Funding follows founders that consistently execute in scaling a solution. The big bet is that these same founders will be able to figure out profitability along the way. The challenge is that there are many "business" that can scale but are fundamentally not profitable, i.e. Groupon.
This used to be fine as IPO process used to filter these bad models out. SPACs however made this IPO filter much less effective and should not be allowed.
Even without SPACs, California is where narratives are made and stories are written (think Hollywood's music and movie industry).
If profitability is not found along the way (spoiler alert: almost never happens) then California fires up the afterburners as it pertains to narrative and storytelling and the company IPOs selling into those who buy the narrative , which is mostly the East Coast Asset Management Industry.
Those at the helm of the East Coast Asset Management Industry will never buy the IPO with their own money, they'd do their due diligence and look under the hood and beyond the narrative, but for pensioneers and insurance policies holders the narrative more than suffices. If anything happens they can turn around and point at the narrative and say "we were told a story".
Groupon is a bad example because Groupon itself is actually fundamentally profitable. It's the value proposition that is flawed - the merchants that use it don't get any value add but Groupon itself is absolutely profitable on every transaction. I mean, how can it not? It literally just takes a middleman fee for selling discounted services, without having to bear any cost of fulfillment.
Yes, they are. I am just a 401K investor, and when I learned about SPACs, I went "wait WHAT?".
You do not need to be an investment prodigy to know how this was going to go - a tsunami of fraud, a few walk away with riches and the investors get screwed. The people who bought SPAC de-regulation knew what they were doing, and the corrupt revolving door that is the SEC was in on it.
This used to be fine as IPO process used to filter these bad models out. SPACs however made this IPO filter much less effective and should not be allowed.