Saturday, September 27, 2014

Dumb Money On Steroids In Silicon Valley

Business Insider reports:
Brad Stadler has been a tech recruiter at the executive search firm he founded, True, for more than 10 years. He tells TechCrunch's Danny Crichton that he's seeing some crazy startup recruitment strategies that resemble 1999.
One particularly over-the-top story Stadler relayed to TechCrunch was about a near-IPO company that was willing to pay an executive-level candidate a $1 million signing bonus — and got turned down.
From TechCrunch:
This year, a startup with revenues of $10 million wanted to find a new chief executive following its Series B raise and offered $450,000 in compensation (5% of revenues). Another startup, quickly growing and approaching an IPO, did a search for a CEO to lead it onto the public markets. In addition to a hefty compensation package, the board of the company is willing to put up a signing bonus of $1 million, to be delivered in two tranches over a year, for a vetted candidate willing to step up and sign the paperwork. Their offer is turned down.
Stadler says massive signing bonuses used to be rare, but they're becoming a more common recruitment tactic among startups.
When the Fed prints new money, it doesn't always fall into seasoned hands. It is often only one step from falling into dumb hands.

For example, a company like Twitter goes public, a lot of the money that ends up buying Twitter comes from Wall Street, that is, it is directly created Fed money via margin accounts etc.

Those selling the stock may include early Twitter tech employees, software programmers etc, who have never run a business and have no clue how to evaluate a business. But they have plenty of money to invest---dumb money.


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