Comment by codingwagie
1 day ago
Alot of startups arent profitable because they are ran by people that have prestigious pedigrees, but dont know what theyre doing/have no experience. So they blow all kinds of money on bad ideas/poor execution, but are still able to raise more funding.
Eventually for some of these companies something clicks, and they do get to something of a valuable company.
This is what ZIRP was.
Alot of people dont know that investors are okay with this, they have 20 Million to push into a company, and figure that something might pop out.
It's bigger and wider than that. Throughout the 1990s people didn't care what anything cost on the web because they figured the money would work out someday. There was the 2000s crash but the success of Amazon, Google and such proved that the web was a great idea.
The story of social media was that there was a narrow time window and a single place (other than, recently, China) where investors were willing to take a chance that the likes of Facebook and Twitter would find a funding model. By the time that model was proven, it was too late for new entrants. Thus Europe was left high and dry.
Yeah there's a few winners they are hoping for. So they pattern match, Jeff Bezos went to Princeton and worked at hedge funds, so lets fund everyone that looks like that.
Turns out a bunch of those people are actually lemons, so they run a bunch of unprofitable startups.
There's two things going on:
1. Long term risky bets that could pay off massive
2. Who is the person they choose to try and execute on the above
> This is what ZIRP was.
Yeah. And a lot of people still doesn't seem to have waken up to the fact that ZIRP is dead. So no infinite amounts of cash in the economy to blow on unprofitable 'growth' startups anymore.
Everything will need to change.