I was. Friday morning at 7 30am after a long and hectic week
See, no one else noticed your harried and threadbare exterior – that’s why I am a great analyst, I cover the human dynamic as well. :?>
Its inappropriate for Fred to sell his risk position to the widower but OK for the institutions to bundle high risk positions and sell them to the widow?
For some reason, the audio doesn’t play on Firefox
works for me. Firefox 3 beta, the best thing ever
Great thoughts, but I think before this were to take place at the individual level (and I know many people are going to disagree) we’d need to redefine what an accredited investor is. The $200k/$1 million net benchmarks are no longer relevant. My grandmother has a million dollar net worth and I’d flip out if I ever found she invested in a private placement.-Wayne
We are certainly due for financial innovation in this area. There is a high chance a regulator will step in and complicate everything. I think there will be issues with founder vs VC vs private shareholder rights. As well as with independent valuation.I’m sure small-medium and bridge market PE/VC mix funds would love to spin off hedge funds that specialize in these transactions. I suspect large multi strategy funds with strong alternative asset divisions would enter as well. I fear that institutions may wish to enter this market themselves and that screams disaster waiting to happen.
Nice video Fred.I like reading your thoughts as written but seeing you say them, complete with the nonverbal cues, really fleshes things out in a way that text alone can’t.Keep up the video posts!
But if the entrepreneur sells his insider “shares” in his own start-up in order to buy a house and thereby by liquidates his vested interest in the company, doesn’t that eliminate his incentive to continue to help build the company, and thus adversly affect the other shareholders’ positions in that start-up?
Of course it does. Which is which is why the docs with vcs have terms to prevent this. I think we’ll see the thinking on founder liquidity evolve and there will be innovation, like what founders fund has doneFred
Fred,I enjoyed the most recent two video posts. However, I don’t think I’d continue consuming your content if it was mainly video and not text/picture. The big difficulty with audio is that I cannot control the consumption speed, so I can’t focus more on topics that concern me, and less on topics that don’t. I read most of you VC stuff and not a lot of your music stuff, because I am more concerned with the former. But even still, every once in a while when I find something that crosses the two topics, I can give it a moment’s glance.With video I can’t control the speed, so I’m less likely to start watching — across the board.
Agreed. Notice that usv has not made any online video investments yetFred
Two points here, first as i mentioned in your original post, this will (unfortunately) come down to regulation. thats easy to say right! But specifically, i believe, it could feasibly come down to the ‘purchasers right of action’ – these types of clauses speak specifically to the document or offering that Fred or an(other) would furnish related to said offering. Material misrepresentations and the such provide the buyer with certain actionable rights against this misrepresentation (they don’t replace those rights or remedies at law) – that place the onus squarely on the seller to construct the offering in a manner that accurately relfects (namely does not over state) the current status of the company at the time of the offering – including appropriate risk disclosures and such. My point here, is that this is no longer the venture business. This is a far cry from a PPT or even an early stage term sheet.I am currently going through an Offering in the Ontario jurisdiction that has all the hallmarks of what you are talking about. The offering – if taken up by accrediteds, a number of which cannot excede 50 individuals (FYI a trust or LP would not count as 1 but all who contribute) otherwise you are deemed public and must act as such – is not subject to the rigors of a public offering, but takes on certain of the regulatory characteristics. In summary, the offering seeks to find liquidity while remaining private.My second quick point is – that clearly one needs to look at the supply demand equation – i believe that there would be tremendous demand here for structured participation ina ‘risk reduced’ venture model. That inequality at the outset would present a set of complexities associated with pricing and such
Fred, could you explain why you have to have an exit? Why not build great companies and own them? Seems to solve so many problems.You won’t have to be at the mercy of the markets. And it would force startups to build companies that last.
Our funds come from investors who have a 10 year time horizon. I’ve held many investments for 10 years or longer and am happy to be patient but at some point we have to sell and give our investors their money back plus a returnFred
Isn’t that what dividends are for? a return to the investor. software companies (online and offline) need less and less capital to operate and grow, is it really inconceivable that software companies should at some point start returning excess earnings back to investors instead of as a rule reinvesting in the company.
Loved the video and it made me chuckle at one point where you mentioned something to the effect of qualified fund managers understanding what they were investing in….made me think about the sub-prime mortgage market and the apparent ignorance across the board by the buyers, the sellers, the ratings agencies and everyone in-between.I can see the sales call now “Hey Fidelity Asset Appreciation Fund, wanna get in one the ground floor of the next Google? You can’t miss investing at valuation levels like this!!”Sobering post over on Salon.com (http://www.salon.com/tech/h… about how our financial gerrymandering may have let us get a little ahead of ourselves……r.
Sad but true. The pros often aren’t as good as the amateurs. We are hoping that covestor will help some of the best amateurs become prosFred
Thank you for the shout out!I actually mentioned your post on my blog (There will be more later this week http://feeds.feedburner.com…. I think this video opened the discussion on individual risk. For example, the inherent risk of venture capital should be implied in acquiring a stake through a private market of “accredited investors,” much the same way hedge funds do. I thought the possibility of an ETF was a smart and logical way of lower risk and increasing capital, many Hedge funds have began to do this through SPAC’s.On a side note: Does Union Square hire interns (paid or non-paid)?
Comments (Archived):
Fred, you look pooped.
I was. Friday morning at 7 30am after a long and hectic week
See, no one else noticed your harried and threadbare exterior – that’s why I am a great analyst, I cover the human dynamic as well. :?>
Its inappropriate for Fred to sell his risk position to the widower but OK for the institutions to bundle high risk positions and sell them to the widow?
For some reason, the audio doesn’t play on Firefox
works for me. Firefox 3 beta, the best thing ever
Great thoughts, but I think before this were to take place at the individual level (and I know many people are going to disagree) we’d need to redefine what an accredited investor is. The $200k/$1 million net benchmarks are no longer relevant. My grandmother has a million dollar net worth and I’d flip out if I ever found she invested in a private placement.-Wayne
We are certainly due for financial innovation in this area. There is a high chance a regulator will step in and complicate everything. I think there will be issues with founder vs VC vs private shareholder rights. As well as with independent valuation.I’m sure small-medium and bridge market PE/VC mix funds would love to spin off hedge funds that specialize in these transactions. I suspect large multi strategy funds with strong alternative asset divisions would enter as well. I fear that institutions may wish to enter this market themselves and that screams disaster waiting to happen.
Nice video Fred.I like reading your thoughts as written but seeing you say them, complete with the nonverbal cues, really fleshes things out in a way that text alone can’t.Keep up the video posts!
But if the entrepreneur sells his insider “shares” in his own start-up in order to buy a house and thereby by liquidates his vested interest in the company, doesn’t that eliminate his incentive to continue to help build the company, and thus adversly affect the other shareholders’ positions in that start-up?
Of course it does. Which is which is why the docs with vcs have terms to prevent this. I think we’ll see the thinking on founder liquidity evolve and there will be innovation, like what founders fund has doneFred
Fred,I enjoyed the most recent two video posts. However, I don’t think I’d continue consuming your content if it was mainly video and not text/picture. The big difficulty with audio is that I cannot control the consumption speed, so I can’t focus more on topics that concern me, and less on topics that don’t. I read most of you VC stuff and not a lot of your music stuff, because I am more concerned with the former. But even still, every once in a while when I find something that crosses the two topics, I can give it a moment’s glance.With video I can’t control the speed, so I’m less likely to start watching — across the board.
Agreed. Notice that usv has not made any online video investments yetFred
Two points here, first as i mentioned in your original post, this will (unfortunately) come down to regulation. thats easy to say right! But specifically, i believe, it could feasibly come down to the ‘purchasers right of action’ – these types of clauses speak specifically to the document or offering that Fred or an(other) would furnish related to said offering. Material misrepresentations and the such provide the buyer with certain actionable rights against this misrepresentation (they don’t replace those rights or remedies at law) – that place the onus squarely on the seller to construct the offering in a manner that accurately relfects (namely does not over state) the current status of the company at the time of the offering – including appropriate risk disclosures and such. My point here, is that this is no longer the venture business. This is a far cry from a PPT or even an early stage term sheet.I am currently going through an Offering in the Ontario jurisdiction that has all the hallmarks of what you are talking about. The offering – if taken up by accrediteds, a number of which cannot excede 50 individuals (FYI a trust or LP would not count as 1 but all who contribute) otherwise you are deemed public and must act as such – is not subject to the rigors of a public offering, but takes on certain of the regulatory characteristics. In summary, the offering seeks to find liquidity while remaining private.My second quick point is – that clearly one needs to look at the supply demand equation – i believe that there would be tremendous demand here for structured participation ina ‘risk reduced’ venture model. That inequality at the outset would present a set of complexities associated with pricing and such
Fred, could you explain why you have to have an exit? Why not build great companies and own them? Seems to solve so many problems.You won’t have to be at the mercy of the markets. And it would force startups to build companies that last.
Our funds come from investors who have a 10 year time horizon. I’ve held many investments for 10 years or longer and am happy to be patient but at some point we have to sell and give our investors their money back plus a returnFred
Isn’t that what dividends are for? a return to the investor. software companies (online and offline) need less and less capital to operate and grow, is it really inconceivable that software companies should at some point start returning excess earnings back to investors instead of as a rule reinvesting in the company.
Loved the video and it made me chuckle at one point where you mentioned something to the effect of qualified fund managers understanding what they were investing in….made me think about the sub-prime mortgage market and the apparent ignorance across the board by the buyers, the sellers, the ratings agencies and everyone in-between.I can see the sales call now “Hey Fidelity Asset Appreciation Fund, wanna get in one the ground floor of the next Google? You can’t miss investing at valuation levels like this!!”Sobering post over on Salon.com (http://www.salon.com/tech/h… about how our financial gerrymandering may have let us get a little ahead of ourselves……r.
Sad but true. The pros often aren’t as good as the amateurs. We are hoping that covestor will help some of the best amateurs become prosFred
Thank you for the shout out!I actually mentioned your post on my blog (There will be more later this week http://feeds.feedburner.com…. I think this video opened the discussion on individual risk. For example, the inherent risk of venture capital should be implied in acquiring a stake through a private market of “accredited investors,” much the same way hedge funds do. I thought the possibility of an ETF was a smart and logical way of lower risk and increasing capital, many Hedge funds have began to do this through SPAC’s.On a side note: Does Union Square hire interns (paid or non-paid)?