What are ways to bet AGAINST the value of some startups?

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pinetboltz

it seems like instead of picking the <0.01% of startups that turn into "unicorns" etc out there, if there's a way to just bet against the value of baskets of these things, it may be even more wildly profitable

the fact that some (ok, many lol) startups have uninspiring ideas + unsustainable/ cash-flow negative business models even in the best of times + many macro headwinds + some truly priced to perfection++ valuations, make them seem very attractive to bet against

what are some ways of doing this?
eg. i was thinking a few theoretical options would include,
- Shorting SoftBank stock
- Borrowing private employees' stock to enter into a total return swap/ sell to another party, kind of like actual short selling but just with the private shares, so that if the company gets their paper value marked down, the transaction makes money
- Waiting for the companies to fold, then sourcing distressed real estate

also, someone should seriously consider starting a hedge fund doing structured bets against these startups, kind of like CDS against subprime mortgages, only against subpar startups (be like >80-90% of the pool). I bet that'd probably a strategy that would ironically outperform many actual VCs out there
 
pinetboltz said:
it seems like instead of picking the <0.01% of startups that turn into "unicorns" etc out there, if there's a way to just bet against the value of baskets of these things, it may be even more wildly profitable

the fact that some (ok, many lol) startups have uninspiring ideas + unsustainable/ cash-flow negative business models even in the best of times + many macro headwinds + some truly priced to perfection++ valuations, make them seem very attractive to bet against

what are some ways of doing this?
eg. i was thinking a few theoretical options would include,
- Shorting SoftBank stock
- Borrowing private employees' stock to enter into a total return swap/ sell to another party, kind of like actual short selling but just with the private shares, so that if the company gets their paper value marked down, the transaction makes money
- Waiting for the companies to fold, then sourcing distressed real estate

also, someone should seriously consider starting a hedge fund doing structured bets against these startups, kind of like CDS against subprime mortgages, only against subpar startups (be like >80-90% of the pool). I bet that'd probably a strategy that would ironically outperform many actual VCs out there
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IPO\EtF
 
Well it is not specific to Tech Stonks per se but just like NDX itself and other majors down the ETF has gone lately:-

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pinetboltz said:
it seems like instead of picking the <0.01% of startups that turn into "unicorns" etc out there, if there's a way to just bet against the value of baskets of these things, it may be even more wildly profitable

the fact that some (ok, many lol) startups have uninspiring ideas + unsustainable/ cash-flow negative business models even in the best of times + many macro headwinds + some truly priced to perfection++ valuations, make them seem very attractive to bet against

what are some ways of doing this?
eg. i was thinking a few theoretical options would include,
- Shorting SoftBank stock
- Borrowing private employees' stock to enter into a total return swap/ sell to another party, kind of like actual short selling but just with the private shares, so that if the company gets their paper value marked down, the transaction makes money
- Waiting for the companies to fold, then sourcing distressed real estate

also, someone should seriously consider starting a hedge fund doing structured bets against these startups, kind of like CDS against subprime mortgages, only against subpar startups (be like >80-90% of the pool). I bet that'd probably a strategy that would ironically outperform many actual VCs out there
More...

you would have to be better at identifying the winners than the VC's are at identifying the losers.
 
Basically you want to buy a put option against a specific startup.

I can make this market. Pick a startup, I’ll quote you a premium, and sell you an OTC contract put. Trust that it will be a hefty premium and tight dates given the risk involved.

Easiest thing ever to hedge… just invest a percentage of the premium into the startup. If it hits, then you win; if it loses, I pay out… but keep the premium. It will probably expire in the money—like most puts—and I keep the premium.. and pay nothing.
 
kmiklas said:
Basically you want to buy a put option against a specific startup.

I can make this market. Pick a startup, I’ll quote you a premium, and sell you an OTC contract put. Trust that it will be a hefty premium and tight dates given the risk involved.

Easiest thing ever to hedge… just invest a percentage of the premium into the startup. If it hits, then you win; if it loses, I pay out… but keep the premium. It will probably expire in the money—like most puts—and I keep the premium.. and pay nothing.
More...

what are you talking about?
 
kmiklas said:
Basically you want to buy a put option against a specific startup.

I can make this market. Pick a startup, I’ll quote you a premium, and sell you an OTC contract put. Trust that it will be a hefty premium and tight dates given the risk involved.

Easiest thing ever to hedge… just invest a percentage of the premium into the startup. If it hits, then you win; if it loses, I pay out… but keep the premium. It will probably expire in the money—like most puts—and I keep the premium.. and pay nothing.
More...

there are so many lol, maybe not to name them individually in public as the founders/ VCs generally seem fairly connected/ egoistical, so it'd be better if the bets against them could be made in secret without fear of blowback

someone should start a FanDuel/ like prediction markets/ exchange for all these startup private shares, i think that's where a lot of the bearish action could be found - esp. large subprime startups at very high previous round valuations that are struggling with actual business ops & have little upside even on IPO/ acquisition, but would see much downside if a liquid market is made on them

the entertainment value would be profound - imagine the VCs feverishly checking markets at 6am Pacific and choking on their green shakes/ soylent bars as they realize the entire market is betting against them & the artificially propped up valuations are now marked-to-market in real time

i think the social value would also be positive, eg
- the cash wouldn't get burned frivolously by random companies doing uninspired, unprofitable stuff (sure, there's the next Netflix out there somewhere but many are nowhere close)
- the subprimes would be seen through/ acted upon faster, looking at Theranos, FTX etc
- employees holding private shares can now free up liquidity and diversify their illiquid net worths, and outside/ non-VC investors can trade both directions
- the VCs/ startup founders face more pressure to not do shady questionable stuff akin to rug pulling
- the ecosystem becomes cleaner and more transparent because of constant price discovery, which makes artificial valuation pumps/ fakery less easy to pull off, which has carry-on effects to the future in reshaping the economy eg. people more focused on the actual products/ tech instead of spin, and less waste etc
 
I’m a little lost. I wouldn’t short SoftBank. They know the odds and take that risk every day. Clearly they have found a way to hedge their bets. Also, are you talking about startups that are publicly traded? If so, you could short the stock. If not, you would have to find a bookie like the eager man who offered to sell you an option.
 
He wants to short startups that are overvalued by VC’s. The thing is the reason they are overvalued is because there is no shorting mechanism and the VC’s have incentives to mark the startups at high valuations.

it’s like shorting houses. You really can’t. You can short a proxy (the borrowers ability to repay the mortgage), which was paulson’s genius.

In hindsight he could have shorted Silicon Valley bank as a proxy. As the startup valuations went down they couldn’t get equity funding to pay their bridge loans. But that trade is done.
 
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