Re:Within the Tech Industry, an Urge to Cash Out
by pg on Monday June 20, 2011 @01:05AM
(#2672946)
"Employees have become more interested in selling, in part because companies are taking longer to go public."
More like the other way around. Companies are no longer in such a rush to do public offerings because they can now achieve the same things from a private round.
Re:Within the Tech Industry, an Urge to Cash Out
by rooshdi on Monday June 20, 2011 @02:16AM
(#2673100)
Yes, but doesn't the decreasing importance of public offerings hurt the general public now? Seems like the rich investors of private markets are going to have an ever-growing first-mover advantage in rapid-growth companies while the general public is going to be left with the stagnant or depreciating left overs. This trend may result in an even greater divide between the elite and middle to lower class.
Re:Within the Tech Industry, an Urge to Cash Out
by pg on Monday June 20, 2011 @01:20PM
(#2675087)
Only insofar as index funds buy stock in newly public cos. Retail investors who do it a la carte are going to net hurt themselves anyway. And IIRC not many index funds buy new offerings.
Re:Within the Tech Industry, an Urge to Cash Out
by rooshdi on Tuesday June 21, 2011 @04:32AM
(#2677910)
Retail investors who do it a la carte are going to net hurt themselves anyway.
This assumes there aren't any adept retail investors in the public market. There will still be an increasing number of savvy retail investors who will now be inhibited from investing in one of the most symbiotically valuable relationships in an economy, one between young organizations in need of capital and public investors looking for more relevant early investments. Instead, the growth of the private markets will dilute these investment opportunities for the public and now offer them to already rich investors. Shouldn't organizations and economies work to provide more integral investment opportunities to the general public instead of increasingly reserving these for the fortunate few?
Re:Within the Tech Industry, an Urge to Cash Out
by lsc on Monday June 20, 2011 @05:18AM
(#2673476)
this is assuming that the total expected return on those rapid-growth companies is greater than the total expected return on publicly traded companies.
I'm not sure that is the case. For every amazon, there are thousands of pets.com.
Now, amazon did make a whole lot of money, so I could be wrong; compiling reliable statistics from private companies is notoriously difficult. Personally, I think this lack of transparency is going to push the market more towards focusing on getting money from investors rather than on actual profits.
Re:Within the Tech Industry, an Urge to Cash Out
by rooshdi on Monday June 20, 2011 @06:33AM
(#2673614)
Although start-up investments may be more volatile than established company investments, the fortunate few elite will still sustain an ever-growing head start over the general public when investing. Plus, the original incentives of founders publicly trading their companies in return for critical funding needed for growth are now being replaced by rich investors who just want a large return once private market valuations have stagnated. The value of the public market is shifting from growing companies to growing wealthy investors' wallets. These developments are quite contrary to the original intentions of the public markets and are increasingly depreciating the opportunities given to the general public.
Re:Within the Tech Industry, an Urge to Cash Out
by jsmcgd on Monday June 20, 2011 @05:35AM
(#2673504)
Can we not now clearly see that this isn't a 'bubble' (an industry wide overvaluation) but a localised problem? Yes there will be ramifications if the handful of companies like Facebook's value implodes but it won't be typical industry/economy crippling fallout that follows a normal bubble popping. Agree?
Re:Within the Tech Industry, an Urge to Cash Out
by mbesto on Monday June 20, 2011 @06:07AM
(#2673562)
> Out of $946 million that Groupon raised from investors last winter, $810 million went into the pockets of the chief executive, Andrew Mason; the chairman, Eric Lefkofsky; and others.
Really? Anyone have a source to back that up? That seems a bit far fetched.
Re:Within the Tech Industry, an Urge to Cash Out
by mbesto on Monday June 20, 2011 @06:34AM
(#2673618)
I've been reading quite a few threads here on HN about Groupon and never saw this. Crazy!
Isn't the point of raising capital to grow the business? How is putting 80% of the capital into founders equity going to grow the business? Do their brains get bigger with more money?
Also as an investor doesn't the business have an obligation to tell the investor specifically what the capital is being used for? If an exec of a start-up told me that they needed capital so they could pay the founders I'd laugh at them... Am I the only one who is super confused here...?
Re:Within the Tech Industry, an Urge to Cash Out
by kinkora on Monday June 20, 2011 @08:14AM
(#2673808)
Someone correct me if i am wrong but i believe the money raised wasn't exactly "capital" per say. From what i've heard, investors for that round were basically buying stock from the founders. Think of it as a private stock market or more commonly known as the Secondary Market (http://www.investopedia.com/terms/s/secondarymarket.asp).
Not saying is the most logical thing to do for a company(from an investors POV) but perfectly legal so long as both sides agree on the transaction and follow any legal obligations.
More like the other way around. Companies are no longer in such a rush to do public offerings because they can now achieve the same things from a private round.
This assumes there aren't any adept retail investors in the public market. There will still be an increasing number of savvy retail investors who will now be inhibited from investing in one of the most symbiotically valuable relationships in an economy, one between young organizations in need of capital and public investors looking for more relevant early investments. Instead, the growth of the private markets will dilute these investment opportunities for the public and now offer them to already rich investors. Shouldn't organizations and economies work to provide more integral investment opportunities to the general public instead of increasingly reserving these for the fortunate few?
I'm not sure that is the case. For every amazon, there are thousands of pets.com.
Now, amazon did make a whole lot of money, so I could be wrong; compiling reliable statistics from private companies is notoriously difficult. Personally, I think this lack of transparency is going to push the market more towards focusing on getting money from investors rather than on actual profits.
Really? Anyone have a source to back that up? That seems a bit far fetched.
And here's the SEC filing: http://www.sec.gov/Archives/edgar/data/1490281/0001047469110...
Isn't the point of raising capital to grow the business? How is putting 80% of the capital into founders equity going to grow the business? Do their brains get bigger with more money?
Also as an investor doesn't the business have an obligation to tell the investor specifically what the capital is being used for? If an exec of a start-up told me that they needed capital so they could pay the founders I'd laugh at them... Am I the only one who is super confused here...?
Not saying is the most logical thing to do for a company(from an investors POV) but perfectly legal so long as both sides agree on the transaction and follow any legal obligations.