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WheelsAtLarge

It's taken me a while to understand this but a very common cycle for tech is:

1)Startup founder gets and idea and develops it.

2)The startup develops the tech and finds a market for it

3)The Startup becomes successful

4)The market falls apart and the founder can't guide the startup thru the difficulties

5)Start up is in distress or fails

6)An MBA type comes along buys everything at a deep discount

7)The new manager restarts the company. This time with much more discipline and a plan on how to sell the product.

8)Company becomes successful enough to be sold or go public.

9)MBA guy multiplies his investment. Startup guy gets the shaft.

We are going to see this cycle in crypto. Right now, MBA types are looking for any companies that are falling apart but have a future. Looks like Celsius is one of them.

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I’ve seen a couple examples of a somewhat opposite scenario where founder does well, sells to MBA for a lot, business struggles, founder repurchases for much less, then brings business back to profitability

I remember some of the founders of the first startup I worked for commenting after its acquisition that before being acquired they had been terrified that the huge acquirer would just go "Oh, we should do that" and assign a dozen software engineers to design, implement and ship a rival product, but after acquisition from inside the huge corporation they could see they had nothing to worry about, assigning a dozen software engineers to go ship a rival product would have needed board level determination and nobody in the board knows the first thing about the actual product so that's not going to happen.

DELL and Apple are a good example of your scenario. And Microsoft and Google are examples where the founders handed the company to an MBA and the companies profits greatly increased. But I've seen these happen much less.

Interesting, didn’t cross my mind even though I had an Apple Performa from their dark years. I think I was young enough not to realize some of the flaws.

You got Microsoft in the wrong category. Gates gave the reins to Ballmer, an MBA, which tanked the stock. Ballmer was never a founder, he was an employee with early stock. Microsoft flourished when Gates was the CEO.

> Ballmer joined Microsoft on June 11, 1980, and became Microsoft's 30th employee, the first business manager hired by Gates

> [Ballmer] left the MBA program at Stanford University

Ballmer is what Marisa Mayer was (or vice versa). An employee that latched onto a rocket. What made the company successful wasn’t them but the founder. By the time you can hire the 10th employee, risk is already greatly reduced.

The way I remember it is that profit's growth for MS greatly increased under Ballmer but company growth tanked and that's what tanked the stock since MS lost its reputation as a growth stock. But generally speaking Ballmer was not the best choice to take on the company.

Yes, Ballmer spent his decade squeezing oil from rocks while completely shitting the bed on anything forward looking; as a result they lost ground on almost every consumer facing product. On the outside Microsoft was starting look like IBM.

However his focus on enterprise laid the seeds for 365 and Azure and flourished once Satya made it clear that not everything had to revolve around Windows and Office. I think Gates is also a bit to blame here as I think the story goes that almost every decision that came to the board was shot down unless it meant more windows/office sales

are you thinking of Dell?

Steve Jobs?

Was thinking of a couple observations that aren’t particularly famous but Jobs is in the category too.

A slightly more cynical version:

1) Startup founder gets an idea and develops a legitimate product.

2) The company gains some customers, but the growth is tough, since competing products often sell below cost.

3) The founder gives up and goes to VCs.

4) VCs take away the controlling stake in exchange for an endless stream of cheap money, so the company can start selling dollars for 90 cents just like the competition.

5) The founder's vision is no longer a critical asset, the cheap VC capital is. The founder gets pushed out and replaced by the VCs' protégé.

6) If the stars align, the (still unprofitable) company exits. Numerous retail investors buy shares in something they've heard about but don't fully understand. VCs get 100x returns. The founder gets a letter of appreciation.

The whole cycle is all about getting a bigger share of the endless stream of cheap money from the fed. VCs throw in a lump sum to buy visibility. Enough visibility guarantees that more people with extra freshly minted cash on hand will choose your shares over other speculative investment.

Except all that recently printed cash is now competing for wheat and baby formula (hence inflation), so the fed has no choice but to backtrack and raise interest rates. And if this holds for sufficient time, the whole VC game may suddenly stop paying off.

I agree with the (cynical) view of founders, VCs, and equity. Founders who sell their business to VCs get what they deserve (an education.)

Your digression into the link between stimulus cash, baby formula, and inflation seems somewhat less accurate.

Firstly, baby formula (and wheat) are not luxuries. The amount of formula you need is 100% based on your baby, which neither knows no cares how much cash you have. My guess is its the first thing a mother buys, not the last. So excess cash, or lack thereof, has no impact on demand.

If demand is stable, that means inflation is caused by constrained supply. Which is exactly what has happened year - close a factory producing significant % of supply, and supply drops.

The same with wheat. No one is buying extra bread with their extra bread. But global wheat supply has been affected by the Russian invasion of Ukraine.

Yes, extra cash can contribute to inflation, and no doubt that has had some effect, but between the war, and the pandemic the primary inflation seems to be caused by supply issues. And oil. The war drives up the oil price, and that knocks on to everything.

"The whole cycle is all about getting a bigger share of the endless stream of cheap money from the fed. VCs throw in a lump sum to buy visibility. Enough visibility guarantees that more people with extra freshly minted cash on hand will choose your shares over other speculative investment."

I would mostly say yes but keep in mind that money does make the world go around. Meaning that greed sparks ideas, products and services that keeps us from going back to a society that survives having or providing nothing to spare beyond the basic necessities.

It's not pretty but it's what's kind off working now.

"Gets the shaft" implies harsh or unfair treatment. It was startup guy's idea to sell the company, and startup guy's lack of abilities which led them to the mess in the first place. It seems like startup guy is getting exactly what he deserved?

I think from a purely moralistic perspective this is unkind. Perhaps they are getting exactly what they signed up for. But how many naive purely technical people have been short changed by similar antics in the past

The list is being added to every day

The conclusion to be drawn here is that naive pure-tech people are not well rounded enough to extract the maximum value from their creations for themselves.

In other words sole-founders have missing skills which are likely to be exploited by those who have those skills.

Perhaps this implies that a founding team with a mixed skill set (creation, sales, business) will likely have long-term better outcomes. Perhaps it implies that sole-founders would be well advised to pay for competent advisors in the areas they are weak.

Facebook's Zuckerberg had the right idea. He sucked in some of his ego and hired Sandberg to help him run the company. I'm sure Facebook has done so much better thanks to the two running the company. She brought in the business discipline and know-how to be able to maximize profits.

Whatever people might think of Zuckerberg, one thing for sure, he's smart enough to know that he doesn't know everything and should ask for help. Many founder's ego just won't let them do that.

I disagree, this wasn't a "startup", this was a scam since day zero.

I can think of a small number of cases where this has occurred. For the most part, it's been the other way around...it's been founders and VCs dumping on MBAs and retail for the past 15 years.

I've been in tech startups for 20 years and have never seen this pattern or heard of it. What is even one example?

MBAs notoriously do not fix things. They usually run them into the ground.

Sometimes VCs will replace founders with experienced execs to try to control costs before a sale, but I haven't seen examples of this where they fix the product or find the market fit. They usually just fire people and try to get the financials to look better.

Celsius in particular should make an MBA more worried.

Their required collateral when making a loan is 4x in cryptoassets. This means the collateral is not enough after a 75% drop.

Yet Bitcoin dropped 80% every 3-4 years or so.

https://studio.glassnode.com/metrics?a=BTC&m=market.PriceDra...

What is celsius' future? It seems like Goldman just wants a bunch of fire sale assets.

Forget the coin. Goldman gets an entire suite of crypto products at cheap prices.

Yeah, it seems much more likely to me that Goldman is just stocking up on a bunch of crypto while it’s stupid cheap.

I don’t know of any company that has happened too. I’ve see the reverse happen all the time in M&A deals when a startup is sold to a big corporation.

It doesn't look to me like steps 7 onwards are on the cards here. It looks like an asset-firesale and the company is going to be allowed to die.

At least in crypto, most founders are getting absurdly wealthy independently of their ability to execute or even bring a working product to market.

You say this as if you're the first person to point it out online.

TLDR; if you can figure out how to sell a product people will buy, while not going bankrupt - you stand to profit.

Celsius founders are doing juuusst fine

Their customers, not so much.

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