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As Angel Investors Pull Back, Valuations Take a Hit

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Re: As Angel Investors Pull Back, Valuations Take a Hit

#21

Post by imh »

themartorana wrote: post #3

Valuations are fake, so who cares? I don't mean to be flip, but valuations are only important to other VCs. No surprise they created their own bubble. Valuations for the Uber-of-this or the AirBnB-for-that have been absurd. I'm not saying there aren't business opportunities there, but sometimes those opportunities are in the tens of millions of dollars, not billions, and hey, tens of millions is fantastic by the way.…

Because of things like liquidity preference, a valuation going down can wipe out the employee stock.

Re: As Angel Investors Pull Back, Valuations Take a Hit

#22

Post by criddell »

CPLX wrote: post #18
dsacco wrote: post #2

As an angel investor, I can anecdotally confirm that I've become more cautious recently (in the last year, really). However, I'm not at all concerned about the stock market. That has never influenced my decision to fund a company. My belief is that a strong company can weather a bear market. I'm concerned with the current state of valuations - I enjoy giving investments to companies on the order of five figures or so…

> However, I'm not at all concerned about the stock market. That has never influenced my decision to fund a company. You may be the exceptional person who has no assets whatsoever tied up in the stock market, but nearly every investor who has the resources to be an angel will have money in the market. When the market falls they have less money. They use money to invest in things. The correlation between the market an…

> The correlation between the market and seed stage investing should be fairly direct and clear.

The money can only be in one place at a time though. If you pull money out of publicly traded stocks, wouldn't that mean you have more money for angel activities? Although, when the market is way down, that's a great buying opportunity, so is that when angel investors stop putting money into startups and instead go on a stock buying spree?

Re: As Angel Investors Pull Back, Valuations Take a Hit

#23

Post by DenisM »

dsacco wrote: post #2

As an angel investor, I can anecdotally confirm that I've become more cautious recently (in the last year, really). However, I'm not at all concerned about the stock market. That has never influenced my decision to fund a company. My belief is that a strong company can weather a bear market. I'm concerned with the current state of valuations - I enjoy giving investments to companies on the order of five figures or so…

An unrelated question, if I may...

When evaluating a startup in a given area, how do you bridge the gap between your expertise in that area, and that which is required to assess the opportunity?

Obviously the startup founders will always project the fields of gold ripe for the taking, so you can't blindly trust that. Do you only invest in the field you know well? Do you look for behavioral clues? Do you look for your or their peers' decision? Do you look for what's in trend, or counter trend?

It seems like a super tough problem, yet it hardly ever gets discussed...

Re: As Angel Investors Pull Back, Valuations Take a Hit

#24

Post by forgetsusername »

dsacco wrote: post #2

As an angel investor, I can anecdotally confirm that I've become more cautious recently (in the last year, really). However, I'm not at all concerned about the stock market. That has never influenced my decision to fund a company. My belief is that a strong company can weather a bear market. I'm concerned with the current state of valuations - I enjoy giving investments to companies on the order of five figures or so…

>But valuations are so frothy right now that it's difficult to tell the strong companies from the ones that won't survive "when the tide goes out."

There seems to be some contradiction here: you seem to say valuations don't matter, but also that you're worried about them. How do valuations prevent you from spotting a good company?

Re: As Angel Investors Pull Back, Valuations Take a Hit

#25

Post by djcapelis »

tyingq wrote: post #16
aetherson wrote: post #13

Earlier quoted context omitted.

Median income in San Jose is $80k, so 50% of all households make less than that. $100k does not mean you're barely capable of breaking even. For any reasonable amount of income, it is possible to spend in such a way that you're barely breaking even, of course. But this whole meme of six figures is hard to keep afloat with is the worst kind of cringe-worthy "Oh poor well-paid me." My wife works at Habitat for Humanity…

>>and no, they aren't all living with their families or have spouses helping out Honestly curious...what are they doing then? Isn't the typical rent cost higher than the entire salary of a low level employee at a charitable org?

For a luxury condo in downtown SF? Yes.

That's not where the people who work for a living at charitable organizations live.

HN is a weird bubble.

Re: As Angel Investors Pull Back, Valuations Take a Hit

#26

Post by tyingq »

djcapelis wrote: post #25
tyingq wrote: post #16

Earlier quoted context omitted.

>>and no, they aren't all living with their families or have spouses helping out Honestly curious...what are they doing then? Isn't the typical rent cost higher than the entire salary of a low level employee at a charitable org?

For a luxury condo in downtown SF? Yes. That's not where the people who work for a living at charitable organizations live. HN is a weird bubble.

Heh. No, I looked up the average rent for Oakland, which I assumed would be less expensive than downtown SF. I saw $3k, which would likely be higher than the take home pay for a low-level employee.

Re: As Angel Investors Pull Back, Valuations Take a Hit

#27

Post by gmarx »

Whenever I see articles about how easily the investment money flows or had flowed all I can think of, from a purely self-centered point of view, is "what kind of loser am I that I have never been able to raise a single round?" Seriously, my ideas aren't objectively stupider than the ones I see funded. Even in this article, I mean, home eye exams? Did I read that right? How about a startup that will come to your house and groom your dog? These can be good businesses but are they on topic when we're talking about the angel investment environment? Apparently so. Not that I'm bitter (stop being bitter, dammit!)

Re: As Angel Investors Pull Back, Valuations Take a Hit

#28

Post by xmj »

jkaljundi wrote: post #10
biggio wrote: post #7

Meanwhile http://www.bbc.co.uk/news/business-35339475

A much better take to look at that data is this: http://www.vox.com/2015/1/22/7871947/oxfam-wealth-statistic It's the same as to compare someone on absolute salary of $100k in Silicon Valley vs $50k in Estonia, forgetting that the latter can provide a luxurious lifestyle with tons of money to spend, while former can mean being barely break-even.

With the difference that $100k is easily reachable in Silicon Valley for engineering positions even before reaching senior levels.

Here in Tallinn, not so much.

Re: As Angel Investors Pull Back, Valuations Take a Hit

#29

Post by aetherson »

tyingq wrote: post #16
aetherson wrote: post #13

Earlier quoted context omitted.

Median income in San Jose is $80k, so 50% of all households make less than that. $100k does not mean you're barely capable of breaking even. For any reasonable amount of income, it is possible to spend in such a way that you're barely breaking even, of course. But this whole meme of six figures is hard to keep afloat with is the worst kind of cringe-worthy "Oh poor well-paid me." My wife works at Habitat for Humanity…

>>and no, they aren't all living with their families or have spouses helping out Honestly curious...what are they doing then? Isn't the typical rent cost higher than the entire salary of a low level employee at a charitable org?

Well, when I met my wife (this was a few years back, but also her pre-tax salary was about $45k at the time), she lived in a very small one-bed apartment in a bad part of Oakland. Prior to being able to afford that, she rented a room in a house (not with relatives) in Berkeley.

I haven't been to the living places of my wife's coworkers, but I would expect that the ones who live alone tend to live in small apartments in undesirable areas of relatively inexpensive cities.

Re: As Angel Investors Pull Back, Valuations Take a Hit

#30

Post by vonklaus »

gmarx wrote: post #27

Whenever I see articles about how easily the investment money flows or had flowed all I can think of, from a purely self-centered point of view, is "what kind of loser am I that I have never been able to raise a single round?" Seriously, my ideas aren't objectively stupider than the ones I see funded. Even in this article, I mean, home eye exams? Did I read that right? How about a startup that will come to your house…

I think the point is, they are good businesses short term. They have a minimal terminal value, short lifespan, and there is virtually no barrier to enter the market.

Sort of like when google launched. The only surviving niche of google X is travel. You just google pets, not petsearches.io.

The equities market is so broken, and interest is so low, that there is an overspend into private markets. Value capture takes 20 years, company lifespan, i would baselessly guess, is 5 maybe. So this shit makes no sense.

Best bet is still make something you like working on, to the extent you represent other people, is pretty much your product demand.

But yeah mate, you could throw up a squarespace site and be the next cat bubble baths on demand startup.

I realized as a super shitty developer, that I will probably totally fail at this side project, but at least when someone gets it done i can say i was years ahead of the curve, just didnt have the chops.

...not that im bitter

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