back to article Tech bubble? Pah. IPOs just return cash to early-stage investors

A internal presentation from Andreessen Horowitz aimed at its limited partners, that has to be taken with the appropriate shovelful of salt, has emerged – and the insights it reveals into the “tech bubble” are absolutely fascinating. U.S. Technology Funding -- What's Going On? from a16z Take it with a shovelful of salt …

  1. Naughtyhorse

    BP, gone?? Noes!!!!1!.. hang on...

    I have it on very good authority that there is an (as good as) infinite amount of oil left, so why would BP disappear?

    1. dotdavid

      Re: BP, gone?? Noes!!!!1!.. hang on...

      Speaking as a layman I think the oil that is there will continue to be extracted until becomes too expensive to extract and sell for a profit. This may be because there's not much left, or that other energy sources are cheaper than oil at a certain price point. This arguably is as good as an infinite supply of oil I guess; oil is likely to become too expensive before it runs out.

    2. Naselus

      Re: BP, gone?? Noes!!!!1!.. hang on...

      "I have it on very good authority that there is an (as good as) infinite amount of oil left, so why would BP disappear?"

      Yeah, the Reg sponsored a lecture by some bloke about it, wasn't there... what was his name, Jim Walsall? Tom Wurzel..?

      1. Naughtyhorse

        Re: BP, gone?? Noes!!!!1!.. hang on...

        yeah wassisface.... bit of a fuckwit if you ask me :-)

  2. Yet Another Anonymous coward Silver badge

    Private markets are private

    So only those in the club get the profits, and there are rules about who can be in the club.

    Meanwhile the great unwashed, buying shares on the public market, or with pensions invested in the public market don't see an of the profits.

    I seem to remember that capitalism was good because it efficiently redistributed wealth between losers and winners, tis looks a lot more like feudalism

    1. Anonymous Coward
      Anonymous Coward

      Re: Private markets are private

      Which is exactly why the SEC has started an investigation into Unicorn funding.

    2. Nick Kew

      Re: Private markets are private

      On the contrary, private markets are getting ever wider open. The new medium of crowdfunding means you can invest as little as a tenner without it being gobbled up in dealing charges. Or shares in many private equity funds can be bought for under a quid.

  3. Anonymous Coward
    Anonymous Coward

    Totally off topic, but...

    ...there is an interesting letter in today's Financial Times about rare earth metals. I'd like to know Mr Worstall's take on it.

    It is here:

    1. Tim Worstal

      Re: Totally off topic, but...

      Well, I know Anthony reasonably well, have done a number of trades with him, and wrote the MMTA standard contract for scandium (one of the rare earths) for him when he was Chairman there.

      So, of course, he's entirely correct.

      I might change a little of the nuance but not all that much.

  4. Nick Kew

    Sounds like they're becoming like us!

    Your description of the US market sounds like one that's moving closer to the UK model, where the stockmarket won't generally support an IPO until you're a fair bit more mature than two years, and on the other side, early-stage investors benefit from tax breaks that require them to hold longer-term. And where mature companies have traditionally paid out more in dividends than US ones.

    1. Tim Worstal

      Re: Sounds like they're becoming like us!

      Not something I'd thought about but yes, you're right.

  5. Anonymous Coward
    Anonymous Coward

    You only get a return on investment ...

    ... during an IPO because of the pump and dump scams operated by the teams involved here to artificially inflate the value of worthless companies - those with no revenue stream or profit, yet manufactured to be 'worth' billions.

  6. Naselus

    So... what you're saying is, you have a bunch of companies which don't actually make any money, and the late-stage investors money is used to pay off earlier investors with interest. And that's fine and dandy, and how capitalism works now.

    Oh, wait, no, that was what Bernie Madoff was doing, wasn't it? Silly me. I get so confused between 'perfectly fine market operations' and 'highly illegal fraudulent ponzi schemes'.

    1. Anonymous Coward
      Anonymous Coward

      Three possibilities...

      1) The companies aren't profitable, this is apparent to the careful reader, but muppet investors stampede in anyway

      2) They aren't profitable but fake it wildly

      3) They are profitable but rather closer to sedate middle-age: making money but already big so long past the stage of buy-5%-of-next-megacorp-for-a-pittance

      You'll note that the second case is Madoff, whereas what's being talked about here is the third...

    2. Gannon (J.) Dick

      Madoff - "You want fries with that"

      Ponzi - Iron Chef. Nobody could grill Unicorn like that guy. They ate it up. Not enough left to feed the dogs - which strangely seemed to be disappearing from the neighbourhood as if anyone needed positive proof of Divine approval.

  7. Anonymous Coward
    Anonymous Coward

    No oil would affect rather more than just energy products, as any fuel kno.

  8. BobRocket

    It's not quite working like that

    Established companies started to buy back their own shares to a. return shareholder value (in individual share price rise) b. trigger bonuses based on share price.

    The same companies then borrow against the company and again buy more of their own shares (increasing each shares price but not its value)

    The last stage is to IPO which dilutes the share price/value and releases capital to the existing shareholders, they then leave the building leaving the retail investors holding the bag.

    Pump'n'Dump or Bait'n'Switch it all amounts to the same thing.

  9. nijam Silver badge

    > ... another complaint that we're seeing around the place, that corporations aren't investing money back into their businesses ...

    Which makes the current criticism of Amazon - namely that it *is* doing that with its profit, rather than "splashing it all over" - somewhat ironic.

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