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Will the Bubble Burst? Ask Your Cabbie - TechCrunch Article

1/31/2016

There's an insightful article on TechCrunch "Will the Bubble Burst? Ask Your Cabbie" that I found interesting. The author recounts the first Internet bubble and then the credit/real estate bubble and how he realized that the markets were overvalued at these times and how he avoided the market downturns. From that experience, he then looks at the current environment. It's a good article and worth a read.

Link:
http://techcrunch.com/2016/01/30/1269710/

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An LP Predicts VC Trends in 2016

1/26/2016

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The PE Hub article "Reading the venture tea leaves for 2016" by Elizabeth "Beezer" Clarkson examines some recent trends in the venture industry and predicts how they may play out in 2016. The main take-aways are:

Emerging managers matter. First-time venture funds and emerging managers (which the article defines as the first four funds of a given general partner) provide LPs with opportunities to obtain strong returns as well as new approaches to investing. I completely agree with this view, and over 10 years ago wrote an article that appeared in the Venture Capital Journal on how emerging managers could attract LP capital.
LPs may slow their investment pace until some of the unicorn valuations moderate. The article indicates while unicorns - VC-backed companies with valuations over $1 billion - have posted impressive paper returns, on the whole most of these returns are unrealized. The article also discusses the recent slow down in the number of funds successfully raising money in the past couple of quarters and suggests that LPs may pause on fund investing until the unicorn valuations moderate.
The investing barbell suggests that more VC funds will invest in the "middle." The article points out that many VC funds are being raised to invest in the very early stages and in the very late stages (creating a barbell), leaving few funds investing in the middle. The article suggests that more VCs will raise money to invest in this middle area in 2016.
Geography still matters in the earliest stages. In most cases, VCs will want to invest in early-stage companies that are physically close to the location of the VC fund (there are exceptions to this). However, once a company achieves "escape velocity, international relevancy with product/market fit locked in," geography matters less and VCs will invest in these companies no matter where they are located.
LPs will become more transparent. The article points out that many LPs are blogging today, and that this trend will help LPs become more transparent, agile and able to provide more value to the VC ecosystem.

It's an interesting article and worth a read.

Link:
https://www.pehub.com/2016/01/659549/

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The Unicorn IPO Challenge

1/21/2016

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There are now over 170 "Unicorns" - venture-backed companies valued at over $1 billion - and recent tech post-IPO performance and market volatility suggest that many of these unicorns may have difficulty going public at their current valuations. The Fortune article "Silicon Valley's $585 Billion Problem" explores the unicorn phenomenon, looks back at tech unicorn post-IPO performance, discusses the slow-down in tech IPOs and the negative feedback loop created when IPOs trade below their IPO prices. The article discusses the IPO process and talks about the IPO pricing and the "pop" from the IPO price to the initial trading price. Having been an investment banker, I disagree with the characterization of investment banks in the article and I believe the article adopts a cynical view of the IPO process. Having said that, I believe there are some good take-aways from the article:

There has been dramatic growth in the number of unicorns in the past couple years. Most of these unicorns are tech companies.
The average profitability of tech companies going public has declined over the past several years.
After they go public, the stock price of many of these unicorns have dropped below their IPO price.
The tech IPO market has slowed, partly due to poor post-IPO stock performance of recent tech IPOs and partly due to recent volatility.
The combination of the above will make it difficult for many unicorns to go public at their current valuations.

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VC Slowdown?

1/19/2016

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Has the general stock market anxiety carried over to venture capital? That's the question posed by the Forbes article "Everything You Need To Know About A Possible Slowdown In Venture Capital Investing." This interesting article explores 2015 funding levels and the current funding and valuation environment. It's worth a read.

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Will the Bubble Burst? Ask Your Cabbie - TechCrunch Article﻿

An LP Predicts VC Trends in 2016

The Unicorn IPO Challenge

VC Slowdown?

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Will the Bubble Burst? Ask Your Cabbie - TechCrunch Article