{"id":180031,"date":"2017-08-03T18:31:00","date_gmt":"2017-08-03T23:31:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2017\/08\/03\/is-it-possible-that-much-of-silicon-valley-is-just-white-boy-criminality\/"},"modified":"2017-08-03T18:31:00","modified_gmt":"2017-08-03T23:31:00","slug":"is-it-possible-that-much-of-silicon-valley-is-just-white-boy-criminality","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2017\/08\/03\/is-it-possible-that-much-of-silicon-valley-is-just-white-boy-criminality\/","title":{"rendered":"Is it Possible that Much of Silicon Valley is Just White Boy Criminality?"},"content":{"rendered":"

It turns out the vaunted “Unicorns” of Silicon Valley may have a lot more in common with bucket shops than they do with any meaningful technological innovation<\/a>:<\/p>\n

Unicorns aren\u2019t real, and neither are the valuations ascribed to many of the startups that say they\u2019re worth $1 billion or more.<\/span>

<\/span> About half of private companies with valuations exceeding $1 billion, known as unicorns, wouldn\u2019t have earned the mythical title without the use of complex stock mechanics, according to a study by business professors at the University of British Columbia and Stanford University. The tools used to negotiate a higher share price with investors often come at the expense of employees and early shareholders, sometimes drastically reducing the actual value of their stock.<\/span>

<\/span> The chasm between public and private valuations is a topic of increasing prominence following several disappointing listings. Among them is Blue Apron Holdings Inc., which is trading well below the price venture capitalists paid in the last fundraising round.<\/span>

<\/span> An often-overlooked explanation for the divide is buried in investor contracts. Blue Apron, which delivers meal kits to customers, gave stock preferences to some shareholders in 2015 in exchange for a $2 billion valuation, according to the study. A convertible loan this year included a provision that offered equity at a discount to the IPO share price, and investors took advantage of the mechanism.<\/span>

<\/span> The use of special investor protections has soared in recent years as startups chase dreams of becoming a unicorn. A lofty valuation can build credibility and help recruit talent in a tight labor market. But it has also complicated the already-opaque process of valuing a private business.<\/p>\n

One provision frequently afforded to investors is called a liquidation preference. It guarantees a minimum payout in the event of an acquisition or other exit. The study found that it can exaggerate a company\u2019s valuation by as much as 94 percent. Researchers pointed to AppNexus, a digital advertising startup. The company sold shares with a liquidation preference that guaranteed new backers at least double the amount they put in if AppNexus is acquired.<\/span><\/p><\/blockquote>\n

When we look at the larcenous and corrupt cultures of companies like Uber, we sometimes miss the forest for the trees.<\/p>\n

The basic culture of the Silicon Valley startup is pump and dump.<\/p>\n

If prosecutors ever looked at the business practices of Silicon Valley with anything near due diligence, I think that half of the company founders, and \u2154 of the venture capitalists would end up in the dock.<\/p>\n

Of course, that’s never going to happen, because \u2026\u2026\u2026 Markets!<\/p>\n","protected":false},"excerpt":{"rendered":"

It turns out the vaunted “Unicorns” of Silicon Valley may have a lot more in common with bucket shops than they do with any meaningful technological innovation: Unicorns aren\u2019t real, and neither are the valuations ascribed to many of the startups that say they\u2019re worth $1 billion or more. About half of private companies with …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[365,368,456],"class_list":["post-180031","post","type-post","status-publish","format-standard","hentry","tag-business","tag-corruption","tag-finance"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/180031"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=180031"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/180031\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=180031"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=180031"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=180031"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}