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I tend to agree but this is really a separate conversation. These days, the struggling musician will give away music for extra exposure in the hopes of becoming famous so they can make money touring. That's the best they can do because nobody sells 50 million vinyl records anymore, although that's probably more likely than selling 50 million CDs (note I didn't say albums).

Still, regardless of where these dollars flow, to creators or the "industry," it's fewer dollars.

There are two fundamental problems:

1) What's good for the consumer isn't necessarily good for the creators. In other words, they have an incentive to fight the future rather than embrace it.

2) The extra efficiency of distribution created by technology is hell on legacy business models. Streaming media is an example of disruption shrinking the whole pie. Craigslist wrecked the classifieds business and became wildly successful but it did so NOT by moving 90% of the industry's revenue to Craigslist; it did so by capturing 10% of the revenue and destroying the rest.

I think you raise a few good issues but I'd like to poke, lightly, at the idea that the only information advantage available to hedge funds is "insider" information. Certainly some successful firms built their track record with illegal insider trading that but that's not the whole story.

They have better access to research, they have better access to the analysts whose opinions help drive public understanding of the company, they have better access to management to ask clarifying questions on areas of concern. They spend every day steeped in the facts, perceptions, and research that are relevant to investing. In short, they have a massive information advantage over a casual investor or day-trader. This does not, necessarily, mean they're trading on "insider information."

Finally, just to clarify, insider trading is often misunderstood. A violation depends on meeting all of the following criteria:

1) The information is material. 2) The information is non-public. 3) There was a breach of duty in sharing or trading on the information.

As an oversimplification: if Joe overhears a conversation between the CFO of a Fortune500 company and his boss talking about losing a major contract... only the first two criteria are satisfied and Joe can buy/trade without fear of prosecution.

For [2] and [3] it sounds like Trace3 is a technology consultancy, integrator, and services provider. So the business is more like "specialized IT for hire" than a new product or innovative technology.

As a result, I'd guess that the $400MM is gross revenue over the life of the company (not annual), and a large portion went to vendors like Avaya and Rackspace that he set-up for the clients.

Then again, this is just reading between the lines, I have no direct experience with Trace3.

Also it protects against the battery in the key dying.

I completely agree.

Thank you for posting this article, I was trying to track it down for the thread. This encounter was so widely reported that it's almost difficult to discuss it honestly and openly and without taking sides. I feel like that, in and of itself, is the tragedy for the community.

Well, their fiduciary duty is to all shareholders and common generally holds a minority ownership interest.

It depends heavily on circumstances, but in a less than amazing sale the acquiring company often wants an incentive for employees to stay. So the acquisition offer will ensure that common gets nothing but they'll be covered by an earn-out over the next year(s).

As you can imagine the negotiation gets very tricky because investors do not generally participate in the earn-out.

There's a service that will negotiate with them to reduce your bill. I remember reading about them last year, it's some Berkeley MBA who likes to practice negotiation, he might handle this too:

https://www.cabletipster.com/

The last point is especially salient. Except there's no "if." Major firms are already doing this (and not talking about it).

Rare for an investor to put money into a company with the expectation of replacing the CEO. The speculation you propose is extra unjustified given that there was no change in control with this investment.

I know it's popular for HN to take the side of a persecuted CEO but in this case there's no evidence, or even pattern matching, to support this perspective.

One of the biggest signs of the bubble were the lack of sanity on exits and IPOs for unproven businesses and technologies.

In this case there is certainly (some) irrational exuberance for funding, but unless you start seeing lots of minimal revenue IPOs it's not the same animal.

In short - lots of startups may die, but it's probably more things that wouldn't have otherwise been funded. It's unlikely to crash the stock market again at current rates.

This is an apples to oranges comparison. You're bringing up losing a job and comparing it to losing an investment. In this case the investment is gone, and the FUTURE earnings of the worker from that specific job are gone. The worker already received compensation for past work.

However, there is a point to be made about how the loss of livelihood, or a reduced standard of living can be devastating. It's just not the same economically.

Of course there's a difference between monetary risk and utility risk. They shouldn't be conflated in this discussion for a number of reasons. One such is that measuring utility is very difficult without resorting to a yardstick like capital.

You also bring up personal utility which is important. How do you balance the risk of a destroyed livelihood against a much greater capital loss? We also have to be careful not to presume that Joe Schmo can't find another job (better or equivalent).

This isn't really an ideal article to kick off a series of debates that could be very interesting. It's trying to relate too many concepts from taxation theory to economic stimulation to labor management, etc, etc.

If the main point is to ask if capital or labor risks more the answer is trivial: capital. There is a -100% downside for investment and minimum positive earnings for labor. On the other hand capital has an unlimited upside, while labor does not.

A more interesting question would be how to you optimize the opportunity between capital and labor?

One of my favorite references to him is a recommendation[1] written by Oppenheimer about Feynman. The line was: "He's a second Dirac, only this time human."

Edit: to be fair Oppenheimer was quoting Wigner... Dirac went on to marry Wigner's sister.

[1] http://www.lettersofnote.com/2009/12/he-is-second-dirac-only...

But many would argue that these laws are unconstitutional. Free speech is one of the highest laws in the land and there's a court challenge underway: https://www.aclu.org/free-speech/aclu-idaho-and-coalition-fi...

My favorite dead startup! Hopefully by charging for delivery, not taking inventory risk, and setting reasonable minimums they'll survive.

My childhood rejoices!

Almost every credit card changed their terms so that cash equivalent purchases no longer accrued perks.

The value of the company is already so high that much of the upside is removed. You really have to believe in the company as a whole to make that commitment.

"Being a partner at a VC means you get a lot of executive positions to hand out to your B-school friends who turned out to be underachievers"

You clearly have a bone to pick with the industry and that's fine. But no VC hands out executive roles to anyone they don't believe to be top talent; they'd destroy their own career, reputation, and compromise the returns of their fund.

Now, they could very well be wrong about somebody and give a job to a C- player but that'd be an honest mistake.

They also get paid exceptionally well to generate exceptional returns, so they make money either way. There is a relatively common saying in finance that 2 & 20 is the best business model that exists.

As for LP returns, if you're not investing in a top quartile (or decile) fund, you're wasting your time. There is still some turnover in which firms perform but it's relatively consistent.

Edit: I've skimmed the article, the other thing that isn't mentioned is that the 2% management fee is generally paid back to investors out of profits (if there are any).

Wow... they should have released this ages ago and participated in the renaissance brought on by Shopify/Squarespace et al.

As others have said, they're in lots of businesses and this looks like another half-baked example of too little, too late. Still, they'll probably make some money transitioning legacy clients to the more expensive platform.

mlost - There are some great responses in this thread and hopefully you're feeling supported. The comment you made about it being a "distress call" really grabbed my attention and if you're in the SF area I'd be happy to buy you a coffee/beer and talk about this or whatever you want.

I've been in a similar situation and can relate to the cocktail of hope/anxiety/despair that come with entrepreneurship and the quarter-life crisis. If you're interested: david [at] moctopus [dot] com

Thanks, this guy's voice is super soothing.

For contrast here's another I've always enjoyed, a little more playful: http://youtu.be/BW1te_miu5I

Well, if we're doing treasure we shouldn't forget about the Lost Dutchman's Mine (http://en.wikipedia.org/wiki/Lost_Dutchman%27s_Gold_Mine)

For those interested there's a new movie coming out on the topic called Imitation Game.

Trailer: http://youtu.be/nuPZUUED5uk

I would heavily caution you against basing a stock purchase on this. Not because you're necessarily wrong about it being a sign, but because that's not what moves the stock.