If I understand the 1/(t+5) schedule correctly, it means the price of capital can’t move in response to supply. In the for-profits investment markets it does: more investors competing to invest = less equity for the same dollars, because capital that’s easy to replace has less counterfactual value.
If AI money suddenly makes funding abundant while vetting capacity doesn’t grow accordingly (which seems to be the most likely scenario right now), we end up precisely in this sort of demand-constrained market. I’m curious how you’d adjust to account for that.
Even if the fraction of equity sold doesn’t change, the price can still move. So if more funding comes in, you’d expect to see the price per share of equity to increase—maybe previously a charity would have sold 20% of their impact for $1 million, but now they sell it for $5 million because lots of impact investors are competing.
The 1/(t+5) schedule is just meant to be a suggested default, though—charities would also be able to set their own terms, so they could choose between selling 20% for $5 million or a smaller amount for $2 million.
maybe previously a charity would have sold 20% of their impact for $1 million, but now they sell it for $5 million because lots of impact investors are competing.
What you are describing here is demand for funding shifting due to increased supply. But that demand isn’t infinitely elastic. Scaling an organization is much more complex than just throwing money at it (this recent article has a good overview of the problem). That’s why I’m talking about a demand-constrained market.
charities would also be able to set their own terms, so they could choose between selling 20% for $5 million or a smaller amount for $2 million.
I don’t understand that part. How would they pick the number? To my understanding the “impact credits” are internet points with no inherent value.
If I understand the 1/(t+5) schedule correctly, it means the price of capital can’t move in response to supply. In the for-profits investment markets it does: more investors competing to invest = less equity for the same dollars, because capital that’s easy to replace has less counterfactual value.
If AI money suddenly makes funding abundant while vetting capacity doesn’t grow accordingly (which seems to be the most likely scenario right now), we end up precisely in this sort of demand-constrained market. I’m curious how you’d adjust to account for that.
Even if the fraction of equity sold doesn’t change, the price can still move. So if more funding comes in, you’d expect to see the price per share of equity to increase—maybe previously a charity would have sold 20% of their impact for $1 million, but now they sell it for $5 million because lots of impact investors are competing.
The 1/(t+5) schedule is just meant to be a suggested default, though—charities would also be able to set their own terms, so they could choose between selling 20% for $5 million or a smaller amount for $2 million.
What you are describing here is demand for funding shifting due to increased supply. But that demand isn’t infinitely elastic. Scaling an organization is much more complex than just throwing money at it (this recent article has a good overview of the problem). That’s why I’m talking about a demand-constrained market.
I don’t understand that part. How would they pick the number? To my understanding the “impact credits” are internet points with no inherent value.