Silicon Valley investors build $300B cash pile in startup funding crunch

https://www.ft.com/content/eb2e085a-ef5a-4e91-8634-747e2a602fbe

by belter • 2 years ago

28 12 2 years ago

ft.com

belter• 2 years ago

https://archive.is/HTYBC

pedalpete• 2 years ago

Doesn't there have to come a point where VCs either deploy the capital they raised or close up shop?

I've been pondering this for the last few years when VCs were sitting on huge amounts of capital, but saying "the market is closed".

With the expectation that they deploy the majority of a fund within the first 5 years, let's say a $100m fund would deploy $20m/year.

They've sat out the last 2 years, so they now need to deploy the money they have at a quicker rate.

Will this mean that they

a) push up the valuations of a few companies that all the VCs are chasing (likely in the AI space)

b) spread smaller amounts of funding across more companies.

c) neither, and just continue to not deploy. If you don't deploy the funds, will investors back your next fund?

Certhas3• 2 years ago

How about we tax it all away and invest in public infrastructure...

scrollaway• 2 years ago

This money is likely already taxed, albeit to a lower rate than usual as most of it is coming from capital gains which caps out at 20% in the USA.

Let's talk real numbers instead of wishy-washy platitudes.

Nov. 2023: https://home.treasury.gov/news/featured-stories/infrastructu...

This page confirms a 1.2 TRILLION dollar investment into US infrastructure. That's 4 times higher than even if you were to take all that SV money at gunpoint and invest it into infrastructure.

I don't want to defend the "cash pile". The crunch is real, and it sucks, but unless it is hoarded for years to come, it still moves a hell of a lot faster than public money, on much lower numbers overall. And innovation money (which a lot of this cash pile would go towards) tends to benefit the entire world, not just the US.

I don't see how your magic-wand suggestion would benefit anyone any faster, honestly.

Certhas3• 2 years ago

Over what timeframe?

Also you conveniently neglect to cite the part of your link where it says that this 1.2 Trillion brings spending levels back to where they were in the mid 2010s, and still way below historical rates.

kcsavvy• 2 years ago

I think it would be unwise to tax away a financial ecosystem that has driven innovation for the world and funded one of the nation’s largest growth industries in exchange for marginally increasing infrastructure spending.

gumby• 2 years ago

VC is a tiny corner of the $4T private equity business. In fact all the funds discussed in this article are late stage / crossover funds who put money into established businesses. Hmm, and none based on Silicon Valley.

Certhas3• 2 years ago

I am not convinced that we have seen much worthwhile innovation through VC money.

Apple has released innovative products. Many other tech companies, too. Compared to that VC funded business in the last 20 years seems to have been very good at creating personally and socially destructive attention machines to sell advertisement.

That's certainly addictive and has been profitable, and being early movers has allowed the US to capture a lot of value from the rest of the world, but whether it's valuable is another question...

4death4• 2 years ago

300B is like what, one NYC subway station?

kaashif• 2 years ago

One, maybe two escalator repairs. After a few years of making us walk up stairs.

Yes, I'm bitter. I don't know how these things are so expensive and take so long.

DidISayTooMuch• 2 years ago

How about we tax you at 90% and let the money goto into pockets of useless administrators instead of having you spend in your self interest?

anamax• 2 years ago

"cash pile" is somewhat misleading.

When an LP "invests" $100M in a VC fund, said LP only sends a small fraction of that $100M at signing. The LP keeps the remainder until the fund does a capital call. Even then, that remainder isn't all sent at once. Funds do several capital calls during the investment phase.

Note that management fees are WRT the paid-in capital, so VCs do have an incentive to get money invested.

Silicon Valley investors build $300B cash pile in startup funding crunch

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