
Startup economy is a Ponzi scheme – Chamath Palihapitiya - 100-xyz
https://www.cnbc.com/2018/10/10/start-up-economy-is-a-ponzi-scheme-says-chamath-palihapitiya.html
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ganeshkrishnan
For better or worse, he is not far off although Ponzi scheme is a harsh word.
It has become clock work routine for most startups to get some users, get some
angel funding, hire, scale, get VC money, pour more money and get more users,
???? , then profit!

Launching a startup used to be something that entrepreneurs loved. And now I
see all my acquaintances are either pounding the pavement begging for angel
money or dreading the routing morning phone calls from their own startup.

Make Bootstrapping Great Again

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edoceo
I'm bootstrapping my current, after doing the funding thing in the past. It's
a refreshing experience, like what I wanted my first attempt (c2001) to be.

You have my vote.

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sputknick
I don't understand where the Ponzi scheme aspect comes in. Can someone explain
it?

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dunnodonna
Ponzi Scheme = the top takes the cream and leaves others to deal with the
rotting milk. A potential bad scenario example is...Uber. Stratospheric
valuations that will offer excellent payoffs to most investors at IPO but by
the time public markets come in, the top value has already been actualized and
the narrative "it's a giant market" collapses once the reality that it has
been achieved through high CACs and unsustainable cash flow levels.

Howard Marks - a bond investor - puts it well. If you are a professional
investor you cannot afford to buy into overpriced stocks because by definition
they have already topped. The basic unit here is the "buy low sell high"
concept. This is why seed and Series A has been most attractive to VCs -
equity is cheapest, if you invest in the right companies.

Tech stock and private tech is overvalued as far as the public buy side is
concerned. This has been absorbed because the market is doing well. Private
tech isn't going public for this exact reason: the public demand isn't meeting
the private valuations. This is bound to crash at some point, most likely when
the leading companies (uber, air bnb) are put under the microscope.

I don't know what will happen to all these companies flush with cash. They
could be in business for years, even decades.

