5 ms·

These days there is too much money and not enough places to put it. It’s difficult as an unconnected angel to find decent opportunities. If you met the threshol

These days there is too much money and not enough places to put it. It’s difficult as an unconnected angel to find decent opportunities. If you met the threshold to invest as an LP in a fund that would keep you diversified and the GPs would have access that you do not.

wtvanhest 7y ago
Even if they are at LP levels, it will be difficult for them to get in to funds that have deal flow.
tw1010 7y ago
But there's clearly a lot of people who still seek funding but can't find it, so how does that mesh with the idea that "there's too much money and not enough places to put it"?
- eof 7y ago
  Some people seeking funding don’t seem like good investments.
  - tw1010 7y ago
    Sounds like it's just a problem of identifying arbitrage opportunities then. I.e. the problem isn't actually that there isn't enough places to put money. The problem is identifying systemic biases in the investor landscape (e.g. a bias against diversity, as just one potential example).
    - edanm 7y ago
      I mean, yes, obviously if there are people who aren't getting money despite actually being a good investment, then of course that's something that should be identified. However, I don't think that's a necessarily large amount of people (I could be totally wrong, this is just a gut feeling). It's a pretty well known failure mode that investors try not to fall into. I think a much bigger arbitrage opportunity, one that e.g. YC tried to exploit a lot at first, is getting people who aren't looking for money, but would actually be a good investment, to try building a startup. That's why pg wrote so much about why people should build startups - he thought (and I imagine still thinks?) that there are way more good startups that can be built, if only more people were trying to build them.
    - formercoder 7y ago
      This might be related but I think the bigger arb opportunity is looking outside of SF/NYC. There are some PE funds operating in the Midwest and doing great, but I think it’s still pretty difficult to find early/growth equity funding.
      - badfrog 7y ago
        Isn't that just choosing wise places to put your capital? Where's the arbitrage?
        tedmiston 7y ago
        The arbitrage is that the same amount of dollars to pay engineers goes further in the midwest than on the coasts which extends the runway of a company with the same amount of funding because of reduced burn rate. Drive Capital (ex-Sequoia) is a good example. You might be surprised how uncommon this idea still is today.
        badfrog 7y ago
        Arbitrage is about buying something that you can immediately sell somewhere else for a higher price with no risk. What you're describing just sounds like getting a good deal. If you could buy 10% of a company for $1mm in Chicago and sell that 10% for $1.5mm in SF the next day, that would be a form of arbitrage. From wikipedia: > the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a (imagined, hypothetical, thought experiment) transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs https://en.wikipedia.org/wiki/Arbitrage https://en.wikipedia.org/wiki/Arbitrage
        tedmiston 7y ago
        In the theoretical sense, yes. The usage in the here is much softer and less strict, not like in finance. I wouldn't get too caught up on the casual usage. The way I've seen the word used in startups is more akin to "Tim Ferriss style" geo-arbitrage. https://www.physicianonfire.com/geographicarbitrage/ https://www.physicianonfire.com/geographicarbitrage/
- charlesdm 7y ago
  Because most people doing things are not worthy of investment (i.e. crappy ideas, bad execution, not ready for investment, etc)
  - o-__-o 7y ago
    Again way too many barriers to entry. I just need $100k to prove my idea. These funds have billions. They won’t lend 100k because it has a prototype app, a handful of interest, but no investor pitch? But they will give $1m to someone who can pitch a dream with no product? Please come to me with $100k and I’ll offer you simply a guaranteed 0% return (no loss on investment) so I can pad my bank account and make “real” investors interested because it makes us look like we can manage our money. It’s all smoke and mirrors and I wish I could get access to the same cheap money big corps get. $300k at 6, 7, or 10% interest is just robbery when public companies and home owners are walking away with 2-3% APRs
    - charlesdm 7y ago
      Lol dude, "just" $100k. Barriers to entry? Totally honest: I'm an investor and I wouldn't invest $100k in you with a mentality like that. We're all in this to make money. What you need is to prove your idea. No one is going to put $100k (or $100 million for that matter) in an untested idea, unless you have a relationship with an investor. And investing is a relationship business. If a friend whom I trust and I know is a talented chef comes to me with a restaurant idea, I'll consider investing. If a random person comes to me, there is <10% chance (unless his food is absolutely amazing in every regard) that I will consider investing. I'm happy to invest in a good tech business. But most things that I see just aren't great businesses. You're likely in the US, but many EU countries have investment entities (generally funded by EU funds) that "give out" loans at 3% APR. If you want it, you can get it done. But there are very few barriers to entry. A good idea in need of funding will find funding.
      - shifto 7y ago
        Might be a bit late but do you have some more info on these EU funds? I'm just a very technical guy but somewhere on the horizon there will be a point where our proto is matured enough we probably should seek some funding if we want to do something with it. Thanks.
- formercoder 7y ago
  I could rephrase to “too much money and not enough risk adjusted places to put it.” Also I’m not particularly tapped in but in major cities in the US I believe seed is still reasonably easy to come by. Series A+ is getting tougher with rates higher than they were in ~’13 risk appetite is lower at that investment size. Sure we could have a discussion about how geography shouldn’t matter, but right now being physically close to the money is an important factor.

wtvanhest 7y ago

Even if they are at LP levels, it will be difficult for them to get in to funds that have deal flow.

tw1010 7y ago

But there's clearly a lot of people who still seek funding but can't find it, so how does that mesh with the idea that "there's too much money and not enough places to put it"?

eof 7y ago
Some people seeking funding don’t seem like good investments.
- tw1010 7y ago
  Sounds like it's just a problem of identifying arbitrage opportunities then. I.e. the problem isn't actually that there isn't enough places to put money. The problem is identifying systemic biases in the investor landscape (e.g. a bias against diversity, as just one potential example).
  - edanm 7y ago
    I mean, yes, obviously if there are people who aren't getting money despite actually being a good investment, then of course that's something that should be identified. However, I don't think that's a necessarily large amount of people (I could be totally wrong, this is just a gut feeling). It's a pretty well known failure mode that investors try not to fall into. I think a much bigger arbitrage opportunity, one that e.g. YC tried to exploit a lot at first, is getting people who aren't looking for money, but would actually be a good investment, to try building a startup. That's why pg wrote so much about why people should build startups - he thought (and I imagine still thinks?) that there are way more good startups that can be built, if only more people were trying to build them.
  - formercoder 7y ago
    This might be related but I think the bigger arb opportunity is looking outside of SF/NYC. There are some PE funds operating in the Midwest and doing great, but I think it’s still pretty difficult to find early/growth equity funding.
    - badfrog 7y ago
      Isn't that just choosing wise places to put your capital? Where's the arbitrage?
      - tedmiston 7y ago
        The arbitrage is that the same amount of dollars to pay engineers goes further in the midwest than on the coasts which extends the runway of a company with the same amount of funding because of reduced burn rate. Drive Capital (ex-Sequoia) is a good example. You might be surprised how uncommon this idea still is today.
        badfrog 7y ago
        Arbitrage is about buying something that you can immediately sell somewhere else for a higher price with no risk. What you're describing just sounds like getting a good deal. If you could buy 10% of a company for $1mm in Chicago and sell that 10% for $1.5mm in SF the next day, that would be a form of arbitrage. From wikipedia: > the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a (imagined, hypothetical, thought experiment) transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs https://en.wikipedia.org/wiki/Arbitrage https://en.wikipedia.org/wiki/Arbitrage
        tedmiston 7y ago
        In the theoretical sense, yes. The usage in the here is much softer and less strict, not like in finance. I wouldn't get too caught up on the casual usage. The way I've seen the word used in startups is more akin to "Tim Ferriss style" geo-arbitrage. https://www.physicianonfire.com/geographicarbitrage/ https://www.physicianonfire.com/geographicarbitrage/
charlesdm 7y ago
Because most people doing things are not worthy of investment (i.e. crappy ideas, bad execution, not ready for investment, etc)
- o-__-o 7y ago
  Again way too many barriers to entry. I just need $100k to prove my idea. These funds have billions. They won’t lend 100k because it has a prototype app, a handful of interest, but no investor pitch? But they will give $1m to someone who can pitch a dream with no product? Please come to me with $100k and I’ll offer you simply a guaranteed 0% return (no loss on investment) so I can pad my bank account and make “real” investors interested because it makes us look like we can manage our money. It’s all smoke and mirrors and I wish I could get access to the same cheap money big corps get. $300k at 6, 7, or 10% interest is just robbery when public companies and home owners are walking away with 2-3% APRs
  - charlesdm 7y ago
    Lol dude, "just" $100k. Barriers to entry? Totally honest: I'm an investor and I wouldn't invest $100k in you with a mentality like that. We're all in this to make money. What you need is to prove your idea. No one is going to put $100k (or $100 million for that matter) in an untested idea, unless you have a relationship with an investor. And investing is a relationship business. If a friend whom I trust and I know is a talented chef comes to me with a restaurant idea, I'll consider investing. If a random person comes to me, there is <10% chance (unless his food is absolutely amazing in every regard) that I will consider investing. I'm happy to invest in a good tech business. But most things that I see just aren't great businesses. You're likely in the US, but many EU countries have investment entities (generally funded by EU funds) that "give out" loans at 3% APR. If you want it, you can get it done. But there are very few barriers to entry. A good idea in need of funding will find funding.
    - shifto 7y ago
      Might be a bit late but do you have some more info on these EU funds? I'm just a very technical guy but somewhere on the horizon there will be a point where our proto is matured enough we probably should seek some funding if we want to do something with it. Thanks.
formercoder 7y ago
I could rephrase to “too much money and not enough risk adjusted places to put it.” Also I’m not particularly tapped in but in major cities in the US I believe seed is still reasonably easy to come by. Series A+ is getting tougher with rates higher than they were in ~’13 risk appetite is lower at that investment size. Sure we could have a discussion about how geography shouldn’t matter, but right now being physically close to the money is an important factor.