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Comment by madamelic | Hacker News Reader

It seems like larger and larger rounds are being announced. Magic just also did a $1B round.

Is this cause for concern or innocuous? I don't remember rounds being this big before.

Cheap capital searches for a return. Venture funds pump up valuations of privately held companies to show mark to market valuations (paper returns) increasing. Allows funds to show good IRR without actually returning capital to LP’s. Allows funds to raise more capital for new funds based on prior performance.

It’s basically an unsustainable financial mess that will collapse.

Not that big of a bubble though compared with the student loan fiasco no one is really talking about these days.

LPs are much more sophisticated than you give them credit for. LPs are not stupid and know how VC works. They woul easily recognize the tricks you are proposing, which is why it's not actually how the industry operates.

It's not becoming more common.

Uber, Didi, WeWork, Airbnb and a select few others have raised rounds that large. These are large businesses. Magic is an outlier in terms of what they're raising vs the size of their business. Those couple top companies have gotten a lot bigger in terms of revenue in the last three or four years. You aren't seeing other companies able to raise a billion dollars like they can. It's best to no longer think of those companies as traditional start-ups, they have more in common with their large publicly traded peers (Airbnb & Priceline for example).

So far it appears Magic raised $500m in the round -

https://www.reuters.com/article/us-magicleap-funding/startup...

Just to piggy back on this, many of these companies are skipping IPO's because there's enough private equity to give them the funds they needs. Previously this wasn't the case.

There is also more scrutiny once you are public. Staying private can keep the authorities at bay.

not just the authorities; the moves your company makes are scrutinized by shareholders and then you have to deal (more) with the court of public opinion.

We are riding a bubble. A couple years ago, people were talking about an Internet/High-tech bubble. It was just the ignition. Now, we are even going crazier but this is becoming the "norm", so pretty good ground for things to go super-crazy-high from here.

Nasdaq Top 2000: 5,000

Nasdaq Top pre-2008: 2,804

Nasdaq Bottom (2008-crisis): 1,293

Nasdaq ATH: 6,624 (just a couple days ago)

That, or the dollar is going through hyper-inflation. And I'm pretty certain this time will not be different (though from a volatility perspective, maybe)

While there does seem to be an abundance of free capital, it doesn't seem to be fueled by the kind of reckless lending that fueled the 2008 housing crisis, so there might be a crash, but IMO its unlikely to bring down the entire civilization as we know it.

However, there might be something else going on... I wonder if China's efforts to prop up its economy? It would be interesting if someone could tell me where all this capital is coming from.

> it doesn't seem to be fueled by the kind of reckless lending that fueled the 2008 housing crisis

How do you know that? The 2008 was led by public borrowing. This might be led by bigger investors borrowing or figuring out "schemes" to leverage themselves.

Either way, what we know and are certain of, is that US stocks are rallying. Not quite hard to worry, but they are showing signs of bubbly like behavior. It'll be time for the "larger public" to take notice and plunge themselves.

> How do you know that? The 2008 was led by public borrowing

Equity versus debt.

Except that if you prop-up the value of equity then everything looks good even though it isn't.

The 2000 tech boom had companies with no revenue. This tech boom has companies with revenue. But it'll be a bubble if this revenue is derived from bubbling sectors.

In the past Lyft would have already IPOd. Now there’s so much private money there’s not a good reason to go public as often.

The inflation from QE has already happened at the highest corporate levels. A billion is the new million so to say. Wait till it catches up with Main St.

2x inflation in restaurant meals since QE.

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