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Ask HN: Where VC money comes from?

8 points by nametakenobv ↗ HN
People claim that there is no risk of economic collapse coming from the VC bubble because this is private money. Is it though? Isn't the large chunk of money coming from pension funds and the like?

Companies, and thus valuations are private. So the investors have a lot of equity on their sheets which is basically vapor. What happens when all those companies which received double and triple digit millions in funding can't reach the valuations and all the startups selling to other startups close shop? Did you spend your grandma's savings on hipster clothes and Starbucks?

7 comments

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tinkerrr
It obviously won't have 'no effect' on grandma, but generally speaking, grandma's pension fund, if managed competently, will only invest a small percentage of portfolio in venture firms. The effect is therefore limited to a small amount of the portfolio.
nametakenobv
I see. That makes sense. But is there some sort of analysis/blog to show what is the concentration of institutional investors in VC? I can only find figures about total VC funding which seems to be around $200B over the last 4 years. I have a hard time believing more than 30% of that is private money, thus starting this thread.
sharemywin
~50B a year is chump change.

US retirement assets hit 208 Trillion.

http://www.pionline.com/article/20130626/ONLINE/130629908/ic...

FiatLuxDave
Just to put it in perspective, $50B/year is approximately one-third of what the US Military (all branches combined) spends on salary for its 3.2 million employees. It is approximately half of what China spends on its entire military, including weapon systems, procurement, etc. It is 0.27% of US GDP.

We live in an era of inflated asset values. $50B/year is NOT chump change when it comes to actual deployed capital flows.

bbcbasic
Yes grandmas pension (assuming she is old - technically a 28 year old could be a grandma) fund should be erring on the side mostly of low risk cash-like assets.
id122015
I'd like to know what happens when the governments prints money out of this air and buy shares in private companies with the help of VCs? Is theft a science?
abannin
It's not a question of where does the money come from, but rather how much. VC as an asset class is pretty small compared to stocks, bonds, etc and vehicles like mutual funds.