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.)
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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.
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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.”
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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.
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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.
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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.
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SAAS: securitized accounts as a service
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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.
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Are groups of profitable products in a larger parent company the pool of small and illiquid assets?
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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.)
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