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‘Crowd’ Sites Let Startups Tap Small Investors’ Cash

http://www.wsj.com/articles/crowd-sites-let-startups-tap-small-investors-cash-1423446571

 

"The moves are a sign of the intense desire among small investors to try to cash in on the technology industry’s gold rush. Rather than wait for up-and-coming firms to go public, these investors are pouring money in much earlier, hoping for supersize returns if a company becomes a hit."

 

How to profit from this bubble before the burst? ;D

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‘Crowd’ Sites Let Startups Tap Small Investors’ Cash

http://www.wsj.com/articles/crowd-sites-let-startups-tap-small-investors-cash-1423446571

 

"The moves are a sign of the intense desire among small investors to try to cash in on the technology industry’s gold rush. Rather than wait for up-and-coming firms to go public, these investors are pouring money in much earlier, hoping for supersize returns if a company becomes a hit."

 

How to profit from this bubble before the burst? ;D

 

Plenty of signs it burst last March

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‘Crowd’ Sites Let Startups Tap Small Investors’ Cash

http://www.wsj.com/articles/crowd-sites-let-startups-tap-small-investors-cash-1423446571

 

"The moves are a sign of the intense desire among small investors to try to cash in on the technology industry’s gold rush. Rather than wait for up-and-coming firms to go public, these investors are pouring money in much earlier, hoping for supersize returns if a company becomes a hit."

 

How to profit from this bubble before the burst? ;D

 

Plenty of signs it burst last March

 

I didn't notice.

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‘Crowd’ Sites Let Startups Tap Small Investors’ Cash

http://www.wsj.com/articles/crowd-sites-let-startups-tap-small-investors-cash-1423446571

 

"The moves are a sign of the intense desire among small investors to try to cash in on the technology industry’s gold rush. Rather than wait for up-and-coming firms to go public, these investors are pouring money in much earlier, hoping for supersize returns if a company becomes a hit."

 

How to profit from this bubble before the burst? ;D

 

Plenty of signs it burst last March

 

I didn't notice.

 

I talked to a VC about a year ago about selling a tech company.  He said that valuations had fallen through the floor and I could only expect 10x sales compared to 20-30x sales a year earlier.

 

To stodgy old value investors 10x sales is probably considered high.  But when valuations fall 60% or more I'd say that's significant.  Keep this in mind, valuations are much different for young and growing companies verses a larger stable mainline company.  A startup might have 50% YoY sales growth, something you're not going to see at KO.

 

On a ski lift I spoke to someone who was ranting and raving about the 'second tech bubble'.  He is an engineer at a mega-corp, very stable job, risk adverse type.  He lived in SV during the first bubble and was visibly frustrated that his friends who went into tech became rich through options and IPO's whereas he never did.  All he got to do was attend the parties.  He felt like this was even worse.  To me it sounded like someone who missed out and wanted everyone else to suffer.

 

In the 90s the market was ahead of itself.  There were companies with no profits on the back of unproven business models.  We wanted things like WebVAN to work, but it wasn't feasible, the infrastructure wasn't in place.  Now 15-20 years later we're seeing companies implement some of the ideas we had back then.  There's a difference, these companies now are profitable and are growing.  Clearly the market is excited about them and has given some high valuations, but there is the potential to grow into them whereas Pets.com never was going to.

 

Maybe a poor analogy but look at the chemical companies in the 60s (I think).  They were the high tech bubble stocks of back then.  All sorts of promises of a better future.  They were clearly a bubble.  Then 20 years later in the 80s those dreams were implemented and you had a second wave in many ways.  But the companies in the second wave grew into the dreams everyone had from the 60s and earned their valuations.

 

Rather than worrying about tech stocks being in a bubble I think value investors should be looking at tech stocks and wondering which new companies are doing to destroy their old mainline blue chip shares.  A few years ago no one would have thought that the taxi business could be disrupted, and suddenly here we are.  It's when industries such as the taxi industry are disrupted that one realizes we're on the edge of a true transformation.  Step into many businesses today and you'll realize that they're tech companies with an old fashioned facade. 

 

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‘Crowd’ Sites Let Startups Tap Small Investors’ Cash

http://www.wsj.com/articles/crowd-sites-let-startups-tap-small-investors-cash-1423446571

 

"The moves are a sign of the intense desire among small investors to try to cash in on the technology industry’s gold rush. Rather than wait for up-and-coming firms to go public, these investors are pouring money in much earlier, hoping for supersize returns if a company becomes a hit."

 

How to profit from this bubble before the burst? ;D

 

Plenty of signs it burst last March

 

I didn't notice.

 

I talked to a VC about a year ago about selling a tech company.  He said that valuations had fallen through the floor and I could only expect 10x sales compared to 20-30x sales a year earlier.

 

To stodgy old value investors 10x sales is probably considered high.  But when valuations fall 60% or more I'd say that's significant.  Keep this in mind, valuations are much different for young and growing companies verses a larger stable mainline company.  A startup might have 50% YoY sales growth, something you're not going to see at KO.

 

On a ski lift I spoke to someone who was ranting and raving about the 'second tech bubble'.  He is an engineer at a mega-corp, very stable job, risk adverse type.  He lived in SV during the first bubble and was visibly frustrated that his friends who went into tech became rich through options and IPO's whereas he never did.  All he got to do was attend the parties.  He felt like this was even worse.  To me it sounded like someone who missed out and wanted everyone else to suffer.

 

In the 90s the market was ahead of itself.  There were companies with no profits on the back of unproven business models.  We wanted things like WebVAN to work, but it wasn't feasible, the infrastructure wasn't in place.  Now 15-20 years later we're seeing companies implement some of the ideas we had back then.  There's a difference, these companies now are profitable and are growing.  Clearly the market is excited about them and has given some high valuations, but there is the potential to grow into them whereas Pets.com never was going to.

 

Maybe a poor analogy but look at the chemical companies in the 60s (I think).  They were the high tech bubble stocks of back then.  All sorts of promises of a better future.  They were clearly a bubble.  Then 20 years later in the 80s those dreams were implemented and you had a second wave in many ways.  But the companies in the second wave grew into the dreams everyone had from the 60s and earned their valuations.

 

Rather than worrying about tech stocks being in a bubble I think value investors should be looking at tech stocks and wondering which new companies are doing to destroy their old mainline blue chip shares.  A few years ago no one would have thought that the taxi business could be disrupted, and suddenly here we are.  It's when industries such as the taxi industry are disrupted that one realizes we're on the edge of a true transformation.  Step into many businesses today and you'll realize that they're tech companies with an old fashioned facade.

 

Why do that when you could just throw it all on the "too hard pile" and take solace from social proof from all the other posters here who use the same phrase?  ::)

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"For example, if Mr. Penchina and 98 chosen syndicate members invest $1 million in a company that is bought later and generates a $100 million return, he would make $15 million from his original $25,000 bet. AngelList would get $5 million, while the remaining investors would divide $80 million."

 

It would seem that the real money is in facilitating the investments. If anyone is more familiar with AngelList, what is their risk in this, why do they get a 5% return on the investment when it doesn't seem they made an investment in the first place.

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‘Crowd’ Sites Let Startups Tap Small Investors’ Cash

http://www.wsj.com/articles/crowd-sites-let-startups-tap-small-investors-cash-1423446571

 

"The moves are a sign of the intense desire among small investors to try to cash in on the technology industry’s gold rush. Rather than wait for up-and-coming firms to go public, these investors are pouring money in much earlier, hoping for supersize returns if a company becomes a hit."

 

How to profit from this bubble before the burst? ;D

 

Plenty of signs it burst last March

 

I didn't notice.

 

Pull up charts of FEYE, ZU, P, N, WDAY, YELP

 

Who knows, maybe March 2014 was just a bump in the road, and I agree with Nate that many of these companies have business models far superior to what was proffered up in the late 90s (WDAY in particular in that bunch), but I wouldn't be surprised to see March 2014 as a peak for many of these names (at least for a long, long time).

 

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"For example, if Mr. Penchina and 98 chosen syndicate members invest $1 million in a company that is bought later and generates a $100 million return, he would make $15 million from his original $25,000 bet. AngelList would get $5 million, while the remaining investors would divide $80 million."

 

It would seem that the real money is in facilitating the investments. If anyone is more familiar with AngelList, what is their risk in this, why do they get a 5% return on the investment when it doesn't seem they made an investment in the first place.

angelList appears to be acting as an IB or merchant bank here. it's common for merchant banks and some IBs to get a piece of the equity for facilitating the transactions. just a guess from what I see in this paragraph.

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If you look at twitters cost, they got almost 800m$ of R&D costs. That is such a massive number. What do they do with that money? Do they pay like a huge amount of smart people a lot of money to sit in a building and think very hard how they can make a profit? What is that staggering number actually spent on?

 

Elon musk actually spent less, and he managed to build rockets that go into space. And they only have a few thousand employees. It seems kind of absurd to spend that much for a company with a website where people can say shit in less then 140 characters. It is a glorified chat website.

 

Ok here is a credible explanation:

http://www.businessinsider.com/twitters-research-and-development-costs-2013-10?IR=T

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I talked to a VC about a year ago about selling a tech company.  He said that valuations had fallen through the floor and I could only expect 10x sales compared to 20-30x sales a year earlier.

 

To stodgy old value investors 10x sales is probably considered high.  But when valuations fall 60% or more I'd say that's significant.

 

IPO valuations may or may not have fallen 60%. Public market valuations definitely did not fall 60% and are at the highest levels ever, second only to the tech bubble.

 

Most likely the VC just saw a patch of weaker quality IPOs that didn't deserve ultrahigh valuations.

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If you look at twitters cost, they got almost 800m$ of R&D costs. That is such a massive number. What do they do with that money? Do they pay like a huge amount of smart people a lot of money to sit in a building and think very hard how they can make a profit? What is that staggering number actually spent on?

 

Elon musk actually spent less, and he managed to build rockets that go into space. And they only have a few thousand employees. It seems kind of absurd to spend that much for a company with a website where people can say shit in less then 140 characters. It is a glorified chat website.

 

Ok here is a credible explanation:

http://www.businessinsider.com/twitters-research-and-development-costs-2013-10?IR=T

 

Twister's pay package is REALLY good. I felt sorry to have missed this boat. I was looking for a new job in 2013 and it was just two months too late for Twitter as they prepare for IPO and started hiring freeze.

 

My other friend got into Twitter and got a stock compensation of 10000 shares per year for the first two years. This is in addition to the base salary and annual bonus. So the total annual package could easily be north of $0.6 Million.

 

This makes Microsoft's pay to be really miserable as it is in the 100k range.

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