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You're right that there's more legitimate internet revenue than in 2000. But most of that is going to a few established players that are decidedly post-unicorn

by timr 11y ago

You're right that there's more legitimate internet revenue than in 2000. But most of that is going to a few established players that are decidedly post-unicorn in nature. I don't think Google is going anywhere (though Twitter might just get its fatal wound; that would be a particularly symmetrical ending, wouldn't it? Company born of the ashes of dot-com 1.0 dies in the explosion of dot-com 2.0. But, I digress.) From what I know, most of the "unicorns" are neither profitable nor particularly modest with their spending. They are vulnerable to any sort of turn in investor sentiment, even if their revenue streams are real.

dvirsky 11y ago
Yeah, of course, there's a real valuation bubble going on. I don't think we'll see twitter going anywhere, too - it's a good product after all. But maybe returning to its real size in terms of worth, number of employees and spending.
somberi 11y ago
I find this article thoughtful: http://www.economist.com/news/briefing/21659722-tech-boom-may-get-bumpy-it-will-not-end-repeat-dotcom-crash-fly http://www.economist.com/news/briefing/21659722-tech-boom-ma... The key is that allegedly "overvalued" companies (like Uber say)are still under private investment which has a larger appetite for risk. Whereas in the last boom, most of the speculation were fueled by publicly traded tech stocks. Edit: Grammar.
- jamesblonde 11y ago
  But privately owned companies are now funded largely by private equity who are massively leveraged. They will be first to the exits. IPOs meant the pain was more spread around among stock holders. Now the pain will be more concentrated among highly indebted leveraged investors. It won't end prettily.
  - danieltillett 11y ago
    Yes we have funded high beta investments with high beta capital. This works great in the boom, but the unwind is a killer.
    - somberi 11y ago
      In the barren wilderness of near 0% interest, wealth shelters under leafless trees, risking lightning strikes.
      - selimthegrim 11y ago
        Have you considered writing haikus to accompany Matt Levine's articles? I see a bright future for you.
    - Balgair 11y ago
      I'm a bit new to the whole lingo of The Valley. Could you explain a little more verbosely what you meant by that sentence? What is beta capital and beta investments? What is considered high? What denotes a boom and what is an unwind? How bad is a killer unwind, what does that mean really? Again, sorry, trying to learn the fast lingo here.
      - jkimmel 11y ago
        Beta is a coefficient that attempts to measure an investment's likelihood to move 'with the market.' The total market has a Beta == 1 by definition, with beta ratings above 1 indicating higher volatility/sensitivity to market movements, and vice-versa. See Wikipedia for how the calculations are made. https://en.wikipedia.org/wiki/Beta_%28finance%29 https://en.wikipedia.org/wiki/Beta_%28finance%29 In this context, I a 'high beta investment' is likely to move with the market, ie) is dependent on some aspect of market performance. 'Beta capital' I think refers to using sources of capital that are likely to become more or less available depending on the market. I've never heard of capital sources being given beta values though, so I think this may be a finance/VC colloquialism rather than an actual calculated value. Disclaimer: I am not a VC and may be totally wrong. http://www.investopedia.com/terms/b/beta.asp http://www.investopedia.com/terms/b/beta.asp
  - snewe 11y ago
    It is a bit misleading to label all private equity as "massively leveraged." None of the major investors in "unicorns" of VC use leverage (e.g. Uber https://www.crunchbase.com/organization/uber/investors https://www.crunchbase.com/organization/uber/investors). In fact, the typical VC fund is legally barred from using leverage in their investments. The buyout side of the PE market is leveraged, however, the investments in those investors' portfolios typically have big balance sheets to support the debt loads (and the interest payments).
netcan 11y ago
What are you considering Unicorn? Small, early stage companies (say <100 employees, <250m valuation) that high profile investors are competing to get in on? If so, most of them are supposed to fail. The money is still small by systemic standards and so are the number of people affected. Volatility here is not dangerous, it's expected. Or, are you talking about the Unicorns expected to go public any day now? The Ubers and AirBnBs? Thee are also kind of retrospectively Unicorns at this stage. If these guys go under, that's a problem. But, these guys aren't rely reliant on investor sentiment.
- dvirsky 11y ago
  > What are you considering Unicorn? A start-up that's worth over $1B https://en.wikipedia.org/wiki/Unicorn_(finance) https://en.wikipedia.org/wiki/Unicorn_(finance)

by timr 11y ago

dvirsky 11y ago

Yeah, of course, there's a real valuation bubble going on. I don't think we'll see twitter going anywhere, too - it's a good product after all. But maybe returning to its real size in terms of worth, number of employees and spending.

somberi 11y ago

I find this article thoughtful: http://www.economist.com/news/briefing/21659722-tech-boom-may-get-bumpy-it-will-not-end-repeat-dotcom-crash-fly http://www.economist.com/news/briefing/21659722-tech-boom-ma... The key is that allegedly "overvalued" companies (like Uber say)are still under private investment which has a larger appetite for risk. Whereas in the last boom, most of the speculation were fueled by publicly traded tech stocks. Edit: Grammar.

jamesblonde 11y ago
But privately owned companies are now funded largely by private equity who are massively leveraged. They will be first to the exits. IPOs meant the pain was more spread around among stock holders. Now the pain will be more concentrated among highly indebted leveraged investors. It won't end prettily.
- danieltillett 11y ago
  Yes we have funded high beta investments with high beta capital. This works great in the boom, but the unwind is a killer.
  - somberi 11y ago
    In the barren wilderness of near 0% interest, wealth shelters under leafless trees, risking lightning strikes.
    - selimthegrim 11y ago
      Have you considered writing haikus to accompany Matt Levine's articles? I see a bright future for you.
  - Balgair 11y ago
    I'm a bit new to the whole lingo of The Valley. Could you explain a little more verbosely what you meant by that sentence? What is beta capital and beta investments? What is considered high? What denotes a boom and what is an unwind? How bad is a killer unwind, what does that mean really? Again, sorry, trying to learn the fast lingo here.
    - jkimmel 11y ago
      Beta is a coefficient that attempts to measure an investment's likelihood to move 'with the market.' The total market has a Beta == 1 by definition, with beta ratings above 1 indicating higher volatility/sensitivity to market movements, and vice-versa. See Wikipedia for how the calculations are made. https://en.wikipedia.org/wiki/Beta_%28finance%29 https://en.wikipedia.org/wiki/Beta_%28finance%29 In this context, I a 'high beta investment' is likely to move with the market, ie) is dependent on some aspect of market performance. 'Beta capital' I think refers to using sources of capital that are likely to become more or less available depending on the market. I've never heard of capital sources being given beta values though, so I think this may be a finance/VC colloquialism rather than an actual calculated value. Disclaimer: I am not a VC and may be totally wrong. http://www.investopedia.com/terms/b/beta.asp http://www.investopedia.com/terms/b/beta.asp
- snewe 11y ago
  It is a bit misleading to label all private equity as "massively leveraged." None of the major investors in "unicorns" of VC use leverage (e.g. Uber https://www.crunchbase.com/organization/uber/investors https://www.crunchbase.com/organization/uber/investors). In fact, the typical VC fund is legally barred from using leverage in their investments. The buyout side of the PE market is leveraged, however, the investments in those investors' portfolios typically have big balance sheets to support the debt loads (and the interest payments).

netcan 11y ago

What are you considering Unicorn? Small, early stage companies (say <100 employees, <250m valuation) that high profile investors are competing to get in on? If so, most of them are supposed to fail. The money is still small by systemic standards and so are the number of people affected. Volatility here is not dangerous, it's expected. Or, are you talking about the Unicorns expected to go public any day now? The Ubers and AirBnBs? Thee are also kind of retrospectively Unicorns at this stage. If these guys go under, that's a problem. But, these guys aren't rely reliant on investor sentiment.

dvirsky 11y ago
> What are you considering Unicorn? A start-up that's worth over $1B https://en.wikipedia.org/wiki/Unicorn_(finance) https://en.wikipedia.org/wiki/Unicorn_(finance)