There's plenty of thinking. The VCs know what they are doing. For those that have plenty of cash, the game is to invest in anything and everything that has a good public facing brand.
Pump it with cash, then dump it on the public market with an ipo to all the less sophisticated investors that aren't reading the financials.
Sure, every once in a while, you'll come across a Facebook type business that ends up being profitable, but in the meantime you can still make money on the losers when you cash out.
> less sophisticated investors that aren't reading the financials
Do these actually exist? My understanding is that retail investors aren't significant and I don't believe that institutional investors don't look at financials.
In most IPOs, the vast majority of shares are allocated to institutional investors plus high net worth individuals who are favored customers of brokerages. Some of those buyers then flip their shares to retail investors just after the IPO for a quick low-risk profit.
Yes they're mostly neutral. But when the stock goes down that's still real people losing real money from their pension funds to what are essentially con artists. The saving grace here is as nradov said, they won't buy into IPO's.
Very few index funds purchase IPO shares. Companies that just IPO'd aren't listed in indexes; it takes a while for them to be added. Then the index funds buy on the secondary market.
Maybe we have different definitions of thought but there's definitely not a lot of in-depth analysis and due diligence in most deals, as that's how portfolio theory and sufficient deal flow is attained.
What you're talking about with IPOs is not quick or easy, and definitely not guaranteed in any way. Taking a company public essentially counts as an exit for most funds, and if it was that easy to just sell up everything then the entire VC field would look different. That process is more for private equity and banking firms who maneuver through financial engineering rather than early and mid-stage VCs.
This strategy requires a chain of greater fools. It’s only possible in a bull market because dumb money runs away quickly. If you collect a salary anyway far better to chase FB, Stripe, Airbnb than even think about flipping some company for more than it’s worth.
