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Amid Fiscal Uncertainty, Venture Capital Is Way Down In Silicon Valley
Hugh Pickens writes "With the 'fiscal cliff' just weeks away, Chris O'Brien writes that venture capital fundraising in silicon valley is down, the amount invested is down, the number of folks investing in venture capital is down, and the number of VC firms and partners are down. 'The people I talked to in the industry sounded grim even as they tried to make the case for optimism,' writes O'Brien. 'Still, it remains difficult to identify a clear path for turning things around for the battered venture capitalists who make Silicon Valley hum.' So what's wrong with the VC industry? The problems are many and complex but they can be boiled down to one thing: Not enough exits. For the size of venture capital being raised and invested, there simply aren't enough initial public offerings of stock or mergers and acquisitions to generate the returns that funds need. Venture insiders blame the global economic uncertainty. They believe that is part of the reason that giant corporations, which have amassed huge piles of cash, are just sitting on it, rather then using it to acquire startups. 'The numbers are way down,' said Ray Rothrock, a partner at Venrock. 'All these companies with these fantastic balance sheets, and nobody is really buying anything. With all the uncertainty they're facing with the economy and taxes, buying little companies is way down on their list.'"
Good.
People who say "sheeple" have about as much sophistication as an AOL user, and in fact are probably actually AOL users.
Investors may have to make their returns by the companies they invest in making successful products that people want to buy. Disaster.
Remarkably verbose article. Somebody's getting paid by the word... The TLDR is: "much like the rest of the economy, the velocity of money is on the decline in the VC/startup field".
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
Much of the VC activity(and startup acquisition by larger outfits) in the valley has been based on absurd speculative bullshit only slightly less risible than pets.com. Now, with the supply of bigger suckers on which to unload your worthless stock in some 'disruptive' Web2.0/mobile/social/bullshit apparently drying up a bit, non-idiots are staying away.
Good heavens, whatever shall we do?
Starwars was a merger long over due.
Netflix looks weak.
AMD is in the wings.
Just because google, apple, and microsoft aren't buying every month on doesnt mean a whole lot of fiscal uncertainty.
It just means there isn't a real motivation to swoop in before your competitors beat you to the punch.
It's good to take a break and take a breath in between spending 100 mil.
Seriously if you need a idea to throw your money at.. how about flying cars that drive themselves with solar energy that let me connect with my friends and tweet our international pub crawls while giving us discounts on our next bar in queue.
BTW how's groupons stock doing. Oh right it's only down 85% for the year.
I can not blame them. I would not consider investing until this economic shitstorm is sorted out. If you have money and you truly think things are going to get real crappy soon you would wait also.
You have better odds in vegas than with a random startup right now....
WW3? Iran? Heh, Whatever. War is good for investment, lots of money to be made. Unfortunately it's got to be paid for by the tax payers.
Bro, WW3 with Iran would be the best thing that every happened for Tesla at least. Oil will go in to the stratosphere and and electric cars will look like a damn bargain!
Also, let's face it, half the "uncertainty" right now has nothing to do with America but with the Chinese transition of power and European debt mess.
you voted for it.
With all the uncertainty they're facing with the economy and taxes?? ;)
I don't get it. I was told there are two thing in life that are certain. Economy and taxes.
Or at least something like that
Privacy is terrorism.
Elections have consequences Do you blame them for holding on to thier cash reserves? With Obamacare looming and a president that has shown no understanding of how our current economic system works, these corporations can only predict that things will continue to worsen. They won't invest any of this money until there is some possibility that there will be a return. That probably won't happen in the next 4 years. Buckle up kiddies we are in for one hell of a bumpy ride.
This is the time for compromise.
Obama is willing to compromise, as long as he gets everything he wants.
The sooner they realize that, the sooner we can move on to truly punishing the evil, greedy corporations that got us into this mess by creating booming economies over the years in the first place. Had the concepts of capitalism and big business never created the most prosperous Nation in the first place, we would not be in this mess we're in.
Fine. We're certain that your tax rate will be going to 39.6% come January first and Greece won't be paying your bonds back.
Feel better? Now get to work.
Have gnu, will travel.
Citation needed. Provide one or shut the fuck up.
People who say "sheeple" have about as much sophistication as an AOL user, and in fact are probably actually AOL users.
Too little innovation, too many apps like "Mobile photo sharing - FOR CATS!"
The funding game is dying, slowly. The future is in the 37 Signals and GitHubs of the world. (Both took funding I believe, but only after they were profitable : if the VC is how you keep the lights on, you're doing it wrong) Even more significant are the bootstrapped startups, the 1-4 person operations, that make great products that actually solve problems. (In other words, the anti-Instagram)
The best thing about a boolean is even if you are wrong, you are only off by a bit.
Rather THAN. Seriously.
We Apprentice Developers and Designers
Cleary they have to be wrong. GOP says that people with money will always invest their cash thus creating more jobs.
Our government (President and most of Congress) are not willing to implement austerity. The debt increases by over a trillion per year, and that's the plan! That's what the actual Obama administration numbers say the future holds, an extra trillion in debt per year. (Based on their assumptions, that trillion will decline down slowly starting in three or four years, but it would take a tiny uptick in the interest rates to wipe out that assumed decline and make it go up.) The unfunded mandates in the Affordable Care Act (a/k/a "Obamacare") fall squarely on business, so lots of businesses are laying off people... the unfunded mandates are a step function, and lots of businesses are firing until they drop down a step or two, and they plan to freeze their headcount forever to avoid the additional financial burden. Dodd/Frank is causing havoc, Sarbanes/Oxley isn't helping any either. There hasn't been a budget in four years, the credit rating of the USA has been downgraded and the credit agencies are broadly hinting that they are about to do it again. Obama has signaled clearly that tax rates are going up soon, and he has the political power to make that stick. Obama is floating a "carbon tax" to make all energy use more expensive as well.
In this environment, who could have foreseen a reluctance to take financial risks?
There is a startup hiring near me, and they look interesting. Instead I am clinging to my less-exciting but stable job. It isn't just investors who are worried.
He said Asia/canada not EU. It is true that taxes are higher than in the US. But the overal cost is lower. Before coming back to Academia, I was part of a startup. With the health care support we have in Canada, as well as other benefits, the lower loaded cost of an employee about makes up for the taxes. He also said undertainty. A higher tax rate isn't what kills it, as Warren Buffet has pointed out time and again. Its the endless bickering and inability to settle on a solution that kills it. If the GOP in the house is willing to meet Obama part way, then the situation will improve.
Atlas stands on the earth and carries the celestial sphere on his shoulders.
The reason why startups can't grow big.
By that time US will accumulate another $4-6T of debt which will put total at about 130% GDP. There is no way to 'grow economy" out of that much debt so market for US goverment securities will cease (both federal and state/municipal.) At that point politicians will have only three options left: 1) _drastically_ cut welfare entitlements; 2) print more money; 3) all of the above. I bet on option 3, which means Inflations (capitalized on purpose.)
At this point hoarding money will become a losing proposition big time.
The good thing about all that cash is it insulates from mistakes. Just ask Intel and Itanium, or Microsoft and the original Xbox. Maybe Sharp would still be with us, if they had done that, instead of investing in risky R&D.
and is building a 12th. The are also a very long list of unneeded military weapon systems that are still funded and rampant corporate welfare. When conservatives want to talk about real fiscal responsibility and not just making the really rich richer than they might be able to say the words "financial cliff" without me laughing at their pure greed.
Amid Fiscal Uncertainty Venture Capital Is Way Down In Silicon Valley
Ummm, is this a good time to invest in Slashdot? :)
Shai Schticks:"You don't make peace with friends, you make peace with enemies"
Maybe since the hoard-cash-and-don't-make-jobs-so-Obama-loses plan didn't work out, they should just buy big TVs and a couple of kegs and just live it up.
Sorry, but gray text on gray background is making my eyes bleed.
This is nothing but FUD.
"Fiscal uncertainty" isn't going to dissuade anyone from making a buck if it can be made.
And in real terms, in real, honest-to-god terms of providing good lives and good jobs for people right here in this country, I'm not all that sure that "venture capital" really means all that much. Oh, it means a lot to those who have it, and for a few minutes it means something to a handful of their pals, but if there is going to be a resurgence of innovation and growth in this country, it's not going to come from "venture capital". Because, as I said, if there's a buck to be made, even if taxes are high, people will line up to get it, regardless of the tax rates. Remember, this whole thing is over whether or not we're going to go back to the tax rates we had during the Clinton administration when everybody was making money.
There was venture capital in every hot and cold tap during the 90s, and all we got was this lousy popped bubble.
Real federal tax rates have never been lower for "venture capital". Is paying 14% really so onerous?
The whole "John Galt" story shows just how incapable of self-examination our economic elite have become. The notion that if the captains of industry are so important - such unique snowflakes - that if they were to disappear there wouldn't be a line of people ready and able to jump into that spot is such an example of ego run amok. But we already knew the egos of our financial elite have reached escape velocity that they believe they are worth yearly incomes of over 1000 times what the average worker is worth. What kind of self-regard does it take for someone to believe that?
Let's see how well their little tantrum works out for them.
Their money has already been on the sidelines. I'm guessing that we're in better shape to do without them than they are to do without us. Fuck 'em.
You are welcome on my lawn.
The more I read the article and follow the links, the more I think that having the Silicon Valley venture capital boys clutching their pearls and running to the fainting couches might be a really good thing for our country.
You are welcome on my lawn.
Romney's cronies in the VC industry are still crying.
But no worries, they will sober up from their hangovers of 25 year old scotch and Rémy Martin Louis XIII.
Venture insiders blame the global economic uncertainty. They believe that is part of the reason that giant corporations, which have amassed huge piles of cash, are just sitting on it,
Newsflash: Rich people suddenly realize that rich people are the problem.
Since we could cut the entirety of the U.S. military budget and still be running close to a trillion dollar deficit, your focus on only one aspect of the financial picture seems pretty stupid. Just sayin'.
It causes devaluation of cash. The only way to avoid it is to invest in something. And with the fed printing money (see QE, QE2, and QE3) we should be seeing it sometime in 2013. I'm hoping late 2013 or early 2014 but that doesn't seem realistic. Now with the type of QE they did, there is supposedly the option of undoing it somehow, but I'm a bit sceptical.
;-(
Why isn't it happening yet? My suspicion is that most of the money went nearly directly to the people who are hoarding it. If it's not circulating it ain't going to cause actual inflation. If this is correct, the Fed truely fucked up. A regulatory and tax climate that allows their last ditch effort to go straight into someones pot of gold would not only eliminate their ability to influence the economy, it would hand it over to someone else
It's been said that US multinationals are holding over a trillion dollars in offshore cash. So if we do get some signs of inflation they may just go on a buying spree to the tune of a trillion dollars. Watch for inflation to start small and then spike - at least for prices of things huge companies like to buy.
I'm actually responding to the two anonymous trolls that tried to say that welfare was more than the military budget.
Ahem... Military budget for 2010. 683.7 billion. http://en.wikipedia.org/wiki/Military_budget_of_the_United_States
Or, here's a chart.
http://www.usfederalbudget.us/welfare_budget_2012_4.html
Looks like Defense is twice as big as the welfare budget.
It took me 2 minutes to actually look at the data. I guess the two trolls never bothered to look into their own positions. Shame.
While I'm at it... From Wikipedia
CBO's preliminary estimates indicate the federal government spent $3.54 trillion on a budget or cash basis during fiscal year (FY) 2012 or 22.6% GDP, down 1.6% vs. FY2011 spending of $3.60 trillion. Spending fell across all major categories except Social Security and Medicare.[20]
Yup, Obama is out of control! Face it, Republicans blow up the deficit, democrats fix it. Republicans whining about fiscal responsibility are lying. They're the ones that have blown up the federal deficit with stupid unneeded tax cuts and huge military expenditures. Look at a fancy graph of federal deficits against presidencies.... It's freak'in obvious. Conservatives hate facts...
As much as they're trying to terrify us about this cliff, about the best thing that could happen to this country is if gridlock takes us right over the edge of the cliff. Taxes would go up... Spending would go down... the public would lose even more faith in our 2 political parties and maybe the military cuts would help us decide to pull troops out of at least a few of the hundreds of countries we have them stationed in.
SS and Medicare are paid out of a combination of special issue treasury securities and payroll taxes cordoned off from the rest of federal income. They have their own issues but they currently have a better balance of income and expense than the rest of the budget, so it's misleading to throw them into the general budget to make military spending look smaller.
Maybe the problem is "money".... what if we ignore money, does the US produce enough food for everyone to eat? Do we build enough homes for everyone to live? Do we have enough water for everyone to drink? Do we have enough electricity for everyone to stay warm/cool? Do we have enough natural resources for everyone to have a basic, yet livable, livestyle? If the answer is Yes to all those questions then the real question becomes why do we have the problems we are having?
Money was created as a way to exchange goods and services easily by a group of people that accept the money is worth some "quantity" of a real product (e.g., food, water, mineral), nothing more. The simple fact is that everyone could easily have the basics to life (shelter, water, food) in the US without problems and those who want to work (or can work) could have a lot more. But instead we have created a monster called "money" (that doesn't even exist, it's just bits in a computer for 99% of it) that denies a lot of people even a basic living condition (or gives just enough to survive semi-comfortably on). Now, don't get me wrong, this isn't some communist or socialist ideal, I don't buy into that model any more than capitalism; I'm just trying to point out that we have the resources to manage all this as a country, so why doesn't the "money" reflect that?
You do know that healthcare (23%) and education (3%) are forms of welfare and are considered by the conservatives as welfare? So when conservatives are talking about welfare, they are talking about the 38% vs 25% of defense.
Fail at basic reading comprehension, dumbass. Read what I wrote, and then please tell me where I drew any comparison to welfare spending.
My point, for the brain dead - 1.4 trillion deficit minus .7 trillion military spending (your number, rounded up) still leaves us with a .7 trillion deficit. Saying "abolish the military" and then smiling smugly to yourself fails at basic math and is entirely unrealistic.
Something might happen. I mean it is America there is something better or politics. wish in one hand shit in the other and see what one fills up first.
We don't owe these VCs certain profits. You take the risk. If your bets come off, great, enjoy your fortune after paying the capital gains taxes. If the bet goes bad, cry me a river.
The sense of entitlement these businesses have is astounding. It is your money. Keep it under the mattress if you want. Fund startups at your own risk. Or enjoy it on a beach in Cayman islands. We live in a democracy. We change our House every two years. We change the White House every four years. We change the Senate every six years, 33% every two years. The winner makes new rules. Wanna play? Fine. Wanna take your ball and go home? Good riddance.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Increase the taxes to 35% to 45% and Silicon Valley will be humming with $Billions of dollars. Yeah, increase taxes and Corporations gets tax credits. Billionaires and Millionaires also get tax credits when they pay their fair share of taxes.
Increasing taxes is called Public & Private Investments.
The alternative to austerity is that you keep borrowing money. But people only let you borrow money if they expect you to pay it back with interest. That means you need to invest the money into something that has a return on investment. High pensions and high-end medical care don't have a return on investment, they are luxuries, and nobody is going to give you money for that.
As for the US economy, it has always been healthier than Europe's, due to lower taxes, more economic freedoms, and less regulation. Obama's limp "stimulus" did nothing other than waste a lot of tax dollars and make our debt worse.
I hope where you live is invaded first; you deserve it.
Contribute to civilization: ari.aynrand.org/donate
First, Silicon Valley sent the silicon (fabs) to Asia. Then, they outsourced labor to Asia. Then most start-ups needed an "Asian talent connection" (H1-B visa, India/China engineering, etc.) to get funding. Then,the VC set up offices in Asia. Now, those offices fund Asian start-ups. Asia is where the action is, and that is where the money is, too.
This has little to do with the recession.
I go to occasional VC conferences in Silicon Valley, and get to hear what the VCs are doing. It's not looking good. The VC industry as a whole hasn't made money since 2001 or so. During the dot-com boom, many new venture funds were created, resulting in an influx of dumb money. Most of them haven't been profitable.
The problem is this. Before the dot-com boom, venture capitalists usually funded a startup which was going to make something. So they'd fund a few engineers for a few years, and about 1 time in 10, something good would come out that paid for the unsuccessful tries. This was a good business model and it drove Silicon Valley.
Dot-com startups weren't about technology. They were about marketing and market share. So they had to be funded beyond the R&D phase, well into the growth phase, before the winners and losers became clear. The loss per failure was much higher than when VCs were involved in technology startups.
This model has persisted in the post dot-com era and into the "Web 2.0" era. Most of the ideas one sees at VC meetings are minor variations on popular ideas. I've seen a presentation for a social network for cats. Some innovative technologies are proposed, but often they're not big wins.
About 1 in 10 VC-funded companies makes it big. 2 to 3 in 10 go bust. The rest end up in "zombie mode" - they generate enough cash to pay their expenses, but can't pay back their investors. A big headache in the VC industry is dealing with the growing army of zombies. They're more profitable alive than dead, so they're not killed off, but they're a net loss. There are a lot of half-dead "social" startups around. Tech startups tended to be sold off for the technology or shut down. That's what VCs mean by "lack of an exit".
Spending fell across all major categories except Social Security and Medicare.
The 3 big expenses of government are social security, medicare, defense. There is a fourth expense: Retirement cheques. This is a large sum paid at a specific point of time. If governments don't save money for this, they can become bankrupt. As city councils refuse to raise taxes, precisely this has happened. The US government is also trying to spend the nest egg of its employees.
... and you ignored the 'unnecessary tax cuts' part because why?
Raise taxes and cut spending and you can balance the budget.
Let me rephrase that: bring taxes back to where they were 10, or 20 years ago - say, during Clinton's or even Reagan's time. There, now you have more revenue and a tax burden that you know won't cripple your economy.
What's so disgusting about this is that the republicans lost the popular vote in the house elections, yet the gerrymandering especially in Ohio and Pennsylvania but also in smaller states such as Wisonsin gave them a huge majority in the house. Still Boehner thinks entitled to demand that Romney's program (succinctly summarized as "more for the rich") be implemented. I think they can get away with this because understanding the implications of the gerrymander takes a few seconds of thought.
To preempt the obvious replies: yes, Democrats state governments also gerrymander, and yes, Florida actually enacted laws against it. Neither means that the republicans won this house election.
The idea that John Galt has anything to do with a bunch of rich investors is funny, and has nothing to do with the book Atlas Shrugged.
The John Galt character (and his fellow shruggers) were the inventors, creators, and the best of the hard workers... there might be SOME overlap, but for the most part the investor class of Atlas Shrugged were actually aligned with the political class and supporting all the social justice policies, some of which allowed them to get control of the companies created by the people who shrugged.
A bit like today, actually, where Warren Buffet and the freaks at Goldman Sachs are "all-in" with Obama and the Democrats... ever counted how many wall street bankers are in the Obama admin? hmmmmmmmm???
Surely part of that 25% for defense is welfare, too?
Cut out the creeping socialization of our military and you will save enough to reduce the deficit. Veteran's benefits are obviously welfare for the soldiering class. What other employer gives such lowly-paid employees such generous benefits? According to wikipedia, the socialist USDOVA gives the following handouts:
disability compensation -- pension -- education -- home loans -- life insurance -- vocational rehabilitation -- survivorsâ(TM) benefits -- medical benefits -- burial benefits
No other government workers, let alone private-sector workers, gets treated so well.
Even active duty soldiers who aren't at war expect free health care and free living in state-owned housing, even though they're employed and there's no reason why they can't pay for it themselves like everyone else.
After all, why should you act kindly to your military people when you refuse to act kindly to the people they protect? Right?
Elections do, indeed, have consequences... the American people gave a large majority in the House of Representatives (where all taxes and spending are constitutionally-required to originate) to the Republicans; They have a mandate to block Obama's tax-and-spend insanity no matter how hard the gimme-crowd who pack themselves into the big cities demand.
Obama spent his entire 1st term pretending that ""compromise" meant everybody but him had to surrender their principles and move to support his policies... and he still thinks this. The jerk is now saying that he will only accept "new ideas" (he has always said this, and always claims any Republican idea is an old one) and that the Republicans must accept that the American people re-elected him... he needs a mirror... he needs to accept that the American people have elected essentially the same congress to stop him TWICE now.
Checks and Balances... not just for Republican presidents...
Not implying Romney.gif. More like RonPaul.FTW!
Let's do a simple test to see if tax cuts are primarily responsible for the deficit. If they are, then the deficits must be a result of revenue decreasing over the years while spending stays the same, right?
Compare US Federal Revenue over time, which has gone from 22% of GDP to 34% of GDP with US Federal Spending over time which has gone steadily upward.
Hmmm, seems pretty obvious that the issue is that spending has gone way up over time. While revenue hasn't quite kept up with the massive spending increases, it's also gone way up over time. So how can you blame tax cuts with a straight face? The fact is that federal government revenue went up after Reagan and Bush's "tax cuts". Congress just managed to spend even more money than they had before.
The people in D.C. think that if you plan to spend way more and then change your plan to increase spending not quite as much, that's a drastic cut.
Here's a modest proposal, how about we cut spending levels to what it was 10 or 20 years ago in the bad old days and then watch as the deficit magically turns into a massive surplus?
One problem with letting D.C. take more of our money is that they just spend it. They have an essentially unlimited list of things people would like them to spend our money on. At some point we have to put our foot down and say they're going to have to prioritize some of it.
Sadly, that doesn't seem to be going to happen anytime soon, since people are just arguing about how much of a spending increase we're going to have and where the extra money's going to be especially increased this year.
The party of stupid and the party of evil get together and do something both stupid and evil, then call it bipartisan.
Hardly a venture when you won't invest unless you have a guarantee or underwritten risk.
This, however, is common with investors. Look at the Lloyds Names when the crash hit them: instant whining about how they needed govenment aid to reduce their losses...
And since paying poor people a dollar gives around 1.6 dollars in local industry, a net gain.
Increase welfare.
WW3? Not likely. World wars require entangled alliances of opposed powers. Those don't exist anymore. Even the mutual defense alliances (like NATO) wouldn't go in for that shit. You've got 3 major nuclear powers with orthogonal interests (US, China, Russia), and a smattering of regional powers/lesser nuclear powers with a general lack of alignment (and a near total lack of military cooperation agreements between them). None of that adds up to a world war. Even a nuclear exchange, so long as it wasn't between two of the big 3, wouldn't be a global problem.
Another costly, pointless regional war with $1 trillion in gold and blood down the sand? Yeah, that might happen.
Unfortunately it's got to be paid for by the tax payers.
But fortunately is doesnt have to be paid for by current tax payers. We can kick this can down a few more generations. Its just a number on a balance sheet.
"His name was James Damore."
So you are looking at the last 40 years and you think that what is missing is inflation?
Inflation is what causes the capital to leave. Well, inflation, which is the 'solution' that governments have to their actual problem: growth of government spending.
Inflation is what governments have been creating for decades, generations now, to prop up government spending. The private sector is chocking on inflation. The businesses cannot get any loans while the only credit that is available is fake one, from the Fed to the treasury, and the member banks are used as the proxy to make this look legit (while having this same process prop up their balance sheets in the mean while), but in reality the governments and the banks are bankrupt right now.
Inflation is what caused the people who shouldn't have been getting into the stock market get into it, this inflates bubbles, I explained it for years and years here, is anybody home? In fact the Great Depression was caused by inflation, the Fed was buying bad UK debt and inflating a bubble in the stock market because people were looking for a way to hedge against it, the bubble burst and started the recession, which then was turned into depression by Hoover printing ever more money for bailout and stimulus and then more of the same by FDR.
The 1921 depression was caused by the same problem - the Fed.
The 1970s stagflation was caused by the spending and printing and borrowing of the 50s and 60s, all of this was growing the gov't (Medicare was new, SS was expanding, wars), but to pay for it the taxes were never enough, they always had to print more and more and eventually Nixon defaulted on the dollar, because the gov't fixed the exchange rate of dollar to gold and this was never sustainable.
Inflation was stopped once, it was done by Volcker in 1981, when he took interest rates up to 21.5%, and after that there were a few years of economic growth, but very shortlived, the capital was still leaving due to the interest falling sharply again, and so jobs were leaving, manufacturing was decimated over the last 40 years in USA.
Inflation causes people with savings to search for a way to escape it, not to invest in the economy that is being inflated by the gov't, because everybody knows, the government will never stop until it destroys the currency.
Turn inflation up, go ahead, the credit bubble is already today bigger than multiple of all economies combined, when it blows, it will be spectacular. You can't even stop it anymore.
MY OTHER COMMENTS
Does a startup get financed because the investors hope that they will get a share of the startups profits from sales of their product in the future OR from said startup being bought up without ever generating a profit?
First = good.
Second = bad.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
Pretty sad when rational business people look at the marketplace and decide that their dollars are best hoarded and subjected to attrition by inflation instead of investing. I guess they look at the risk/reward of the potential investments and have decided that given this macroeconomic and regulatory market, "thanks but no thanks." And yet many on this website will decry those lousy capitalists...so unfair to use their wealth as they see fit. If you wanted to see investment you should not have voted for Mr. Obama. Stupid libtards in CA.
So taxes will go back to levels that prevailed during the most robust economy of modern times - sounds like a nightmare.
First, Silicon Valley sent the silicon (fabs) to Asia.
Nice sound bite except it isn't actually true. Yes a lot of chips are made in Asia but a lot are made in the US. Intel, Cypress, Freescale,IBM and more all have large scale and very competitive chip fab in the US.
Then, they outsourced labor to Asia.
Yes, the labor intensive assembly work. Would you rather pay $15/hour in the US or $1/hour in Asia? If you can find a way to get the work done in the US for similar cost, fame and fortune await you. For more automated work (like chip fabrication), much of the production is in the US. The US has a nearly $4 trillion manufacturing sector.
Then most start-ups needed an "Asian talent connection" (H1-B visa, India/China engineering, etc.) to get funding.
Citation needed. I have worked with a lot of tech startups and they do NOT need Indian or Chinese talent to get funding.
VC's are trending down, Kickstarter is trending up. Isn't this how it should be?
Apples and oranges. Companies that need and can get VC funding aren't generally the sort that are going to get kickstarter funding. VC funding for the most part is for much bigger dollar amounts. Kickstarter is swell but it is more like a form of Angel investing and works on a smaller scale. (Not saying it's less important, just that it isn't how one is likely to get funding for a company like a biotech venture) Furthermore a lot of what VCs do isn't just providing funding. VCs provide a lot of management resources and expertise to try to grow the company. VC funding is expensive but it makes sense for certain types of businesses.
Another argument in favor of "redistribution of wealth", which appears to be a significant part of the angry white guys mantra.
Regardless of whether it's an individual or a corporation, sitting on wealth instead of circulating it should be a crime against the global economy.
You need the VC money to "get big fast". If you try to grow organically, you will get crushed by those with better judgement.
Think so? I've worked with a lot of VCs and I assure you that most of them would disagree with you. Most companies are not actually venture backed. Venture capital is only useful for companies with particular funding needs. A typical VC investment will be between $2 million up to maybe $50 million, have a 3-5 year investment horizon, and will be VERY expensive with the VC demanding 25%-60% of the company if not more. Most companies do not fit into the model for VC funding and in fact if you can avoid it you really do not want VC funding because the cost of capital is so extraordinarily high.
Venture Capital funding is just one of many avenues to fund a business. It is a form of Private Equity but not the only one and certainly not the only way to build a successful tech company. VC money is extremely expensive and VC backed companies demonstrably do not succeed at a higher rate than non-VC backed companies.
US has the highest corporate tax rate in the world
The statutory rate is not the same thing as the effective rate which actually gets paid. The effective US corporate tax rate is just 12.1% of profits in 2011 which is the lowest number in 40 years. The 10 most profitable companies in the US last year paid, on average, approximately 9% tax.
While I think that our tax code is a mess and needs serious reform, the notion that taxes in the US are the highest in the world is demonstrably false political propaganda. The 35% number you cite is a meaningless number which is only useful for political soundbites.
While it then doesn't give a clear picture at all, you need to normalize the data or it's just nonsense.
The "2005 dollars per capita" and "% of GDP" are somewhat reasonable methods to do so.
Also you should remove any data from after 2011 since it is not reliable.
You will then see that both spending is a good bit up bit also income is way down.
Which as I said doesn't mean much (except that it might sense to attack both sides, which is of course completely opposite to the current "I am right and thus the only acceptable thing is to do exactly the thing I want done, including to how the dot is placed on the i").
ok, 2005 dollars per capita.... federal government revenue has almost doubled. Has it ever been higher? Sure. Over time, has it been increasing, not decreasing? Yeah.
Here's 2005 dollars per capita in government spending, from $4 Trillion to now over $10 Trillion. It's still very obvious that while revenue has gone up over time, spending has just gone up even more.
Still clearly shows that the problem isn't less revenue, it's way, way too much spending. In 2000 we spent 30% less than in 2011 in per capita 2005 dollars. You can't explain that away by anything other than we're experiencing massive spending increases that have no relation to anything but that the feds just want to spend more money.
The party of stupid and the party of evil get together and do something both stupid and evil, then call it bipartisan.
The "military budget" doesn't include the trillions flushed down Iraq and Afghanistan so it's actually much larger than it appears.
Also note that Federal military budget numbers released to the public, from the pie graph included in IRS forms on down, are deliberately falsified - downward. Administration "discretionary spending" for military purposes is not in the budget approved by Congress and is not included in "Federal budget" claims. Payment toward Federal debt incurred by military spending is not counted. Collateral damage, like military pensions and the Veteran's Administration, is not counted. A couple of years ago the War Resister's League conducted a cursory audit and found that roughly 50% of U.S. Federal spending is military spending.
Not a lot. Exactly how many Social Networking and Gaming sites can these guys fund? Get a grip, it is supply and demand. The supply of good ideas is relatively small at the moment. Most ideas are limited by the available infrastructure. We need increased broadband speeds to enable new possibilities. It's the infrastructure stupid.
So go to the people directly - cut out the middle-man. Services like kickstarter and indygogo have been shown to be able to produce startup money for small businesses up to the several millions of dollars range. The truly wonderful part of it is that the investors take such a tiny risk each ($75 on the average) that an occasional failure doesn't hurt. For the business person, you have not just initial funding but also a guaranteed immediate market. If there isn't enough interest to sustain your company, it doesn't fail - it just never gets started.
My g/f and I recently started a small business that way - we needed a few tens of thousands to get going - we got three times what we asked for and will be busy making product for several months to fulfill our promises. Once that's done, we're a viable business with zero debt, zero liabilities - so we're free to make whatever we think will sell without investors and shareholders breathing down our necks.
It's a win/win situation.
How many radio or TV innovators and VC funders are there? Maybe we are at the end of this boom and into bust and consolidation. People are done with
investing in Facebook and Groupon market flops. Only crooked bankers and snake oil owners make money from these. Finances are drying up in the crash.
The Netfix is flopping, the Google is flailing, the Yahoo has a fork in it. The PC makers are done, the phone guys finished except Apple and its Foxconn slave force. Cloud crap is just commodity services not innovation. Ebay, blagging, publishing and the rest have peaked. Graphics, books, movies, music, all done, what is next "feelies", "smell-o-vision"? Even printing plastic gewgaws is done. What is next, a disruptive service to catalog "epic tweets" for your CIA sponsored color revolution? Pah, that is not innovation that is incremental junk.
Like IBM and the mainframe biz, plenty of money to be made, but not much innovation for VC startups though.
Yes this has nothing to do with our current presidents war on profit and subsequent reelection. Let's make a reference that points and blames conservatives call for some fiscal sanity. The US doesn't have a monopoly on innovation and investors can take their resources elsewhere and unfortunately this is exactly what is happening. I saw this coming. Tuesday night, this was my biggest fear.
I'll just leave this here:
Obama is a moderate republican
I think you touched on the counterargument (that has been very well made): while state money is loose, bank money (the overwhelming majority of the economy) is very tight. Because banks are still recapitalizing, the money supply is very tight. I'm not a fan of CATO or Hanke, but I still have to credit him for making the case on this. He also did a good EconTalk podcast about hyperinflation where he explains this in detail.
I'm not prepared to say whether or not the fed fucked up yet. I think we're going to have to leave that one to the history books and just agree that we don't really have sufficient understanding of all the what-ifs at this time. My gut says they stopped things from getting far worse, but that these policies are simultaneously slowing a recovery and setting a path for a new bubble.
SWM seeks new sig for a brief fling
Don't believe me? Read this
I really don't know why a reduced number of exits have anything to do with the fiscal cliff or with higher taxes. I think this issue has much more to do with the Facebook stock bubble popping. Whoever wrote this post is offering no reasons to make a correlation; the argument in this post should not be accepted unless these actual reasons to accept it. See http://en.wikipedia.org/wiki/Correlation_does_not_imply_causation. Just because two things are happening at once doesn't mean one causes the other.
To be a little more complete, the "partners" of the feds who own private concerns doing contract business with the US government want the feds to spend more money. Government payrolls? Way down since 2000. Direct government assistance? Doesn't even come close to making up that increase.
The federal government wastes its money lining the pockets and coffers of private businesses. I believe that if it's worth it for government to spend money on something, then the government should operate it. Schools (local government), prisons, military, roads, etc. The only exception should be commodity procurement necessary for operations where there is a competitive marketplace.
I find it ludicrous that there are companies that contract with the US government whose executive compensation is in the tens or hundreds of millions per year. Civil servants should be doing their jobs.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai