U.S. Tech Funding – What’s Going On?
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Re: U.S. Tech Funding – What’s Going On?
#2Robert Shiller had an interesting analysis of the current stock market's "frothiness": http://www.businessinsider.com/robert-shiller-stock-market-b...
Basically, the stock market is a bit overvalued, and people expect that trend to continue. However, peoples' level of confidence in the stock market pricing is very low. To me, if there's a coming crash, it's going to be because investors are overly anxious rather than because valuations are so stratospheric.
Re: U.S. Tech Funding – What’s Going On?
#3"And the tech IPO is basically dead. The tech IPO market is at early 1980's volumes. For most of the 90's the majority of tech funding was public. This has reversed. It used to be routine to hit $20 million in revenues and go public. Not anymore."
It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley. Before an engineer might vest after four or five years, just as the company is going public at a modest valuation. But if the company stays private, the employees are forced to go double or nothing. Either the company continues to grow, and there is a Google or Facebook like outcome with hundreds of employees getting rich. Or the company goes sideways and the stock ends up diluted to nothing. Furthermore the general public would have shared in the growth in the 1980's, but now most of the value has accrued by the time the company goes public. So for the few that make it, all the wins go to the founders and VC's, rather than having the general public get in early.
Re: U.S. Tech Funding – What’s Going On?
#4My takeaway- the VC's have leveraged the money from their successes to create a vortex that sucks in money from consumers, into privately owned companies, back into VC pockets, and back into more companies that get more people to spend more money.
The tech vortex that is sucking away quality of life from the middle class and padding the billionaires (and large company) bank accounts. Throwing out a few bones on occasion (fewer and fewer) to entrepreneurs to keep the vortex going.
Vortex is the opposite of bubble, but it does the same thing to the life of the average person.
Re: U.S. Tech Funding – What’s Going On?
#5"And the tech IPO is basically dead. The tech IPO market is at early 1980's volumes. For most of the 90's the majority of tech funding was public. This has reversed. It used to be routine to hit $20 million in revenues and go public. Not anymore." It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley. Before an engineer might vest after four or five years, just as the company is…
In practice, there are almost always offerings for employees to liquidate at roughly the same benchmarks that an IPO would have reached.
Re: U.S. Tech Funding – What’s Going On?
#6This doesn't really directly address the issue of valuations for the unicorns. P/E valuations are probably insane by most metrics - the type of user base growth required to get them in line (P/E wise) with other companies is on the order of double-digit percentages of the global population IIRC.
This doesn't really mean there's a "tech bubble", though. It's possible we'll see a massive correction to those companies, but it will likely be isolated, and thanks to the weird structuring of these private equity deals I can't imagine that the VCs will be much worse off.
Re: U.S. Tech Funding – What’s Going On?
#7Robert Shiller had an interesting analysis of the current stock market's "frothiness": http://www.businessinsider.com/robert-shiller-stock-market-b... Basically, the stock market is a bit overvalued, and people expect that trend to continue. However, peoples' level of confidence in the stock market pricing is very low. To me, if there's a coming crash, it's going to be because investors are overly anxious rather than…
Hopefully gradual increase in interest rates will result in stabilization of stock value as people pull out for safer low-rate returns (which are basically non-existent now).
Then again the fed sure is taking their time...
Re: U.S. Tech Funding – What’s Going On?
#8If anyone had trouble seeing the embedded flash of slideshare, here's the direct link to the slideshare:
Re: U.S. Tech Funding – What’s Going On?
#9"And the tech IPO is basically dead. The tech IPO market is at early 1980's volumes. For most of the 90's the majority of tech funding was public. This has reversed. It used to be routine to hit $20 million in revenues and go public. Not anymore." It's interesting how it seems that inequality is an unintended consequence of Sarbanes-Oxley. Before an engineer might vest after four or five years, just as the company is…
Many highly valued tech companies do secondary offerings to allow average employees to get some liquidity.
Sure, the general public may not "get in early" but M&A is far less risky for both VCs and general investors. If mostly "sure things" make it to IPO, it's far less likely for the general public to be exposed to the meltdowns that made the headlines circa 2000-2001. The flipside is that until the startups IPO, the VCs and founders are exposed to most of the risk.
Re: U.S. Tech Funding – What’s Going On?
#10My takeaway- the VC's have leveraged the money from their successes to create a vortex that sucks in money from consumers, into privately owned companies, back into VC pockets, and back into more companies that get more people to spend more money. The tech vortex that is sucking away quality of life from the middle class and padding the billionaires (and large company) bank accounts. Throwing out a few bones on occas…
When you read "public returns" that doesn't mean the middle class. The "public market" the deck is referring just means that the trading happens on the open market (NASDAQ, S&P, etc.) rather than in private deals. Regardless, it is always the big players who make the big returns. The average investor wasn't the one making all the returns on Microsoft either. So you are right that the rich use these tools to get richer, but it is hardly a new thing.