
Unicorns are setting up their own venture capital funds - monsieurpng
https://www.bloomberg.com/opinion/articles/2018-11-15/unicorns-starting-their-own-vcs-welcome-to-peak-tech
======
AndrewKemendo
From an operations perspective, this is for Business Intelligence and creating
a funnel for acquisitions.

Venture is one of the best ways to spot trends in your own market(s), and lead
run any future competition with an acquisition, new product or product
changes.

This is one of the major things that distinguishes major 21st century
companies today from major companies in the past. If you know all of the up
and coming competitors, or an entire new market that could threaten you, you
can't be disrupted.

~~~
beagle3
Microsoft knew all about Google

Yahoo knew everything about Google

Google knew everything about Facebook

Intel knew everything about ARM

Yet disruption ensued. “Can’t be disrupted” is foolish.

~~~
hobofan
Facebook knew everything about Snapchat, and they are currently crushing them.

Microsoft at their core also wasn't disrupted by Google.

Google at their core also wasn't disrupted by Facebook.

They're all tech giants in the same (broad) industry, but they have widely
varying products. Competitive BI certainly has its merits if you are trying to
stay at the top of your field.

~~~
beagle3
Off the top of my head, Facebook is, indeed, the only giant I can think of
that has not yet been disrupted; snap is indeed being crushed.

And, wrt the article, it’s not VC that gave Facebook the BI they needed to
know it is happening, but rather Onavo - a BI/Spying startup masquerading as a
vpn/compression suite, which Facebook purchased and which gave them insight
into what their mobile users do on the internet _other then facebook_

It’s not illegal, but it should have been.

~~~
hobofan
> Facebook is, indeed, the only giant I can think of that has not yet been
> disrupted

It's also still the youngest one of them, but yes, for a company in the social
networking space they've showed a lot of staying power (they could've already
fallen to what could've become out of independent WhatsApp & Instagram).
Facebook (and Google) only exist as they do today because an acquisition by
Yahoo didn't happen, and I think they've internalized that.

------
etaioinshrdlu
A lot of blockchain tech startups raise money and then turn around and invest
in other startups.

I think we're gonna look back at this in 5 years and collectively say, what
were we thinking?

~~~
arcanus
> we're gonna look back at this in 5 years and collectively say, what were we
> thinking?

We did that after the housing bubble in 2008 (low down payments, flexible
credit ratings, etc.)

The big question is: could this also be a systemic risk to the economy? No one
liked bailing out the banks, but it was necessary to save the economy. It is
not clear tech or crypto are similarly critical.

~~~
hobofan
I think it's already pretty clear that crypto doesn't need bailouts.

The total cryptocurrency market size is at 1/4th of what it was at the
beginning of the year, and there haven't been any significant results because
of that. I would wager that the remaining 1/4th could be wiped out and it's
still pretty much the same. Crypto projects were always very removed from the
real world, both in valuation and usage (so if crypto vanishes it doesn't
impact other companies).

The biggest result of the crypto market correcting will probably be software
engineer salaries becoming a bit lower again (outside of SF).

------
skywhopper
No better evidence you’re in a bubble market if the billions flowing into
self-driving cars and blockchain didn’t convince you. If investors are willing
for their startups to use their capital in this way then there really is just
way too much money floating around.

~~~
thoughtexplorer
Blockchain sure, but why do you think self-driving is a bubble?

~~~
wpietri
Exactly my question. I have yet to see real use cases for blockchains beyond
speculation and some light crime. And I think true self-driving cars (SAE
Level 5 in specific) are 10-30 years out. But I think there's enough value to
be had in lower, more achieveable levels that I expect some of the companies
investing in those technologies now will be long-term financial winners.

~~~
golergka
Light crime, as in buying drugs, is one hell of a market. I don't have solid
data, but it seems that 90-95% of all drug-related transactions go through
bitcoin nowdays, at least on the consumer level.

~~~
detaro
I'd assume a large part of drug consumers still buys from their dealer in
person, and why would you use Bitcoin then?

~~~
golergka
Among drug consumers I know personally or follow in social media, there's not
a single one who buys in person. Compared to picking up a ziplock in
designated location, it's unsafe to a ridiculous degree.

------
motohagiography
So they've got cash and no ideas? If I were an investor I would be livid.

How is this different from blowing your funding round at a blackjack table?

------
asaph
What happens to the unicorn's equity stake in a unicorn-backed company if the
unicorn itself goes out of business? Does that equity get re-distributed to
the unicorn's investors?

~~~
sjtgraham
Seems like an asset that would be liquidated to pay failed co's creditors,
preferred stockholders per liq prefs, and common if anything is left.

~~~
atlasunshrugged
I think sometimes they get spun into their own legal entity, I'm thinking
about Yahoo's and Naspers. In Naspers case their investment in Tencent is
worth so much that actually Tencent's value is what drives most of Naspers
stock price

[https://en.wikipedia.org/wiki/Naspers](https://en.wikipedia.org/wiki/Naspers)

------
gaius
If you are a VC and one of your investments is doing this then next time why
wouldn’t your investors cut out the middleman (i.e. you) and go straight to
them?

------
goldfeld
And people still say dolphins are the second most intelligent species on
Earth.

------
eriktrautman
This makes sense when your business strategy requires that you create a
vibrant business ecosystem and the current support for these businesses is
broken or inadequate. Focus and domain expertise become a competitive
advantage and you can reap value from both the fund and the main business by
creating value in the ecosystem.

------
gigatexal
So Silicon Valley’s version of the CDO or better yet and the even worse —
synthetic CDO

~~~
JumpCrisscross
> _So Silicon Valley’s version of the CDO_

Not really.

If by “CDO” you mean “multiple assets in another asset,” then every company is
a CDO. If by CDO you mean “tranching,” then pref stacks create (or for that
matter, any company that issues debt is) a CDO. CDOs are differentiated by the
kind of debt they buy and their tendency for having a tiny senior tranche and
leveraged buyers of their riskiest tranches. That doesn’t apply here.

(The latter _might_ apply, since the loss-making unicorns buying start-ups’
equity need to raise new money to stay alive, but that’s just classic
leveraged buying.)

------
tehlike
I didnt think much into this until the start up of a friend(yc backed, if i am
not mistaken) failed. They did have their own venture fund to boost up the
drone companies, but eventually they shut down.

Good thing to look out for.

------
ajcodez
Big tech companies will do anything to avoid paying out more dividends.

------
milesf
"When beggars and shoeshine boys, barbers and beauticians can tell you how to
get rich it is time to remind yourself that there is no more dangerous
illusion than the belief that one can get something for nothing."

    
    
      - Bernard Baruch

------
gammateam
As long as the money keeps flowing.

