Startup prices are rising like a snowball. Where are we going?
Bill Gurley, the general partner of the Benchmark, allows himself to say what other venture capitalists can say only if they are pretty drunk. But Bill attracts attention and his statements do not leave indifferent.
Most recently, Gurli expressed the opinion that many capitalists are investing huge amounts of money with 9 and 10 zeros in technological and innovative start-ups, not really delving into their financial situation. Now the problem is particularly relevant when the prices for the late investment rounds have become simply indecently high.
“Pay attention,” says Gurli. “These companies have not been fully tested ... We are moving smoothly from the highly profitable business to the ever-growing low profitability. Be careful. I do not think that in such a situation we will keep afloat "
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Even if you leave alone low-profitable business, the story of the verification companies somehow alarming. After all, the risk may be much greater than it seems, if you invest huge sums in companies that are not properly tested. And in this case, the risk is not the prospect of possible gain, it is the constant fear of loss and disappointment.
According to Gurli, some start-ups, starting a regular round, claim a large sum, but consider it sufficient to show a regular presentation. And there are no S-1 forms and other documents that would be more credible.
But this approach also works when the market is full of stagnant capital.
Maybe Gurli is mistaken?
Looks like no. Other, highly reputable venture capitalists largely confirm his point of view.
“Indeed, there are cases when startups do not want to provide detailed information about their business.” But this is an alarming signal for the investor. Firms that invest without requiring such information are playing a dangerous game. ”
“I know that many successful venture capitalists did not make new investments last year due to poor forecasts and inflated prices. But those who are driven by thirst for profit, pay very little attention to expertise. They will burn out. And it's not just about venture capitalists. Do you think someone from AngelList is examining startups? Not. No one!"
“Fear of missing opportunities is what drives those who make deals without requiring detailed information. Of course, one cannot put this fear at the forefront, otherwise there are not bright prospects waiting for us. ”
“This epidemic literally embraced Silicon Valley and generated inflated prices that will not be stable in the long term. We still hope that competent investors will continue to insist on expertise, but, in some cases, they are amenable to the general mood. ”
“I agree with Bill. It reminds me of the old principle: you set the price - I set the dates. That is, many investors are now ready to pay "unrealistic" money so that startups fit into their "unrealistic" terms.
“Now we are seeing a large influx of investors with insufficient experience, compared with venture capitalists. Thus, there was more money in the markets, and prices began to rise. However, new investors do not understand all the risks or do not think about them. They invest behind the backs of large venture capitalists and hope that all this will get away with them. And in vain "
“I think the quality of the examination is acceptable. Another issue is that private assets are not liquid, the main profit is concentrated in only a few companies. Therefore, the rest were willing to pay more, if only they were taken into the business. Well, prices began to rise like a snowball. ”
This whole situation is gradually swelling up like a huge soap bubble. Therefore, many investors are in a hurry to quickly invest in startups and quickly get a profit from them, until prices have risen even higher.
But, as you know, any soap bubble sooner or later burst. So, now we will wait for prices to start falling.
Most recently, Gurli expressed the opinion that many capitalists are investing huge amounts of money with 9 and 10 zeros in technological and innovative start-ups, not really delving into their financial situation. Now the problem is particularly relevant when the prices for the late investment rounds have become simply indecently high.
“Pay attention,” says Gurli. “These companies have not been fully tested ... We are moving smoothly from the highly profitable business to the ever-growing low profitability. Be careful. I do not think that in such a situation we will keep afloat "
')
Even if you leave alone low-profitable business, the story of the verification companies somehow alarming. After all, the risk may be much greater than it seems, if you invest huge sums in companies that are not properly tested. And in this case, the risk is not the prospect of possible gain, it is the constant fear of loss and disappointment.
According to Gurli, some start-ups, starting a regular round, claim a large sum, but consider it sufficient to show a regular presentation. And there are no S-1 forms and other documents that would be more credible.
But this approach also works when the market is full of stagnant capital.
Maybe Gurli is mistaken?
Looks like no. Other, highly reputable venture capitalists largely confirm his point of view.
Matt Murphy (Kleiner Perkins):
“Indeed, there are cases when startups do not want to provide detailed information about their business.” But this is an alarming signal for the investor. Firms that invest without requiring such information are playing a dangerous game. ”
Jason Lemkin (Storm Ventures):
“I know that many successful venture capitalists did not make new investments last year due to poor forecasts and inflated prices. But those who are driven by thirst for profit, pay very little attention to expertise. They will burn out. And it's not just about venture capitalists. Do you think someone from AngelList is examining startups? Not. No one!"
Josh Felser (Freestyle Capital):
“Fear of missing opportunities is what drives those who make deals without requiring detailed information. Of course, one cannot put this fear at the forefront, otherwise there are not bright prospects waiting for us. ”
Ron Hines (Signal Peak Ventures) was categorical:
“This epidemic literally embraced Silicon Valley and generated inflated prices that will not be stable in the long term. We still hope that competent investors will continue to insist on expertise, but, in some cases, they are amenable to the general mood. ”
Aziz Gilani (Mercury Fund):
“I agree with Bill. It reminds me of the old principle: you set the price - I set the dates. That is, many investors are now ready to pay "unrealistic" money so that startups fit into their "unrealistic" terms.
Jacob Mulins (ex. Shasta Ventures, currently Exitround):
“Now we are seeing a large influx of investors with insufficient experience, compared with venture capitalists. Thus, there was more money in the markets, and prices began to rise. However, new investors do not understand all the risks or do not think about them. They invest behind the backs of large venture capitalists and hope that all this will get away with them. And in vain "
Chris Calder (Epic Ventures):
“I think the quality of the examination is acceptable. Another issue is that private assets are not liquid, the main profit is concentrated in only a few companies. Therefore, the rest were willing to pay more, if only they were taken into the business. Well, prices began to rise like a snowball. ”
This whole situation is gradually swelling up like a huge soap bubble. Therefore, many investors are in a hurry to quickly invest in startups and quickly get a profit from them, until prices have risen even higher.
But, as you know, any soap bubble sooner or later burst. So, now we will wait for prices to start falling.
Source: https://habr.com/ru/post/285968/
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