
Secondary shops flooded with unicorn sellers - ap3
http://techcrunch.com/2016/02/18/secondary-shops-flooded-with-unicorn-sellers
======
danjayh
I think that this is just the beginning. In my opinion, we're heading for a
tech bust that's going to spread to the rest of the economy, and deflate
additional bubbles (housing, for one). The government has been pushing cheap
money for the better part of a decade in the name of creating the appearance
of a 'recovery', but what they've really done is build a new house of cards.
Make no mistake: the 'free' money that's been gushing into major institutions
under the current administration is just as distortive and will be just as
disastrous as the 'free' money that the last administration encouraged banks
to put into the hands of sub-prime individuals.

Maintaining a near-zero interest rate creates artificial demand, and
encourages investment of capital in inefficient enterprises. The thought
process is "hey, I _lose_ value with money in the bank. I'd be better off if I
found something -- _anything_ \-- else to do with it!"

I think that once things take a turn, housing will also turn again, because in
many areas the median house now costs enough that it's beyond the reach of the
median person. That environment is unsustainable over a large time scale.
Ultimately, we'll need a correction that sticks if we want to avoid repeating
these events, and for that to happen we'd need a government willing to
tolerate a politically unpalatable permanent reduction in asset prices.

(edit/note: I do find it odd that under a Democratic president, the major
flows of borrowed cash (debt) have been directed to the big guys, while under
a Republican president, they were directed to the little guys. Both were a
terrible idea, but it seems backwards for what one would expect.)

~~~
sawthat
I predict, that in the future, there will be a recession. Also, at some point,
an economic boom. Feel free to quote me on that.

I am unable to give exact dates, but there is a 25% chance that it will begin
in the spring (what year, I cannot say)

~~~
danjayh
I'll nail it down a little for you. I think it's going to be within two years,
based purely on asset valuation : income ... which isn't a particularly
sophisticated way to analyze it, but when people can't afford things anymore,
they stop buying them, and that has predictable effects.

~~~
enraged_camel
I think you should both put your money where your mouths are: longbets.org

~~~
nostrademons
Don't even need Longbets; just invest in or short the stock market.

~~~
clock_tower
Shorting is very risky, since the downside risk is unlimited if you guess
wrong. (Imagine shorting Microsoft based on the low quality of their code,
sometime around MS-DOS 1.0.) It's better to buy businesses that will go up
when the market goes down, or ones that are recession-proof in general, while
avoiding cyclically sensitive businesses and, especially, any sectors that are
about to have bubbles burst in them.

If the near future is the unicorn version of the dot-com bubble, its aftermath
would be a good time for tech stocks you're interested in.

~~~
nostrademons
Options, then. Buy a put option and your downside is limited to the cost of
the option; you just get nothing if it's out of the money.

My point is that there are plenty of financial instruments that exist
precisely so you can "put your money where your mouth is".

~~~
sk5t
Options vs. shorting are just two different ways to risk all your capital on a
bet... the "unlimited" downside of a short position has a practical limit--
it's when your broker forces your account to cover with buys (the short
squeeze) and you zero out.

~~~
eru
You describe selling a call. Not buying a put. (jessaustin is right about
these.)

~~~
sk5t
No, I described the practical downside exposure of a short (or, the trader
could put in a stop). It is no more "unlimited" than is the downside of buying
a bunch of ultimately worthless options.

~~~
eru
Unless your options trade on an exchange, and they have a clearing house
behind them. (The government doesn't let the clearing house fail.)

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dpflan
Has any HNer participated in such a secondary sale? I think it could be
informative to describe the experience, whom you dealt with, how a price was
agreed upon, how your company discussed secondary sales, etc.

~~~
throw2192015
I have participated as a seller.

I offered some of my exercised options for sale on SharesPost [1]. The
SharesPost representative contacted me; she said that she had a potential
buyer interested, but the bid was slightly lower than my initial ask and the
volume they wanted to buy was a little lower than what I had offered to sell
initially. We agreed on the deal.

I filled out some paperwork and sent proof that I was a legitimate seller.
SharesPost representative got in touch with my employer. My employer had the
right to first refusal which they waived. The process took few weeks with
escrow etc, but was smooth.

SharesPost charged me a %ge fee. I also had to pay for the escrow service.

[1]: [http://sharespost.com/](http://sharespost.com/)

~~~
shostack
How did things work out from a tax perspective if you don't mind my asking?
Also, what sort of communication did you have with your company before/during
this transaction regarding it?

Is this the kind of thing employers might freak out about if they are
blindsided by the request?

~~~
throw2192015
> How did things work out from a tax perspective if you don't mind my asking?

The proceeds I got from the sale were treated as long-term capital gains. I
got a 1099-B from SharesPost.

> Also, what sort of communication did you have with your company
> before/during this transaction regarding it?

I mentioned my desire to sell some of my stock to my manager. I was directed
to speak to the head of legal department. Here is what I learned that person.
The company could not provide me with a buyer, or advice me to sell/hold etc.
But once I found a buyer, the company was bound to agree to that sale or
direct me to another buyer who was offering at least the same price.

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JavaScriptrr
The last couple of years, everytime someone would ask the cliché 'is there a
bubble?' Question to a VC, they all waved it away. The questions were legit
because of the insane valuations that have been thrown around. How often in
History have companies like MagicLeap for example, got to billion+ valuation
before ever launching a product. Evernote is a legit business, yes but same
story. Blown up by investors. The bubble is cracking.

~~~
tayo42
I don't understand why magic leap has so much investment with nothing to show.
Just in general I don't see how it could be worth that much. It's cool in a
nerd way but doesn't seem to have real value. Like how is this going to make a
meaningful impact on the world?

~~~
tim333
Their product comes out in 11 days. I guess the bull case is people buy the
thing. They are being secretive but here's Scoble and others being upbeat in
their promo vid
[https://youtu.be/XxwrXacMe6Y?t=25s](https://youtu.be/XxwrXacMe6Y?t=25s)

~~~
tayo42
Didn't know they're coming out with something so soon. I guess we can all
judge then. lol

I guess still to me virtual reality glasses seems like a very cool gimmick. If
its a general purpose consumer product its success would be really dependent
on a "killer app" and affordability. I guess we'll see... thats a lot of money
invested.

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GeoffreySteven
I have done a dozen or so private share sales or purchases.

The model I have really come to like is EquityZen's.
([https://www.equityzen.com](https://www.equityzen.com))

Using a crowd sourced approach, a group of accredited investors (buyers) can
participate in purchasing a block of shares as a fund. A win for the smaller
individual investor who could not normally participate due to various
constraints (ie buying power, transaction costs).

Likewise, its also a win for sellers and it applies to the Unicorn's of the
world. It gives these shareholders access to a market they wouldn't normally
access.

It seems that selling shares privately is becoming more common, any model that
connects a larger group of accredited buyers to accredited sellers is good -
IMHO.

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bcg1
I've been in the "its probably a unicorn bubble" camp and I think this is
evidence of that, but does this really make a difference outside of those
companies and their VCs?

What kind of situation could turn this into a systemic risk? Institutional
investors getting involved? Is there any evidence of that happening? "Unicorn
derivatives"? Is there any indication such a thing might exist?

Seems like it is possible that a unicorn crash could just leave a bunch of
rich guys in Cali somewhat less rich than when they started.

And of course employees might be hurt by this I guess... especially the young
ones who traded work for worthless stock. But you know what... I signed up for
the army after 9/11 so I know what its like to get bamboozled in your 20's...
it sucks but you get over it. If I was in their shoes though I would probably
looking to cut my losses and liquidate too.

~~~
matt_wulfeck
Unicorpses are merely a symptom of the greater ailment: long term near-zero
interest rates.

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acd
Lets get the mythical horse animals straight first. A mythical horse animal
that can fly is called a Pegasi. A unicorn another mythical horse animal
doesn't have wings. In startup terms there often mentions of runway and burn
rate. Now the magical horses is running down the runway without wings. My
guess is that there will be a whole lot of unicorns and very few Pegasi.

Tom Petty - Learnig to fly lyrics "Well I started out down a dirty road
Started out all alone And the sun went down as I crossed the hill And the town
lit up, the world got still

I'm learning to fly, but I ain't got wings Coming down is the hardest thing

Well, the good ol' days may not return And the rocks might melt and the sea
may burn"

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mmanfrin
Semi related question: One has to be an accredited (i.e. wealthy) investor to
invest in startups, but this does not apply to employees exercising options.
Does that mean that employees who do not meet the wealth requirements to be
accredited are only ever able to _sell_ ownership, and only to accredited
investors?

~~~
jluxenberg
Side note: You're considered an "accredited investor" if you made $200k/year
in each of the prior two years and expect a similar income in the current
year. [https://www.investor.gov/news-alerts/investor-
bulletins/inve...](https://www.investor.gov/news-alerts/investor-
bulletins/investor-bulletin-accredited-investors)

So, not necessarily just "wealthy" individuals.

~~~
personjerry
That's pretty wealthy by most standards, isn't it?

~~~
colinbartlett
I think the point was that you don't necessary need wealth (assets) for which
the threshold is $1 USD Million excluding the value of your primary residence.

You can instead have a high income (the $200k mentioned) and zero wealth. I
suspect that many more people qualify as accredited under the income
requirement than qualify under the asset requirement.

~~~
ddlatham
I suspect the opposite

[http://money.cnn.com/2014/03/14/news/economy/us-
millionaires...](http://money.cnn.com/2014/03/14/news/economy/us-millionaires-
households/)

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jonesb6
I predict in the future more people will declare bubbles until there is an
actual bubble. Then, even after the bubble is fully deflated, those people
will tell everybody about how they predicted this bubble ahead of everybody
else. Then time will pass. People will then continue declaring bubbles, until
one day they too they can become a true oracle of the bubble world. Then time
will pass..

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roymurdock
> Secondary sales totaled $47 billion in 2014, up 80 percent from the previous
> year, according to investment bank Evercore.

Still a relatively small volume of sales we are talking about here. Does
anyone have any information on the structure of the secondary market - big
players, regulation, etc. The article was light on details.

~~~
prostoalex
Just follow the headlines - Fidelity (FBGRX, FDGRX), Blackrock, T. Rowe Price
(PRNHX), GSVC - [http://gsvcap.com/charts/](http://gsvcap.com/charts/)

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ryguytilidie
I worked for a company about 18 months ago and the CEO sent an email to
everyone "prohibiting" selling your shares on the secondary market because he
was worried about a hostile takeover.

None of this made sense to me. You're going to restrict your early employees
from making money? No one owns more than .5% so why would one be worried at
all? To me it just seemed like another example of a CEO believing their
employees are second class citizens and that they don't deserve any money
until the CEO is RICH.

~~~
rqebmm
> why would one be worried at all?

Because the CEO holds less than a decision-making stake to himself? It
wouldn't matter that everyone has a tiny percentage if an outside party is
willing to spend enough money to buy them all.

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sixQuarks
Sell while you still can. I don't know who would be buying these shares right
now.

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sharkweek
>“In tech, when times are good, it’s about potential. When they aren’t,
investors focus much more on fundamentals.”

That second part... why that isn't ALWAYS the focus is beyond me.

Edit: Adding a clarifying statement as my point wasn't specific enough. I'm
very aware that early stage investments are VERY speculative, but when we're
talking about a company moving into 1BN+ valuation territory, fundamentals
should be in focus.

~~~
rhc2104
As a counterexample, Google didn't show ads until 2000.
[http://googlepress.blogspot.com/2000/10/google-launches-
self...](http://googlepress.blogspot.com/2000/10/google-launches-self-
service.html)

~~~
dkarapetyan
But the fundamentals were not ads. It was solid search. That's what delivered
value to users and why they kept coming back.

~~~
jessedhillon
you are confusing business and technology fundamentals.

Business fundamentals -- bottom-line numbers on the P&L statement -- are not
furthered by increasing the number of active users alone, or by delighting
users. Only ad revenue would increase the fundamentals being discussed here.

~~~
dkarapetyan
I disagree with the overall sentiment. Doing the right thing technology-wise
and delighting users is what made google possible. Technology fundamentals !=
business fundamentals but the pre-not-bubble-but-maybe-bubble market did not
have either one. Many companies were pure buzz with neither business nor
technology figured out.

~~~
jessedhillon
Then you're basically arguing semantics while agreeing with the sentiment in
question here. You're saying that startups do best when they focus on
delivering value to users first, and _then_ figuring out a path to profit that
preserves the first value. Which is a strategy that investors who make big
bets on potential would also promote.

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grandalf
I use Evernote (paid plan), but it's been my impression that the level of
intuitiveness of the UX has steadily declined, to the point where I have no
idea what to click to make it do what I want.

Like Yahoo, some companies are very challenged when it comes to building
intuitive UI/UX. It's too bad the market focuses on financial performance and
market share rather than more fundamental aspects of competence.

~~~
apetrovic
Couple of years ago I was OneNote user (on Windows). Then I decided to switch
to Mac, and moved all my notes to Evernote. I was happy at first, but then
Evernote started declining in quality. Microsoft introduced OneNote on the
web, on the phone, on the Mac, and last month I switched back. It's free, and
it is, at least for me, superior user experience.

~~~
wlesieutre
I switched from OneNote to Evernote when I got a Surface. The only things I
like Evernote better for are its simple file format (OneNote will be harder to
get my data out of if I leave) and its Clearly web clipper. Outside of that,
OneNote is just better put together and much more intuitive.

Being able to draw with a pen is awesome, and the killer feature that makes it
work is "Insert Space." You can pick a point and push everything below it
down, like you would when making edits in a word processor. All the layout and
diagram flexibility of handwritten notes, but without the usual limit that you
run out of space or have to work in the margins if you want to go back and add
anything in the middle.

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junto
Here comes the gold rush and anything else people believe they can secure
their money and weather the storm.

The trick now is to work out where the bottom of the market crash is going to
be, and cash in on the companies that will survive this next recession, but
whose stock price is still being hammered.

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dookahku
I wonder if this will increase or decrease my chances of getting hired.

~~~
netheril96
I guess decrease. Fewer companies will be hiring, and some of the best people
who went to unicorns for their prospect are now back in the market,
outcompeting the ordinary ones waiting for a new/better job.

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rdxm
this is where we find out how badly the SEC f-ed up in allowing these markets
to exists...

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nathanwdavis
I was quite disappointed to find the article is not about actual unicorns :-(
Where have all the great journalists gone...

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sjg007
Yep and it sucks.

