketing to get any traction. I'm sure there is more examples like Slack that did not use much marketing, but they are very rare.
If you build a startup and hope to iterate your way into being viral, this is bad planning in my opinion, no matter how awesome what your building is. Unfortunately, one that I had to learn the hard way.
In fact as a founder I don't think there is anything cheap or easy about it. Especially if you are trying to do anything with significant technical challenges like with computer vision, deep learning, VR etc...
> Especially if you are trying to do anything with significant technical challenges like with computer vision, deep learning, VR etc...
My view is that those are not very promising
"technical" directions, exploitations, or
"challenges".
My view: Take in data, manipulate it,
put out results of the manipulations.
Want the results to be valuable in some
important sense. For that value, want
more powerful manipulations.
Well, any such manipulations are necessarily
mathematically something, understood or
not, powerful or not. For more powerful
manipulations, proceed mathematically,
i.e., exploiting powerful classic results
and, maybe, doing some new derivations,
right, complete with theorems and proofs.
This work needs a background in
pure and applied math, but given
that background the derivations
require just ideas, paper, pencil,
and, hopefully, access to
a computer with D. Knuth's TeX
for writing up the results.
Not really expensive.
My view is that it is much better to
exploit relatively classic pure and
applied math than anything pursued
in computer science.
You don't think CV, ML/DL, VR are worth pursuing? Or are you saying that those are not "mathematically" technical? If the latter then you are decidedly wrong as proven by any number of research teams at MSFT/FB/GOOG etc...
>Not really expensive.
So applied math researchers aren't expensive? Tell that to every PhD Mathematician at Google/FB.
> Or are you saying that
those are not "mathematically"
technical?
Right. They are overwhelmingly
merely heuristic.
The methodology is to guess, with
heuristics, and then try it and find out
(TIFO method) on real data, maybe adjust,
and use it when it appears to work.
There's next to nothing in theorems
and proofs before hand that show that
the manipulations will be powerful
or yield valuable results.
There is a long history of good
applied math where, once the theorems
are proved, there isn't a lot of doubt
about how the real world application
will go. E.g., (1) GPS, (2) the earlier
version for the US Navy, (3) error
correcting coding for, say, satellite
data communications, (4) phased array
passive sonar, (5) optimal allocation of
anti-ballistic missiles to incoming
warheads, .... There's much more
making good applications of math, e.g.,
Wiener filtering, the Neyman-Pearson result
in advanced radar target detection,
in cases of engineering where,
once the engineering is done,
there's not a lot of doubt about
how good the practical
results will be. No guessing.
No TIFO. Low risk. High payoff.
E.g.,
As designed, unrefueled range 2000+ miles,
altitude 80,000+ feet, speed Mach 3+,
never shot down. Just as planned. Just
as clear from the engineering, based
on quite a lot of applied math.
Uh, for (5), really don't want to
have to use the TIFO method!
Instead, want to know with high
confidence before someone pushes
a big red button.
> So applied math researchers
aren't expensive?
For evaluating the cost of a startup,
commonly pay the founder $0.00 per year
until there is revenue or at least funding.
:-)! Sorry 'bout that.
E.g., I worked in artificial intelligence
at IBM's Watson lab. Part of the work
was to monitor the health and wellness
of server farms and their networks.
No theorems. No real guarantees
of the power of the data manipulations
or the value of the results. I did
an upchuck, derived some new math,
and published it. The math says that
we know in advance the false alarm
rate. The AI work didn't. The usual
approaches to machine learning don't
do such things because they don't
approach the work as assumptions,
theorems, and proofs.
For Ph.D. applied mathematicians
(I am one) at Google, once Google
ran a lot of recruiting
ads, and I sent them a resume and
got a phone interview.
They asked what my favorite programming
language was, and I said PL/I. Apparently
the only acceptable answer was C++.
It was clear enough that my
answer of PL/I essentially
ended the interview.
Why PL/I? It has some
total sweetheart scope of names rules.
The exceptional condition handling
is super nice (get an implicit
pop of the stack of dynamic descendancy
with just the right clean up).
The data structures are nearly as powerful
as classes and much faster in execution.
Threading (tasking)
in the language. Pl/I does
really nice things with
automatic storage -- C doesn't.
And there's more.
C++? We know the history: Unix
was a baby Multics, on an
8 KB DEC box. C was a dirt simple
language, no runtime. All function
calls for every little thing, e.g.,
string manipulations -- the first
version of PL/I was like that, but
the later versions compiled such
things and were much faster.
PL/I does just wonderful things
with arrays, but C doesn't really
have arrays.
Then C++? That was, along with Ratfor,
an example of Bell Labs liking
pre-processors. So, C++ was a
pre-processor to C. Instead, PL/I
was carefully designed.
My selection of PL/I over C++
was not wrong.
Google laughed at my naming PL/I.
The laugh is on Google. Uh, Linux
is a version of Unix which was
a baby version of Multics which was
written in, may I have the envelope,
please (drum roll), right, PL/I.
It was clear that my Ph.D. in applied
math and experience were of no interest
at all. None. Zip, zilch, zero.
C++? Sure. Ph.D. in applied math?
Nope -- worthless.
Okay. It was
Google's decision. But,
now I get to make a decision:
I'm not
impressed by the power of the role
of math at Google. At QUALCOMM,
maybe. At Renaissance Technologies,
sure. At Google, nope.
I still prefer PL/I to C++. Sorry
'bout that! But I wouldn't want
to use either language in production
now.
Now I program on Windows, not Linux,
and on Windows I use the .NET Framework.
To do that, for a language, I have
just two leading choices, C# or the .NET
version of Visual Basic (VB). The
difference is mostly just the flavor
of syntactic sugar, and I prefer
the more verbose flavor of VB.
For FB, I never applied -- it
seemed totally hopeless.
I'm doing my own startup, right,
based on some applied math
I derived as in my post here.
A few weeks ago I got
all the code running I first planned
to do. Now that the code is running,
I see a few tweaks. Then I will load
some initial data -- have been
having fun collecting some. Then
on to alpha test, beta test,
going live, getting publicity, users,
ads, and revenue.
Hopefully people
will like the results (from the
math, although users will not be
ware of anything mathematical);
if so, then I stand to have a nice
startup.
Much of my confidence in the work
is the theorems and what they say
about the power of the data manipulations
and the resulting value of the
results.
Math is supposed to be useful.
There's a long track record that
it can be.
I studied math hoping it would
be useful, and I believe that
it is for my project.
Doing some applied math might
seem unusual, but it's not
"crazy". The unusual part
indicates an opportunity.
A "name"?
For my work so far, I've not
needed a static IP address so
have not paid extra for one from
my ISP. So neither do I have
a domain name yet.
I won't get a static IP address
or a domain name until just
before I go live, ASAP.
My startup is for Internet
search, discovery, recommendation,
curation, notification, and subscription
for safe for work Internet content
where keywords/phrases work at best
poorly.
My project might become a big thing.
The user interface is just a
simple HTTP, HTML, CSS Web site,
also simple enough for
smart phones.
So, my software takes in data,
manipulates it, and sends
the user the results. The
crucial core of the manipulations
is from some math I derived
based on some advanced prerequisites
I got mostly in grad school.
Right, the users will see the
results but not be aware of
any of the math. What the
user does with the Web site
and the results they get back
will seem intuitively reasonable
and maybe even natural, but
actually doing the data
manipulations
in a way with good promise
of good results is a
challenge, one that I
addressed mathematically.
The theorems give good evidence
that with some good data the
results for the users will be good.
Given what I'm betting on this
project, I want the good evidence,
up front, long before TIFO results,
traction, etc.
My main use of italics is a common
one, mark a word as being
used in a sense maybe not the
same as in a literal dictionary
definition and, thus,
needing some caution, reinterpretation,
and/or apology.
> My guess is that in the end, problems will come when the established companies slow down in acquisitions and the VC companies and angel investors get tired of startups which can't show profit.
I think it's exactly this as well. The way I see it (and I'm a financial idiot so I'm probably totally off), the bubble pop won't be when "the stock market" decides the companies aren't valuable anymore, rather the game is up when the Big Corps (Google/FB/Microsoft/etc) stop buying.
The playing field in the private market should be leveled with the JOBS Act that will allow equity crowdfunding. Though I think the rules were supposed to be created a year after the law went into effect, and it's about 3 years later.
While in theory such a system should bring a little democracy/meritocracy to these future unicorns of tech (no longer shall VC money/equity dictate winners) in practice I think we will see snake oil salesmen and big marketing firms ruin the trust for everyone.
Keep in mind that putting money into a company is only half the equation. Getting it back out is the other half. The JOBS Act is saying anyone can invest, but those small time investors will now face the same risks employees at start ups that don't IPO face right now - their stock is worth essentially nothing.
This is also the same problem facing 2/3rds of our economy that are small businesses. They can't get access to financing for R&D because R&D doesn't produce immediate cash flow to service debt, and equity investors will never get their money out of a small business.
And the more interesting follow up, which I really hadn't thought about, was that the value is being returned privately. That explains for me why hedge funds are investing in private companies. If these companies then develop a process of 50 / 50, where if you're in at Stage X then at Stage Y you can sell 50% of your holdings and buy in at your pro-rata share. Then you can invest, get returns, and never have the company go public (caveat the number of investors rule).
But is that the right strategy? Going public sure forces you to reveal lot of things you rather not and bring in expensive SAP and KPMG guys to do SO. But considering so much "free" money flows in during IPO, wouldn't it be good strategy to go public if you can?
I would argue the point of Sarbox was to squish the IPO market. Not an unintended consequence at all.
It was done with the bigger picture of restoring retail confidence in the market. That could only be achieved by damping the oscillations.
I agree it's been a bad thing. What is odd to me is that I exepcted IPO activity to take off in a different jurisdiction, like London or Toronot or somewhere. That hasn't happened really. Instead it's just a case of some companies getting picked off by bigger ones, a couple of big home runs, and the rest sputtering along making a but if money but soaking up investors time and patience.
It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley. Before an engineer might vest after four or five years, just as the company is going public at a modest valuation. But if the company stays private, the employees are forced to go double or nothing. Either the company continues to grow, and there is a Google or Facebook like outcome with hundreds of employees getting rich. Or the company goes sideways and the stock ends up diluted to nothing. Furthermore the general public would have shared in the growth in the 1980's, but now most of the value has accrued by the time the company goes public. So for the few that make it, all the wins go to the founders and VC's, rather than having the general public get in early.