This page has been archived and commenting is disabled.
The Shot Heard Round The Valley World
Submitted by Mark St. Cyr
The Shot Heard Round The Valley World
The greatest issue facing Silicon Valley is the one thing many newly minted and aspiring entrepreneurs have taken for granted: the money.
Many believe this gravy train of a never-ending Venture Capital/Angel Investor class will not only always be there, but the ranks will swell becoming even larger with burgeoning pocketbooks filled with their own newly minted IPO greenbacks.
Problem is for a great many, they have never seen the real Jeckyll and Hyde personality of “investor funding.”
Initial Public Offerings (IPO) has been the rallying cry for many over the last 5 years to the detriment of what it really means to be an entrepreneur. (i.e., creating something that becomes bigger than one’s self)
The term has now morphed into something akin to: I’m going to push this idea, get it funded, IPO it, and cash out! Rinse – repeat. For I’m a “Trep!” (For those not familiar with the term, it’s the newest self-appointed moniker for the person who seems to be following this pattern of entrepreneurship.)
For what it’s worth, this style of thinking about entrepreneurship from my perspective is very worrisome. The reason? It’s only about the “Benjamins.”
Is there anything wrong with that? Absolutely not. However: If your purpose was to bring a real company, (what ever the field,) run and grow it to its full potential you’ll find too your detriment – money alone will not do it. Regardless of how much.
And, if your sole focus for your existence hasn’t been on sales, customers, and net profit. Or, you’ve been lackadaisical in any other manner because the dominating thought in your mind is – “I just need to get another round, then I can IPO and be through with this?” Your time is probably up.
Come this October the Federal Reserve will make its final tranche of QE available. The amount assumed by many is that it will be 50% larger than what we’ve seen over these last years. ($15 Billion as opposed to $10)
One may see an increased flurry of buying into anything and everything that has even the slightest possibility of making a profit. Or, what Wall Street cares about even more; a growth story that can be perpetuated via financial engineering that sticks during earnings seasons.
But, one shouldn’t read into this as “confirmation” the risk appetite story is not only alive but growing. For that is all about to change.
Once the Fed shuts down the section of QE that has been pumping Billions upon Billions of dollars every month – it’s over for a great many of today’s Wall Street darlings.
Think of it this way: Who is going to fund your next round when they no longer have access to the Fed.’s piggy bank? Let alone pump more money into older start-ups that just haven’t produced any real money (as in net profit,) but have produced nothing more than great new employee digs or benefits?
Tack along side this the culture shock in what will seem near instantaneous with the shunning that will take place of any business resembling the, 3 employee, menial customer base, Zero if not negative profit margin businesses formed with the implicit intent as to be bought up or “acquired” for Billion dollar pay days.
These will be the first to go. That formulation is going way of the now infamous Pets dot-com sock puppet. This will be the first true shock to Silicon Valley culture that hasn’t been seen in many years. And it will be far from the only one.
Many will point directly at the darling of both Silicon Valley as well as the touchstone of riches for aspiring entrepreneurs; Facebook™ (FB) as proof this line of thinking is off base. And why shouldn’t they? The price has never been higher.
Yet, what many shield their eyes from and a great deal more turn their heads from entirely is what I and very few others have been arguing: “It’s all been possible via the Federal Reserve’s interventionist policies.” And the greatest source of that inflow of cash made available via “investors” is about to be shut down.
Let me go on the record here and point out what I believe will prove my point in the coming weeks and months.
Currently Zuck and crew have been lauded over with the prowess in its acquisition choices. You will know everything has changed when the calls to rescind Mark Zuckerberg’s authority in having carte blanche via not needing board approval for acquisitions going forward is demanded by Wall Street.
And that won’t be the only monumental shift coming. Maybe, one at an even faster pace: The meaning of IPO.
IPO is not going to have the same term of endearment it now has. I believe it will turn into the last and most dreaded three-letter acronym no one ever imagined in Silicon Valley.
The IPO screams of joy will turn into wails of terror when those VC “angels” meet at many “treps” desk and state – they’re IPO-ing.
No, not getting one set up for the big pay-day. No IPO will mean: “I’m pulling out.” i.e., “Have a nice day. Where’s the rest of my money?”
The once renowned purchases of “Billion dollar babies” will prove out not to be worth two cents in this environment.
Valuations will get crushed and people will be shocked at just how fast a company touted across the financial channels and other media as “fantastic buys” are flogged and fleeced when Wall Street comes back for their “investment.”
If the story or the numbers aren’t there – neither will these once darlings of Wall Street. Regardless of size or stature.
People will continue pointing at FB and others as proof that this whole idea of what I’m professing is off base. Again, they’ll point to the stock prices and say, “Look! During the recent sell off some they went higher! This proves, blah, blah, blah.”
What it proves is this in my opinion: It’s a last gasp effort to have exposure in these companies during this newest round of earnings season. i.e., As to have the possibility (more inline with hope) of any earnings windfall, whether it be real, or financially engineered. Because: There isn’t going to be another shot after this one. The money to take these stylized chances will no longer be there. Period.
I watched and read many viewpoints on what has now been circulated throughout Silicon Valley as the “tweet storm” unleashed by well-known Silicon Valley sage Marc Andreessen where he ended his views with the word “WORRY.” I believe he is spot on.
Many in the so-called “know” of any and all related to Silicon Valley pontificate that his alarm bells are a little “over the top.” Some have stated in rather condescending tones that “It’s not like the current crop of Silicon Valley has never had issues with funding. I mean, it was hard in 2009.”
Oh yes, it was – for about a week!
I would remind everyone to remember what took place in 2009? The birth of QE. Then it was off to the races. Or should I say “coding?” And as of today there has been no need to look back. Until now.
This next bout of what I believe to take place will not be limited to just the small-sized, or start-up class. It will be just as abrupt of a sea change for the current crop of Wall Street darlings that have produced what many have seen as “skeptical” results. e.g., FB, Twitter™, Pandora™, LinkedIn™, et al.
They are going to face harsh skepticism this earnings release period. Far more, and certainly more harsh or critical than any previous in my opinion.
The reasoning is: With no more “free money” pouring in from the Fed. for “investors” to slap around anywhere and everywhere in the hopes of something sticking. They’re going to do what anyone would do. Buy Nothing – Sell Anything and everything that isn’t making real money. For they are well aware their bankers or margin clerks – don’t accept “likes” as legal tender for deposits in their accounts either.
One last thing: If you think all this “worry” stuff is just nonsense. Let me leave you with this one line…
Yahoo™ just announced it’s interested in AOL™.
Feel better now?
»
- 16995 reads
- Printer-friendly version
- Send to friend
- advertisements -
I CAN'T WAIT FOR THIS THING TO CRASH INTO A PROVERBIAL CONCRETE WALL.
There aren't enough printer toners in the world to keep this ship afloat....
"Sounds like it's time to carpet-bomb target areas with fiats" -Heard in the back-room of the New York Fed.
They're out over their skis a little.
I just made up that phrase myself.
Yahoo should wait till AOL goes under, then it can buy the pieces for a lot less than it would pay now.
this is not going to end well...
Yep. For the UN, the EURO group, NAFTA, Rocka fellas, Soros and company, and all the other globalist fuckers.
According to rumors, Softbank has considered buying Yahoo. Yahoo has a lot of Alibaba money burning a hole in their pocket. You just know they will do something stupid with it.
Softbank invested in Alibaba 10+ years ago and did well. I remmber at the time people thought it was wild speculation but it worked out for them. Japan is tied to the wests's financial ponzi, China is not. Of course I think they will do something stupid like buying yahoo, easy money comes and goes.
I hear Sears is interested in Radio Shack.
My homie works for a SF startup that makes baby house-arrest monitors:
http://www.sproutling.com/
The team is broken due to an abusive managerial figure, so my homeboy's gonna bounce, but this is the typical SF startup for you: making useless things to bring on an onslaught of invasion and predation.
+++
But there is gold in toner cartridges.
3d printing gold jewelry.
You might not be that far from the truth in actuality.
In other news, Philco is eying a merger of equals with television powerhouse Magnavox. Both stocks soar 90%.
Survivorship bias!!
Dammit, I had my money on that old nag Zenith!
"Hit something hard. I don't want to have to limp away from this bitch." - Ron White
I've known many a V.C. in my time. I can assure you that most venture funding is based on getting in and out quick.
As soon as there's any significant rise in risk, the lenders(VCs) have protected themselves, and will take back not only their funding capital, but also the companies they funded, and liquidate them for pennies on the $.
It's a numbers game folks.
I have been the guy that shows up to work to locked doors and no paycheck. Yes, this is exactly what happens. They didn't earn the name Vulture Capital for nothing.
Right on, yen. I worked Silicon Valley for years as a contractor. Feast or famine. No neutral ground.
And boy, can it happen fast!
In the blink of an eye... VC funding almost always locks in majority share(drawing rights) & top Officer spots on the board of directors.
AOL is that cheap whore that everyone bangs at the weddings!
I think Facebook is going to be AOL's younger sister. Zuck has to know all the scams behind social media, that the billions are just funny money, and he doesn't truly have the staying power of established corporations of his market cap range. He will see when the tide is about to turn, and try to use the funny money to buy a more established business line to fall back on a la AOL/Time Warner. When Facebook tries to buy a media giant, that's the jump the shark moment.
I keep wanting to short it but I have the feeling that is going for the falling knife. I will get cut and cut bad by trying.
The consolidation into a few small hands through mergers under the guise to boost revenues when the economy is tanked begins.
If one has invested wisely he will be rich for the rest of his life. This was predictable, and was predicted.
Yep but when you are sitting on plenty of QE stimulus money you buy before the blood is in the streets because when it is all that money ain't worth shit at that point except maybe to turn it in for newly issued/foreign currency and get pennies on the dollar that point. We are in the last stages of the shitshow when the mergers and acquisitions overtake the IPOs to move the markets.
Who will be the first "Big Swinging Dick" to get out and who will be their "Bitch".
Dell has bee doing this for a few years now and have not gotten anywhere. I guess the Whores are worn out
So is Oculus worth $2B or not?
Depends on how you see it ....
That's a bit myopic, you freak.
I think they're lacking the vision to make that venture profitable.
Just a week before paying $2 billion to buy Oculus VR--maker of the Oculus Rift virtual reality headset--Facebook founder Mark Zuckerberg tried out Sony's own virtual reality headset, Project Morpheus, it has been revealed.
How can you play Farm Ville without Oculus? I'm getting virtual "hunger pains" as I type this post.
As gay as it is, I like normal reality just fine thank you.
I'm really gay Skateboarder. +1
Where's my box of Fags?
Just kidding, I only smoke the occasional Cigar.
+1 Yen, I decided to permanently stay in gaysville too.
No longer put fags in my mouth - kicked that habit, fortunately.
The occassional winter-time ceremonial bowl of pipe tobacco in my churchwarden is quite the enjoyable experience, especially with some nice whiskey.
YO ??
run that by me again.
It's a screaming buy at 2 billion. Hush number was 10. Bar room rumor had it at 25! Buy! Buy! Buy!
:) Right now, physical Silver is the only real screaming buy at 17+. The physical PM market will drive this. You will not be saved by worldly gains, thank the Lord every day and you will be blessed, otherwise all your gains will be taken from you. I wish good fortune and strength for all my brethren.
Visibility looks a bit myopic.
Oculus Sinister -3.5
It depends entirely on whether or not www.oculusrealporn.com catches on or not. If it does, I'm pretty sure $2B is seriously undervalued.
I think it makes the girls legs look fat... fail.
I was at a merger [AOL-Time Warner] meeting and Steve Case was pounding the table, saying "The stock will go to $200+"... Bawhahaha.....
You've got hate!
WOW! Now this is news I can really jerk off to.
bs. this program is ending and direct wage subsidies are next. election year says the floodgates of .gov money is just beginning.
Why is Starboard pushing Yahoo (worthless POS with BaBa folding money) to buy AOL (an even more worthless POS) for 3.5 billion??
Wait - Starboard owns a good chunk of AOL and want to cash out of that POS before they crash out of Marissa's POS.
I am just curious as from the peanut gallery both of these seem to belong in the 1980's and are just chips on the table and in of themselves (less some assets) are totally worthless.
New normal. When you pump mindless liquidity into the system, nothing is strange.
I've been inside AOL headquarters in Virginia. The place is completely empty, minus a few programmers diddling around, playing computer games
Been in the warehouse where they keep the dial up modem banks?
I don't care. it is an insane world get over it. put your money into whatever you want buy a lama farm or open a used tire shop in a suburb if you can source used tires you are set for life. stocks are for people who have no other initiative.
AOL is an interesting company because they built out their own internet back in the 90's...which is still true today.
In other words they're not ".com" but ".aol" from what the telecom people have told me.
Can't say that makes them worth what is being paid (they did buy Time Warner for 100 billion I believe.). That does give them an asset no one else has: their own network.
Everything else is owned by the NSA as I understand it.
Black swan siting.
An American, not US subject.
GPIF will buy them there ipo thingies.
I thought the fed would never, ever taper. Do we believe this end of QE in october is for real?
No one really believes that, they will end QE and rename it to something new. . . "Twist" or "Twirl" or some other BS.
Twerk. Yeah, twerk it baby!
imo they will untaper within a year. stealth qe is also ongoing via various foreign and domestic entities.
Somehow I feel this connection with that Suckarock guy, I don't know what it is.
"feel better?"
yes
GPRO should double next week ????
"Doctor , help !
The Dollar needs ObamaCare , stet ."
AOL still exists?
Yes, and it's so fucked up that Netflix can't send e-mail to customers with aol.com addresses.
Don't ask how I happen to know this.
AOL is systemically important. We won't let it fail
I can just hear the new jingle... A-hooooole!
Don't worry if all your pension plans don't invest in these cesspools of greed they will soon enough to keep the dream alive
That is if treasuries or bonds don't beat them to their last red cent
You know the old saying better dead than red
So go green
Everyone I know got out at 14k and are chilling with big fat grins
I sell them alot OF spensive shit luchee :)
Gotta bounce!
forgot the " of " man
yah fucking drugs are harmless
Actually, I have some connections in SillyCON Valley and those I've spoken with think this bubble is a complete farse. Last one seemed more real because there was a sense that true innovation was occurring, this one is just a pile on effort to get those dead presidents.
whoaaa...AOL is still trade marked...did not know that...and Yahoo too...I'll be damned...thought all those letters were available again....
I still think you go back to the value-add argument. Where does someone or a company add value? For the commodity companies (mining or drilling), the value is in the execution. The problem I have with Silicon Valley is that the stuff may be innovative, but it can be replicated quickly. So where exactly is the value-add?
An entrepreneur's job is to see value where others do not. So just ask these people, where do you add value and how can someone replace you? If it's someone like Pandora... great you have an internet music service, but apple has the same thing for free, so should I bother with you? Am I supposed to buy that an algorithm is a differentiator?
But on the "fed is no longer going to pump" argument. The Fed wasn't pumping leading up to the last bubble. The leverage increased. And that's what's missing here: the pumping from the Fed could be replaced with leverage and this insanity could go on. If you're waiting for this shit to pop in the very short term, you're the sucker.
Value addition and barriers to entry for competition are two entirely different things. True, an investor would be interested in both, but that doesn't mean they are the same. The problem with technology companies today is few want to find out what the consumer is willing to pay for receiving a service, so practically everything is free of charge. When alternate sources of revenue dry up and these service providers have to depend on the consumers paying for their services we will know exactly which of these services was adding what value.
Yahoo and AOL: The bottom feeders of the Internet.
Poison Pill?
Yahoo is one strange bastard company already. If you think about it, it’s like two companies merged together which both have bad business strategies. The smaller part is a flailing old internet blog/news/social media/marketing/webhost/whatever, with no competitive market share or position whatsoever. With or without AOL, this whole mash sits like a wart on the ass of the other much bigger part of Yahoo, which for all practical purposes amounts to a growth ETF with only one large holding in BABA (so much for diversification here). The worst thing is, there is nothing the management of Yahoo can do that will have a substantial impact on the future price of YHOO. They have effectively been marginalized by their BABA investment which is all in the hands of Alibaba. Frankly, I think you could eliminate the entire senior management team at Yahoo, let the middle managers run wild with crazy ideas and projects, and no one in the investment industry would really care as long as they didn’t break any tax laws or get arrested for something. Alternatively, it seems to make more sense for Alibaba to just buy out Yahoo with a share swap and then either integrate the wart into their U.S. marketing strategy or possibly spin it off to a willing buyer.
Yes, they should have kept doing the funny yahoo commercials instead of becoming an awful commercial.
It's not on YAHOO "news"!
hardware service and realestate
.
make the world go round bitchez
Yahoo and AOL deserve one another! Great job, USSA. Another fucking IPO where there is no product manufacturing. Go BRICS!!
Just think of all the 9600 baud modems Yahoo will acquire from AOL - why, that alone is a goldmine!...Bawhahaha.....
Typical silicon valley cannibalism. The 2 companies will merge and effectively one company with two names and 1/2 the people will emerge.
China doesn't need yup valley tech and usa tech sold, robbed and funneled for the good of a stifled stagnant usa retarded tracking tech market which is all the mind numbing usa will get. You can stop thinking now along with doing and enjoy the technocratic feudalism applied.
If Yahoo and AOL merge, will it be called A-Hole???
You can all be rich.....just plug into the Matrix, relax, feel good, if its happening in your mind its real isn't it? and if it isn't does it matter? ......enjoy.
Silver Surfer coming to town? This presumes QE is actually over.
AOL gots cooties.
Yahoo gots Ebola.
A match made in heaven.
TechCrunch has sucked since AOL acquired and it will be hilarious to see the stories if Yahoo does acquire AOL.
Here is what Marissa should learn to say:
?????????Because it never gets old.
http://www.youtube.com/watch?v=mcSujceZDmg
Of course the overall context of the article is correct, FB and the likes the social sites that are no more then good Web applications will collapse from their current valuations.
I simply doubt QE will ever end, or, better yet, it will only end in tragedy for the financial sector.
So it will be not now exactly that the all above mentioned scenario will take place.