No, they didn't raise $122B as the HN title implies. A big chunk of that $122B is a "maybe" that depends on various things that need to happen in the future.
Oh, man... I can't wait to see where this is going. Might not be pretty after all.
I've wondered how many announced fundraising rounds were like this. It's in everyone's interest (VCs and entrepreneurs) if the message to the outside world is "this company is amazing so they've raised a boatload of cash". But VCs might not want to give it all up front, or unconditionally.
It makes it hard to say what the valuation of a company is. If the milestones are unlikely to be hit, then it's anyone's guess.
This is a common structure. It's confusing to people who don't know finance or startups when they first see it.
Even VCs don't get all of their fund money delivered into their bank account when they raise a funding round. It's inefficient and undesirable for everyone involved to have to move all of the money up-front, at once.
If you talk to anyone in startup funding or finance they'll be familiar with the term "capital call" which describes how committed capital obligations are delivered at a later date than the initial deal: https://en.wikipedia.org/wiki/Capital_call
I've been involved in many startups, and this type of fundraising is not common, or at least it wasn't common before a few years or so ago
The whole concept of talking about "runway" is basically calculating how much cash in the bank, that is actually in your bank account, will last. And this arrangement is different, as there are contingencies. In the past, VCs would just give you money in a particular series, and then if your business did well, they'd eventually give you more money in a later series. But it wasn't like they announced it all up front in, say, a Series A, but a big chunk of the money would only be delivered if you met milestones.
$100B isn't a startup. And if there's a $100B deal, you better believe the cash is there. Case in point - Netflix/Paramount wanting to buy WB. Or the $44B that Musk had to raise to buy out Twitter shareholders.
Both your examples are purchases. Musk had to raise actual capital to buy Twitter because the people getting the money were taking it and walking away.
Funding doesn't work like that. Investors are giving you money as part of a longer-term deal where they stick around.
This was already common in tech for Series C+ fifteen years ago when I raised a round. Once you’re talking tens or hundreds of millions, almost everyone wants milestones and tranches instead of giving all the money up front.
Both of CFS B rounds were cash, in recent years, and each in the range of "low billions". Sure another 2 orders of magnitude is another story, but so is selling hope. I'd say the latter is the thing that is unique here.
No, it's not common for the startup itself to make capital calls. The phrase (and your link) refers to capital calls made by VC firms to their limited partners. Same thing in PE.
I think more people are aware that VCs raise commitments for a fund that they can pull in via capital calls than are aware that startup funding from VCs come with hurdles to clear.
This is perhaps because the most common round to raise is a small/early one, and these tend not to have hurdles. Founders that only ever raised these rounds wouldn't necessarily know what happens in later/bigger rounds.
Also, I wonder if capital calls come with hurdles as well? That is, can an LP refuse to put in more money if the VC's recent investments have not done well? I would think not, since it typically takes many years to determine whether investments were good or not.
Gotta hit that high IRR as a fund manager and the clock starts when the cash comes in so capital calls are appreciated by fund managers. Unless they are emerging managers (the startup equivalent in finance) and their LP’s are less than institutional and ghost them when the capital call hits.
IRR is so trivial to manipulate - it'd be wonderful if more investors began demanding actual metrics on capital performance. If you're parking cash with an investment firm you want to know about how much of a return you can expect when it is withdrawn, and while history is a guide and not a guarantee, there are much better ways to inform that expected return than IRR. "My million got a return of 2% during a year when your reported IRR was 10% - where's the other 8%!" is a common cry from those who haven't just rolled over their investment, unaware of how little it has functionally appreciated.
There's an accelerator here in Taiwan with a model I truly don't understand: 100k usd for 10%. 10%!! You've just valued the company at only 1 million! And taken a HUGE chunk of equity, not much left on the table!
Maybe it makes sustainable sense but in the world of venture capital it seems the most profitable thing to do is lie through a Cheshire grin, every day.
Their ~$50 million total Alibaba investment turned into ~$70 billion. As of two years ago they were still liquidating out of it.
January 26, 2024 - "Japanese investment holding firm SoftBank Group Corp has largely cleared its ownership in e-commerce giant Alibaba Group Holding, concluding one of the most successful deals in China's internet industry and a holding that spanned about 23 years."
"SoftBank, which invested US$20 million into Alibaba when it was still a start-up in 2000, said in a corporate filing on Thursday that it was set to book a gain of 1.26 trillion yen (US$8.5 billion) - about 425 times the value of its initial outlay - for the Tokyo-based firm's 2024 financial year after divesting its [remaining] shares via subsidiary Skybridge."
"As of two years ago they were still liquidating out of it"
I get that people are scared of investing in China. But if I still made single stock investments, I would seriously consider BABA, it seems well positioned.
Tell that to Trump and his glorious way of bombing Iran. Nothing against the idea itself, the Mullahs all but asked for it to happen.
But the execution? That was a level of dogshit I haven't seen in the time I was alive lol. Even Russia was better prepared with their invasion of Ukraine.
Both Trump and Netanyahu had a somewhat solid perspective on not getting utterly wasted in the next elections. Instead they go on one of the most ill-prepared wars in modern history, with results that may seriously upend the global economy if not lead us to WW3 outright.
It just makes comparing funding rounds hard to understand, since money in the bank is money in the bank, and a lot of the "committed capital if you reach a milestone" is capital that would be easy to get if you reached that milestone, if it is sufficiently advanced, and has enough outs, etc., that you may as well have just raised another round in the future.
Note that even that "money in the bank" of traditional venture firm is not really money in the bank. VC, PE, and hedge fund managers usually don't have all the cash for the fund sitting in the bank at all times. Rather, their agreement with the LPs that fund the fund is structured as a series of capital calls: it gives the fund the right to demand that their LPs deposit cash in their bank accounts within 10-30 days, which can then be used to fund the investments that the VC firm makes. The capital calls are backed by legal documents enforceable in court, with pretty stiff penalties for failing to meet a capital call.
Such a funding structure here isn't all that different: the funding agreement gives OpenAI the right to call on their backers to make certain cash deposits, contingent upon milestones being met. Deep down inside, "money in the bank" doesn't actually exist, it's just mutual agreements backed by force of law.
That’s logically inconsistent. If the company was performing poorly enough that they couldn’t meet their funding milestones from a previous round, they’re not going to have an easy time raising the same money in a future round.
The milestones aren’t a hard-stop that forbids the previous funding round participants from providing the money if they still choose. It’s just an out.
What I am saying is that if you do meet the milestones from your previous round, you're going to have an easy time fundraising anyway, so funding contingent on milestones isn't that different than just saying "well, if we need more money we can do another round"
Fundraising rounds are difficult, laborious, and distracting. It would be extremely different to try to multiply the number of rounds by 3-5X. There's nothing easy about that.
You're also ignoring that the market changes frequently. If you only raised as much money as you needed for the next 4-6 months with plans to re-raise all the time, you'd have to constantly be sizing your growth plans up or down based on how the market felt about startup investing that month.
Imagine the company having to either do speed hiring or large layoffs every few months to adjust to the size of the fundraising round they were able to get this time around.
Nothing about what you're suggesting would be easier, or easy at all
Funding Round A: VC “A” invests 200M (100M immediately and another 100M if sales grow 10% or whatever)
At 6 months the company will either get the other 100M automatically (meaning they grew sales 10%) or they don’t (meaning they grew less than 10%).
Assuming it’s the later they can then do another round during which they try to get the other 100M. In all likelihood VC “A” won’t be interested (or interested at a lesser amount). They could go ask VC “B” for an investment but it will likely be less than 100M as well because they didn’t grow as much as “the market” anticipated.
Nothing complicated at all.
I’ll give you $1 dollar for your banana today and another dollar in a week when it has ripened. If it’s rotten when I come to get my banana I won’t give you the other dollar. You have your original $1 and you can still try to sell your rotten banana to another HN reader but you probably won’t get another dollar this time.If instead you have a ripe banana I’m sure you could easily find a buyer.
The funds are committed under the terms of the deal (share price, things like board seats, and other details). There are legal obligations to provide it.
This is a common structure for large investments. It would be really inefficient for all of these investors and companies to have to have the money sitting in cash to do a deal and then transfer it into the company's bank where it sits and earns interest for years until they can deploy it.
Even VC firms who raise funds work this way. The capital is "committed" but investors don't wire all of the money over right away so it can sit in the VC firm's bank accounts, waiting. The VCs do what's called a "capital call" through which they're legally bound to provide the money they committed when requested, under the terms of the deal.
It's splashier this way, and is meant to shape the narrative, make other companies fear their warchest, and make hiring easier. Of course, those who are in-the-know won't be fooled, but the perception of the general public will be set in stone by the PR framing.
With NASDAQ and NYSE looking to reduce the timelines for new public companies to be included into indices (“fast entry” rule), I have a feeling that OpenAI and SpaceX and Anthropic are mostly looking to dump their inflated shares into the public’s retirement accounts by force.
Michael Burry called out this structural manipulation play recently:
Retirement accounts already own funds and those in turn are often tied to the underlying index. If the time to being included in an index is reduced, they end up being automatically bought sooner. And that keeps their price from collapsing artificially.
It's also like... >$50 billion in compute credits and discounted hardware between Amazon/Microsoft/NVidia. Which is all inside baseball since they simultaneously juice their financials with OpenAI's cloud compute bill
Mods on HN sometimes change the titles of submissions to be more neutral but they generally start off as the linked article's title, which is what the comment you're replying to was referring to.
I had a job interview with one of the founders. The whole process was, by far, the worst experience I ever had in my life, and a complete waste of my time. (I interviewed for maybe 25-30 jobs in my life overall).
I am not too familiar with the FreeBSD community, so I have a question for the experts: has it ever been for FreeBSD something similar to Ubuntu for Linux? Meaning: a successful billionaire that decides to put money and effort to create a valid, popular alternative to Windows for end users? (not saying that Ubuntu is perfect; just stating the intention).
I have used Nextcloud. If feels about 30-35 years behind the current state of product quality for Google Docs or Microsoft Office. Good luck Europe (that's us).
If you do, you could protect yourself with a sell stop below $17.25... because if it breaks that on weekly candles, next are $14 and $10. Or you could buy some calls instead when the volatility calms down. If you do it now, the volcrush could happen even if you're correct.
Not investment advice, do you own research. I'm just someone on the Internet.
Beautiful comment. Thanks for sharing. "Homo homini lupus" comes to mind, used by Locke in De Cive ("on the citizen") [1]. Cive, root Civis, is where the word civilization comes from.
They're a government contractor specializing in identity and a monopoly who loves not being regulated. They're really a straw donor - this is the government donating money to lobby itself. All of this is money leaving the government proper and being put through barely two degrees of indirection to be sent both to politicians whose job is to direct the government, and to the media to misdirect the public.
This (an end to general purpose computing) isn't anything that people can prevent through civil channels. It will happen with or without public approval. You will have as much control over it as you had over the decision to go to war with Iran. It will never be on any ballot. People who help will get rich, people who don't, won't. Eventually, people who help will barely be middle class, and people who don't, won't. Their kids will own your kids.
AI companies are also donating tens of millions to these PACs and others that are promoting age verification laws, it lets them sell AI content rating systems using their models.
This doesn’t make sense, how do these fake accounts bring revenue ? I thought the end goal is to improve conversion rate by removing the “bots” and this would therefore lead to higher ad spend and more money to Facebook direct
I work in marketing and not nearly as much effort as you think goes into removing bots. They go after the lowest hanging fruit, the most obvious bots like scrapers and crawlers but most bots impersonating real people easily make it through. Traffic is traffic.
I’m curious why Meta would benefit. Meta seems wholly unnecessary, the verification can be done at the OS level, completely in the hands of Apple/Alphabet and maybe Microsoft.
If anything, Meta’s utility would seem to shrink if the OS handles proof of being a real person.
Regulatory capture through a higher barrier to entry. Any social media platform that wants to compete with Meta's portfolio will now also need to have an age-verification system in place (which is guaranteed to introduce higher costs). Meta can likely afford to eat the costs here as a tradeoff for the higher impact on smaller players.
It also gives them more information on users as a bonus. Further, verification with a real ID is also a quite effective barrier against excessive bots.
Look beyond the CA law, states have already passed laws that put the liability on app and website developers to ensure users aren't kids, there's no passing the buck to Apple or Google.
Meta's entire business model lives on ad deals that are not on the frontend. They are in the data business and this campaign is to get access to more data without an option to opt out. Who takes the data doesn't really matter.
1. It deflects any obligation that would have landed on Meta itself to do age verification (which is what the regulators have long asked for).
2. It gives Instagram/Facebook/Messenger the ability to deliver the right ads to the right audience. It's free targeting data.
Tangentially related: anyone has suggestions on an "automated" way to "print" pages with a typewriter? If you want to have papers that "look" as typed with a typewriter, as opposed to printed with laser printers and such.
If you also want a thing to do typewriting on, later-model word processors (e.g., Smith Corona PWP series) tend to have a feature that auto-types text entered and edited earlier. It'll have the imprinting insofar as the type impacts the paper, but it's not going to have the off-center / over-inked / patchy manual typewriter look. For that you may just want to find a font face that replicates it.
Oh, man... I can't wait to see where this is going. Might not be pretty after all.
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