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Heaven help us all, they’re doing it again. The “who” are the venture capitalists, and the “what” is super-inflating another start-up company bubble.
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Consider the following valuations, as summarized by Steven Davidoff-Solomon in this morning’s New York Times: Instacart, a same-day grocery delivery service (remember WebVan?) wants to raise a $100 million at a $2 billion valuation. Too modest? How about WeWork Companies (why not share your office space the way Uber shares cars?), which closed on $355 million at a $5 billion valuation. And then, of course, there’s Uber, with a $41 billion valuation and only a slice of the $7 billion a year people spend on cabs.
The list goes on, fueled by the billions of dollars raised annually by VC funds, despite the fact that for the five year ending in 2013, VC funds trailed the S&P Index by 5.4% annually. Indeed, only 10% of all funds topped the S&P. Truly, they must be the smartest guys in the room.
Should you care? Well, as you may recall, we suffered a little bit of an economic blip back in 2000, when the last technology bubble burst. Wall Street investment bankers got most of the blame, although it was the VCs that found and funded, and then drove up the valuations, of the mostly worthless companies that the I Bankers took public. Ever wonder how it was that the venture capital industry was able to stay out of the spotlight? Full Story |
