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What exactly happens when there is a bubble in the private markets? And what happens when it crashes? Does it affect the public markets in anyway? In other wor

What exactly happens when there is a bubble in the private markets? And what happens when it crashes? Does it affect the public markets in anyway? In other words, if I believe there's a huge bubble in the private valuations of unicorns likewise proven by companies like Wag or WeWork, will it A: Affect my 401K and mutual funds I have in Vanguard and B: Is there anything I can do to short it?

georgeecollins 7y ago
Probably the best way to take advantage of a private market bubble is to sell into it. In other words, pitch a trendy idea to an angel and raise money. Or if not that, sell something that is consumed a lot by bubble participants. In other words, in a gold rush sell mineral claims or shovels. It's much more feasible to do that then to short private investments.
john_moscow 7y ago
Become a founder of Uber for dog grooming and raise a billion before the investors realize they paid for both the dogs and the tools. /s
aabhay 7y ago
Take the barbell strategy — make sure to exit any less liquid investments (e.g. stock), and then extract capital from the bubble by raising money. When the market crashes, use your cash to purchase cheap assets and/or failing companies, and then work towards profitability. Absolutely do not: become a VC, work for a startup, or place your capital into some kind of ‘growth’ fund indexed to tech. Don’t buy real estate in urban areas and don’t borrow.
- racketracer 7y ago
  Raising money in the bubble doesn’t do anything if you can’t liquidate from the company with good terms and you’re paid a startup founders salary right?
  - chii 7y ago
    WeWork begs to differ - get the highly funded startup to purchase your own property/contracts to extract the value out of the startup and into your own pockets. Then when the economy/startup tanks, leave and let somebody else pick up the pieces.
  - aabhay 7y ago
    In a bubble, your terms and leverage as a founder are better, including self-comp, voting shares, and funding runway. Raising money is always risky (hence the barbell), but you have unlimited optionality compared to a desk jockey.

georgeecollins 7y ago

Probably the best way to take advantage of a private market bubble is to sell into it. In other words, pitch a trendy idea to an angel and raise money. Or if not that, sell something that is consumed a lot by bubble participants. In other words, in a gold rush sell mineral claims or shovels. It's much more feasible to do that then to short private investments.

john_moscow 7y ago

Become a founder of Uber for dog grooming and raise a billion before the investors realize they paid for both the dogs and the tools. /s

aabhay 7y ago

Take the barbell strategy — make sure to exit any less liquid investments (e.g. stock), and then extract capital from the bubble by raising money. When the market crashes, use your cash to purchase cheap assets and/or failing companies, and then work towards profitability. Absolutely do not: become a VC, work for a startup, or place your capital into some kind of ‘growth’ fund indexed to tech. Don’t buy real estate in urban areas and don’t borrow.

racketracer 7y ago
Raising money in the bubble doesn’t do anything if you can’t liquidate from the company with good terms and you’re paid a startup founders salary right?
- chii 7y ago
  WeWork begs to differ - get the highly funded startup to purchase your own property/contracts to extract the value out of the startup and into your own pockets. Then when the economy/startup tanks, leave and let somebody else pick up the pieces.
- aabhay 7y ago
  In a bubble, your terms and leverage as a founder are better, including self-comp, voting shares, and funding runway. Raising money is always risky (hence the barbell), but you have unlimited optionality compared to a desk jockey.