The layoffs at Klarna

Re:The layoffs at Klarna by mrweasel on Sunday August 14, 2022 @01:10PM (#32460930)

It's kinda fascinating really. We had a client that had only ever lost money. Their idea was pretty good, they had what I'd call a working prototype and paying customers. Our CEO happened to know one of the investors, and chatted with him about the investment and the numbers we did on a whiteboard. Even if they grew their business with 10 times the number of customers, and each customer ramped up their usage 10 times it would take 10 - 12 years to make back the money that had already been spend. That was assuming no new investments and zero cost in those 10 to 12 years. The idea that this may not have been the best investment in history was more or less brushed, as the stock price would surely rise.

VC funding is weird.

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Re:The layoffs at Klarna by runnerup on Sunday August 14, 2022 @01:18PM (#32461000)

Even if the already-invested money can’t be recouped, marginal additional investment could theoretically be with favorable (LIFO) terms offered typically offered to later investment.

So sure, acknowledge a bad $300 million bet, but then throw your next $50 million at the same bet if it looks like the best place to put a marginal $50 million.

I don’t always think investors are doing this rationally - sunk cost fallacy / gamblers paradox / greater fool theory / FOMO all play a part, but also recognize that lots of these super large investments are led by a small team using lots of other peoples money so there are ways for the decision-makers to come out closer to breakeven if much of the pot is lost.

Also with potential IPO’s and sky high rate of valuation growth over the past decade, the “greater fool theory” isn’t necessarily an irrational motivation to invest.

Not all smart investments are value-based.

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Re:The layoffs at Klarna by lumost on Sunday August 14, 2022 @01:36PM (#32461175)

A company built to operate as a 100 billion dollar behemoth can rarely transition to a 1 billion dollar success without lots of pain.

To make this transition, your going to need to crush a lot of dreams and projects. Why would the result not be a hollowed out hulk of a company?

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Re:The layoffs at Klarna by sys_64738 on Sunday August 14, 2022 @02:33PM (#32461665)

It depends on the exit strategy. The technology will sometimes be scooped up by a big fish and take the key employees with it. When folk invest VC cash then they are sprinkling it amongst many projects that will have most typically fail. A Couple making it will give them the VC investment reward.

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