kidmercury

The issue of raising money for my business has come up a few times over the past few years, though has not been pursued with much diligence: the furthest we got was writing a business plan and submitting it to a handful of angel and VC firms, all unsolicited. No one responded.

I've not bothered to put much effort into it, though, for a few reasons:

1. I think platforms are like countries. The way to invest in a country is to invest in its currency (or buying government-issued bonds). And so, I think the means for investing in platforms will involve investing in virtual currencies or the equivalent of treasury bonds. We talked a bit about this before; see our previous post on Bowie bonds. This is not the way professional investors look to make investments in startups.

2. Many professional investors typically look to liquidate their investment via a sale of the company or an IPO (i.e. getting listed on the stock market so people can buy and sell shares of your company). As noted previously, I expect corporate finance in America to collapse. We've already seen the IPO market and the M&A market take big hits. The hits will get bigger as the economic woes are just beginning.

3. Accounting standards are all messed up. Part of the problem with the banks is an accounting issue. Already venture capitalists have bemoaned their own accounting issues.

4. Finance is dependent upon economics. In other words, investing (finance) is dependent upon currency (economic). As regular readers know, I expect this economic crisis to result in a currency crisis in the US. If the US dollar experiences devaluation in excess of 40%, markets will likely breakdown. Can/will Obama/Bernanke/Geithner make sure this doesn't happen? Given that their fueling the fire now and show no signs of turning back, I remain skeptical.

So what's the future look like?

1. Valuation models that are not based on forecasting cash flows (i.e. no DCF valuation). No one can accurately predict cash flows, and there are incentives abound to cheat the numbers.

2. Small bets, casual bets. Microfinance. Stuff like Kiva and Kickstarter. Those are more like charities, but they're a step in the right direction. The end result will be in investors making more bets but of a smaller amount.

3. As finance is dependent upon economics, I don't see how we're going to get anywhere without a stable currency. As there are no stable currencies, that means we have to make new ones.

Here's "Money" by Pink Floyd.