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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 226.19-1.8%Dec 12 9:30 AM EST
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To: llamaphlegm who wrote (11897)7/28/1998 2:25:00 AM
From: Rob S.   of 164684
 
If you look at what the venture capitalists look for funding internet start-ups, it isn't that they will necessarily make gobs of money in their lifetimes. That's completely secondary. The analysis hinges on "how exciting of a story will it make when we take it public". If they can create large cash flow, regardless of the consequences, its that much better. The conclusion of the funding analysis often resolves to something like this, "Can we recoup 10X to 30X our investment when we take it public? It would be nice if we can show profits because that would make getting a high return much easier, but if we can show huge sales growth or promising alliances, that should be enough. In this new industry few people have things figured out and very, very few investors know enough about the industry to tell what is important and who will make it. We don't really care so much who will end up being profitable as long as they have a good story to sell." I have talked to a couple of VCs with my own e-commerce business plan and that is exactly what they want to know. The "end-game" is to take the company public, build sales almost regardless of profits, and gradually sell-off enough stock to make a fortune. If things work out in the long-run is just icing on the cake. Otherwise, the VCs are off to other ventures and the founders of the company are rich many times over anyway.
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