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v. April 21, 2017
The proliferation of venture capital hype increases in correlation with the quantity of fired investment bankers.
Sex and the Future always sell.
A start-up founder who is looking for a friend to accompany his project, should buy a dog. (Pedro Rosso)
Within 3 to 5 years after a financial crisis there will typically be a venture capital crisis.
Many investment bankers are experts how to become rich by burning other people's money. It is a game. It is gambling. If they have been fired and without a new job offer, this is typically some kind of proof. Either they caused significant losses. Or they took part in violating legal rules.
Now they are sitting at home with millions on their bank accounts. Their license for gambling has expired. How to continue gambling?
There is a possible option to continue gambling. A small new own investment business could be created. General Investment hype has lost its credibility due to the crisis. But technology innovation is something what always sells.
After a general financial crisis we get a worldwide proliferation of "new Silicon Valleys".
For example, Germany then gets typically a lot of media hype about a "new Silicon Valley" either in Berlin area or in Munich area or in the Frankfurt area.
Why Frankfurt? ... Why Frankfurt? ... Because it is the major financial center in Germany. There is not a proliferation of innovative companies but a proliferation of investment bankers who lost their job. If they do not want to move to areas where the innovation lives, then they try that the innovation moves to the area where they live.
There Are Two Things That Always Sell: Sex and the Future. Technology innovation hype is hype about the future.
And why do venture capital companies need hype?
Their banks provided them for free with people's money to burn. Now they have to do this difficult job on their own. There are 2 possible sources for getting fresh money to burn for the start: Public subsidies - governed by lobbying rules; and badly informed institutional investors.
The later final phase of the game requires for the "exit" some excited silly managers of Big Business. Or in case of a later IPO many excited silly share buyers will be required.
Innovation hype helps for all these gambling tasks.
Innovation hype does not cost very much. Journalists are lucky to fill pages with emotional stories about founders of innovative businesses. For their participation in this investment gambling it is even not required to offer bribes. It is just required to finance the creation of entry points to the hearts of journalists: Events, documentation, friends, business founder competitions and whatever.
The hype coordinator should also spend the money for the photograph. The typical emotional business founder photo has to be managed with care, and has to be supplied free of fee to the press. Journalists do not like to make stories if the editor has to finance the photograph.
These above are the building blocks for the virtual reality of technology innovation hype. Now let us now have a look at vital details.
But first a waning: Never believe in the story above.
First of all, there are many venture capital companies which have a very different origin. When searching a while you will surely find some among them which are serious businesses. And then be aware that parody is always exaggeration. Exaggeration is the tool of our mind to help to understand reality, even if the exaggeration is not reality.
2 years of search - and still no reliable correct fair intelligent investor?
"I have not failed. I've just found 10,000 ways that won't work.” (Thomas A. Edison)
But when looking for an investor, you should understand his point of view, too. Let us suppose that an Investor sets the intended business value to $ 10 million and takes 60% equity. Then the value of the investor's money immediately drops by $ 4 million. So now the investor is thinking what are you going to do to get the $ 4 million back and profit above that?
This problem is reduced if you have not only a business idea and your future success probability. If you bring into the compay some software or significant market test experience or scientific research result or other value then this problem is at least much reduced.
This way it becomes evident why investors want to handle investments in several steps. If the supposed future value is raised to $ 30 million and there is now a different investor bringing $ 1 million, then the initial investor sees his $ 6 million increasing to $ 18 million. There are legal problems involved. So please do not consider this as a recommendation. It should perhaps not be done this way. But read the newspapers and then ask the question if it is usually done this way.
For the glory: "Our successful exits: We sold various portfolio engagements with success. We took part in financing the Facebook success" - or whatever...
(1) Buy 1 share or some derived financial product of all companies which are promoted by hype and/or balance sheet fraud from circular marketing service transactions and/or vapor arguments.
(2) Keep the share as long as the hype creation is increased (which requires a lot of money for marketing hype).
(3) Sell the share as soon as there is reducing hype marketing (hence when the hype financing has been stopped).
(4) Otherwise keep the share until the point of culmination, e.g. an IPO or an exit agreement with the managers of some more traditional company.
(5) Decide if you can dare to name this company in the context of your portfolio or your success story, or to list it in a more indirect manner.
(6) Find with this success story new investors for your funds and other investments. Take care that the involved consultant fees are sufficient to finance all luxury which you are able to consume.
Remember the Golden Rule for investment service providers
Conforming to the rules of mathematics, for investment markets the total losses and the total profits of all game players are typically exactly 50% : 50%. Due to fees, the loss cases tend to be 60 % or more, the profit cases tend to be 40 % or less.
Close to all investment consultants and investment service providers, when listing their investment history, are apparently only among the 40% of winners?
This is the Golden Rule: If you are a consultant or a service provider, never list your losses.
The Golden Rule for investors: Never trust in sucess history lists. They are meaningless, if the loss cases can not be traced.
For the glory - "our portfolio includes more than 100 companies - read the list!"
by "investing" a total(!) of only $ ~120
The following variant for the portfolio list has been discussed here:
(1) Go to a site for crowd financing (or crowd funding). Search for all possible investments in Internet startups.
(2) Donate the minimum, if only 1 USD.
(3) Check later if the site for this project is running with success.
(5) Ask them if you are allowed to use their logo when publishing a link to their site. Typically you will get this permission.
(4) In this case include such a link on your site in your list of your portfolio.
Please be aware that such a list might be considered as evidence of faulty behavior if there is some problem within your main activity. So this is not a recommendation.
To avoid this risk, you might state the truth of $ 1 donations.
(Please observe: Donations are not an "investment".)
We are the 3 start-up girls of the App 'How to find Lolitas with your smartphone'.
Our smartphone app displays all escort girls nearby with their phone numbers and a minimum bid. 15 minute auctions.
$ 2000 is the share price for the start-up 'How to find Lolitas with your smartphone'.
Investors can fetch their dividend in kind once a year personally in our premises. Female investors welcome, too. We the 3 start-up girls will take care that investors will feel satisfied from their investment.
This was not a serious suggestion.
Please be aware of the legal limits, rules, restrictions and whatever. It was just inserted here as a parody about the many crazy app suggestions circulating in start-up brainstorming small talk.
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