The Shot Heard Round The Valley World

Tyler Durden's picture

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?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Rastadamus's picture

I CAN'T WAIT FOR THIS THING TO CRASH INTO A PROVERBIAL CONCRETE WALL. 

El Oregonian's picture

"Sounds like it's time to carpet-bomb target areas with fiats" -Heard in the back-room of the New York Fed.

NoDebt's picture

They're out over their skis a little.

I just made up that phrase myself.

COSMOS's picture

Yahoo should wait till AOL goes under, then it can buy the pieces for a lot less than it would pay now.

X.inf.capt's picture

this is not going to end well...

Harbanger's picture

Yep.  For the UN, the EURO group, NAFTA,  Rocka fellas, Soros and company, and all the other globalist fuckers.

0b1knob's picture

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.

Harbanger's picture

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.

ebworthen's picture

I hear Sears is interested in Radio Shack.

Skateboarder's picture

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.

TheReplacement's picture

But there is gold in toner cartridges.

BlindMonkey's picture

3d printing gold jewelry.

You might not be that far from the truth in actuality.

Bangin7GramRocks's picture

In other news, Philco is eying a merger of equals with television powerhouse Magnavox. Both stocks soar 90%.

Emergency Ward's picture

Dammit, I had my money on that old nag Zenith!

Pairadimes's picture

"Hit something hard. I don't want to have to limp away from this bitch." - Ron White

Yen Cross's picture

 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.

sleigher's picture

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.

Professorlocknload's picture

Right on, yen. I worked Silicon Valley for years as a contractor. Feast or famine. No neutral ground.

And boy, can it happen fast!

Yen Cross's picture

  In the blink of an eye... VC funding almost always locks in majority share(drawing rights) & top Officer spots on the board of directors.

Eireann go Brach's picture

AOL is that cheap whore that everyone bangs at the weddings!

Georgia_Boy's picture

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.

BlindMonkey's picture

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.

Dewey Cheatum Howe's picture

The consolidation into a few small hands through mergers under the guise to boost revenues when the economy is tanked begins.

Barnaby's picture

If one has invested wisely he will be rich for the rest of his life. This was predictable, and was predicted.

Dewey Cheatum Howe's picture

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.

chubbyjjfong's picture

Who will be the first "Big Swinging Dick" to get out and who will be their "Bitch".

I am Jobe's picture

Dell has bee doing this for a few years now and have not gotten anywhere. I guess the Whores are worn out 

duo's picture

So is Oculus worth $2B or not?

knukles's picture

Depends on how you see it ....

Barnaby's picture

That's a bit myopic, you freak.

NoDebt's picture

I think they're lacking the vision to make that venture profitable.

Yen Cross's picture

    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.

Skateboarder's picture

As gay as it is, I like normal reality just fine thank you.

Yen Cross's picture

 I'm really gay Skateboarder. +1

  Where's my box of Fags?

 Just kidding, I only smoke the occasional Cigar.

Skateboarder's picture

+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.

WhackoWarner's picture

YO  ??

run that by me again. 

Bangin7GramRocks's picture

It's a screaming buy at 2 billion. Hush number was 10. Bar room rumor had it at 25! Buy! Buy! Buy!

Harbanger's picture

:) 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.

natty light's picture

Visibility looks a bit myopic.

Oculus Sinister -3.5

umdesch4's picture

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.

TheReplacement's picture

I think it makes the girls legs look fat... fail.

Fix It Again Timmy's picture

I was at a merger [AOL-Time Warner] meeting and Steve Case was pounding the table, saying "The stock will go to $200+"... Bawhahaha..... 

Barnaby's picture

You've got hate!

agent default's picture

WOW! Now this is news I can really jerk off to.

besnook's picture

bs. this program is ending and direct wage subsidies are next. election year says the floodgates of .gov money is just beginning.

Make_Mine_A_Double's picture

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.