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patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

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Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

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    Patrick McKenzie‏ @patio11 Jan 30
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    I think it is underappreciated by many technologists how many technology companies are, often quietly, building vehicles which have cash flow profiles similar to asset backed securities. The economy structurally wants those assets and capita for them is extremely abundant.

    8:35 PM - 30 Jan 2020
    • 19 Retweets
    • 195 Likes
    • Justin Ridgely Brian Schulman Alexandre Lazarow Ahad Duane Aditya Ramnandan Krishnamurthy Christian Owens Jan Saupe
    10 replies 19 retweets 195 likes
      1. New conversation
      2. Patrick McKenzie‏ @patio11 Jan 30
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        This isn’t a good thing or a bad thing by itself. (Securitization got an extremely bum rap after the global financial crisis, mostly not for good reasons.)

        4 replies 1 retweet 24 likes
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      3. Patrick McKenzie‏ @patio11 Jan 30
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        The opportunity is twofold: one, there is some underlying customer need for a transaction that cannot be facilitated economically in the status quo. Two, there exist enormous pools of capital which are return-sensitive and need an option in a low-interest environment.

        1 reply 0 retweets 22 likes
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      4. Patrick McKenzie‏ @patio11 Jan 30
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        “Can you give me an example?” Socially awkward, sorry, but you should look at basically any business model where there is a high initial expense and then a consistent stream of payments afterwards and think “Ahh tech companies don’t want that on their balance sheet.”

        2 replies 0 retweets 32 likes
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      5. Patrick McKenzie‏ @patio11 Jan 30
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        SaaS companies have approximately this dynamic but largely don’t securitize yet, because equity funding is so abundantly available for SaaS, but I will eat my hat if there are not billions of SaaS-cash flow backed securities issued by 2030. Probably closer to 2025.

        9 replies 7 retweets 128 likes
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      6. End of conversation
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      2. Lee Wen Jie‏ @TheWenJie Jan 30
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        Replying to @patio11

        You might be onto something here. Would there be an agreed upon way to price tech companies cash flows for securitization? Pricing methods seem to be fragmented now - i.e. early vs late stage, pricing based off fomo.

        1 reply 0 retweets 1 like
      3. Patrick McKenzie‏ @patio11 Jan 30
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        Replying to @TheWenJie

        I think the genius of this approach is that you *don't* have to price the company's cash flow. You have to price the cash flow of *a small, tractable subset of accounts.* The financial industry has Extremely Well Understood Prior Art on this problem.

        0 replies 0 retweets 22 likes
      4. End of conversation
      1. will minshew‏ @wminshew Jan 31
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        Replying to @patio11

        SAAS: securitized accounts as a service 📈

        0 replies 1 retweet 4 likes
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      1. Ben‏ @BenWiesenfeld Jan 30
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        Replying to @patio11

        I feel like there is sort of a "build it and they will come" assumption here at the time of the securitization. As opposed to ABS, where the sale has already occurred the time of securitization, and payment is to follow.

        0 replies 0 retweets 2 likes
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      1. Johnboy23233‏ @John_of_83 Jan 30
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        Replying to @patio11

        Are groups of profitable products in a larger parent company the pool of small and illiquid assets?

        0 replies 0 retweets 1 like
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      1. Jeff Helman‏ @JeffHelman42 Jan 30
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        Replying to @patio11

        Is this perhaps a hint at something we may someday see from a certain financially-oriented company? (BTW, I have direct experience building software like this, but I'd have to kill you if I said anything more.)

        0 replies 0 retweets 1 like
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