VCs make big bets, assuming that many (most?) of their bets will fail, but they make it up on the winners. That is fine, I guess. What made the dot-com bubble was that the public did not understand this and the VCs were able to shovel many of these bets off in the form of IPOs, and many of these companies had no business model whatsoever. That is not happening here. These people are smart and learned their lesson, a rare trait in our economy.
There is a lot of exuberance, let's call it, in the VC world right now. On the one hand I see lots of good companies that have a good service and actually make money, or are getting close, but I also see a lot of social media companies with dubious business models, like in the dot-com days.
I get very worried however when I see a sector of the economy starting to defy the laws of nature, so to speak. What worries me are the valuations. Most of the companies he mentions are good companies, as defined above, but few if any of them I believe are worth these amounts. Sorry. I don't buy it.
Accounting shenanigans aside, public companies are relatively easy to value. These startups are black boxes with astronomical valuations. It's really tough to swallow. These valuations are clearly in the VCs interests.
What I see in the future are that some of these companies will succeed, some will be bought at an overvalued price and a whole bunch will die as startups do.
The latter two circumstances will certainly be a drag on the economy if it causes a dip in further investment, write-downs, etc.
I do not see a bubble as I said, but I see a whole lot of risk building up. It's not scary like the housing and dot-com bubbles, but it's definitely concerning.
VCs make big bets, assuming that many (most?) of their bets will fail, but they make it up on the winners. That is fine, I guess. What made the dot-com bubble was that the public did not understand this and the VCs were able to shovel many of these bets off in the form of IPOs, and many of these companies had no business model whatsoever. That is not happening here. These people are smart and learned their lesson, a rare trait in our economy.
There is a lot of exuberance, let's call it, in the VC world right now. On the one hand I see lots of good companies that have a good service and actually make money, or are getting close, but I also see a lot of social media companies with dubious business models, like in the dot-com days.
I get very worried however when I see a sector of the economy starting to defy the laws of nature, so to speak. What worries me are the valuations. Most of the companies he mentions are good companies, as defined above, but few if any of them I believe are worth these amounts. Sorry. I don't buy it.
Accounting shenanigans aside, public companies are relatively easy to value. These startups are black boxes with astronomical valuations. It's really tough to swallow. These valuations are clearly in the VCs interests.
What I see in the future are that some of these companies will succeed, some will be bought at an overvalued price and a whole bunch will die as startups do.
The latter two circumstances will certainly be a drag on the economy if it causes a dip in further investment, write-downs, etc.
I do not see a bubble as I said, but I see a whole lot of risk building up. It's not scary like the housing and dot-com bubbles, but it's definitely concerning.