<story><title>Facebook establishing a venture arm to invest in startups</title><url>https://www.axios.com/facebook-establishing-a-venture-arm-to-invest-in-startups-91d9ee71-2282-4032-8f31-45b861a6ba9c.html</url></story><parent_chain><item><author>a13n</author><text>It&amp;#x27;s pretty interesting that FAANG doing venture capital is basically like legal insider trading.&lt;p&gt;They clearly have data on web traffic, consumer usage, advertising spend, etc. that other VC firms and investors generally don&amp;#x27;t have access to.&lt;p&gt;They can use this to understand entire markets, see who the incumbents are, estimate revenue&amp;#x2F;users, see who&amp;#x27;s up-and-coming, etc. Obviously within some margin of error.&lt;p&gt;I wonder if this is how Facebook identified that Instagram was on the path to success, and knew $1B was a great deal. Meanwhile everyone at the time thought they were crazy for spending that much.&lt;p&gt;Since startups aren&amp;#x27;t publicly traded, I don&amp;#x27;t think insider trading laws apply to trading their securities. FAANG is legally allowed to use their access to information to make better investing decisions than other companies are able to. (IANAL)&lt;p&gt;It seems like they have a high chance of getting a great ROI. Once you&amp;#x27;re a big tech company, this is just another way of monetizing the vast troves of data you have.</text></item></parent_chain><comment><author>gimmeThaBeet</author><text>That&amp;#x27;s not really insider trading. Matt Levine pops up here all the time, and one of the really distilled mantras he has:  
inside trading isn&amp;#x27;t about &lt;i&gt;fairness&lt;/i&gt;, it&amp;#x27;s about &lt;i&gt;theft&lt;/i&gt;.&lt;p&gt;Like the people who track flights to speculate on M&amp;amp;A, or use satellite and aerial imagery to look at parking lots. Gathering information isn&amp;#x27;t a crime, in fact gathering and acting on that information is explicitly &lt;i&gt;what you want&lt;/i&gt; at an aggregate level. What you don&amp;#x27;t want is entities stealing or misappropriating information that doesn&amp;#x27;t belong to them. I think all the mentioned data categories are basically Fb&amp;#x27;s line of business, so if it&amp;#x27;s usable it seems like its pretty fair game.</text></comment>
<story><title>Facebook establishing a venture arm to invest in startups</title><url>https://www.axios.com/facebook-establishing-a-venture-arm-to-invest-in-startups-91d9ee71-2282-4032-8f31-45b861a6ba9c.html</url></story><parent_chain><item><author>a13n</author><text>It&amp;#x27;s pretty interesting that FAANG doing venture capital is basically like legal insider trading.&lt;p&gt;They clearly have data on web traffic, consumer usage, advertising spend, etc. that other VC firms and investors generally don&amp;#x27;t have access to.&lt;p&gt;They can use this to understand entire markets, see who the incumbents are, estimate revenue&amp;#x2F;users, see who&amp;#x27;s up-and-coming, etc. Obviously within some margin of error.&lt;p&gt;I wonder if this is how Facebook identified that Instagram was on the path to success, and knew $1B was a great deal. Meanwhile everyone at the time thought they were crazy for spending that much.&lt;p&gt;Since startups aren&amp;#x27;t publicly traded, I don&amp;#x27;t think insider trading laws apply to trading their securities. FAANG is legally allowed to use their access to information to make better investing decisions than other companies are able to. (IANAL)&lt;p&gt;It seems like they have a high chance of getting a great ROI. Once you&amp;#x27;re a big tech company, this is just another way of monetizing the vast troves of data you have.</text></item></parent_chain><comment><author>objclxt</author><text>&amp;gt; Since startups aren&amp;#x27;t publicly traded, I don&amp;#x27;t think insider trading laws apply to trading their securities. FAANG is legally allowed to use their access to information to make better investing decisions than other companies are able to&lt;p&gt;Insider trading laws apply to all companies, be them public or private. It is illegal to trade based on undisclosed material information the other party doesn&amp;#x27;t have - the law doesn&amp;#x27;t care whether the stock you&amp;#x27;re buying is private or on an exchange.&lt;p&gt;Here&amp;#x27;s an example: suppose you have a startup that&amp;#x27;s been going a long time, and some employees want to sell their stock on a secondary market. To avoid this, the startup offers to buy back employee stock, using the most recent valuation of the company to price it. However, the CEO knows that since that valuation was carried out the company is doing much better than expected - and the real value of the stock is much higher. This isn&amp;#x27;t disclosed to their employees.&lt;p&gt;This is classic insider trading, and the SEC has taken enforcement action against private companies for doing this sort of thing.&lt;p&gt;FWIW, I don&amp;#x27;t think Facebook actually has a large amount of material data in this case - a lot of what they possess (number of active users, platform engagement, etc) is already going to be known by the other party.</text></comment>