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The author never makes the connection (for me) in how this is good news for the technology "sector". Three over-generalized and shaky premises applies to the en

The author never makes the connection (for me) in how this is good news for the technology "sector". Three over-generalized and shaky premises applies to the entire industry? Ridiculous. There are probably multiple I-told-you-so's waiting in the wings from those who have raised large amounts of investment dollars with potentially hard-to-fathom implied valuations. The causes will be many, and lessons-learned will be summarily written. The label associated with the mythological creature is noise, not signal. In the end, failure is a good thing in the tech sector. To quote Bill Gates, "Success is a lousy teacher. It seduces smart people into thinking they can't lose."

keithwhor 11y ago
"A correction may teach startups to focus less on headline numbers, more on fundamentals." To me, this is the most important sentence in the article. The amount of hand-waving in this industry is staggering. The point of a business is to create value. Most of us would interpret this as, "create value for a customer." The idea being you then capture the value you've created later on. There are hundreds... thousands of people working in and running startups that totally miss this mark. "Create value," to them, means, "get an amazing valuation." You know those stories about hyper-competitive MBA-types? There are people around us who base their own self-worth on how much money they raise compared to their peers. I have an inkling that it's becoming a bit of an epidemic. The article hits the nail on the head in that top-performing firms can't create enough of a signal to be heard over all of this "valuation aggression." How can they compete? Get more narcissistic and play the game everybody else is playing... now we have all the makings of a positive feedback loop. It's easy to forget fundamentals. I welcome a correction, and I don't think it's pessimistic to do so. It's just economic homeostasis at work. Need to negate that feedback loop at some point. The competent and well-intentioned will be the most likely to survive. It's why we argue for a free market, right? :)
- jroseattle 11y ago
  This is all true, but a broad-based correction (whatever that looks like) will do little to change the behavior you're mentioning. Hand-waving? Been around forever, and it will continue to be. Hyper-competitive MBA types? Existed well before the tech industry. These are personality traits, and while annoying, do not drive this industry.
god_bless_texas 11y ago
One way I think it could be good for the tech sector is the return of reasonable angel investment. Outside of YC, angel investment has moved up the due diligence ladder, resembling something nearer to actual venture capital. When you apply VC difficulty meters to quantifying the success on return of investment, then everyone at the bottom loses. Angel investment was supposed to be high risk, high reward but now it seems even angel groups don't do actual angel investments any more. In Texas, angel deals are standardized at the 2-3 million dollar level for a valuation when they should be high 100's instead. Losing the angel syndicates and opening things up again for real, actual angel investment would mean alot more actual unicorns make it to the marketplace. Not just the ones that get high profile coverage because of educational pedigree or VC attention from sand hill.
- jroseattle 11y ago
  The focus on specific dollar amounts is a red herring though. The implication of what is "reasonable" depends on whom you ask.

keithwhor 11y ago

"A correction may teach startups to focus less on headline numbers, more on fundamentals." To me, this is the most important sentence in the article. The amount of hand-waving in this industry is staggering. The point of a business is to create value. Most of us would interpret this as, "create value for a customer." The idea being you then capture the value you've created later on. There are hundreds... thousands of people working in and running startups that totally miss this mark. "Create value," to them, means, "get an amazing valuation." You know those stories about hyper-competitive MBA-types? There are people around us who base their own self-worth on how much money they raise compared to their peers. I have an inkling that it's becoming a bit of an epidemic. The article hits the nail on the head in that top-performing firms can't create enough of a signal to be heard over all of this "valuation aggression." How can they compete? Get more narcissistic and play the game everybody else is playing... now we have all the makings of a positive feedback loop. It's easy to forget fundamentals. I welcome a correction, and I don't think it's pessimistic to do so. It's just economic homeostasis at work. Need to negate that feedback loop at some point. The competent and well-intentioned will be the most likely to survive. It's why we argue for a free market, right? :)

jroseattle 11y ago
This is all true, but a broad-based correction (whatever that looks like) will do little to change the behavior you're mentioning. Hand-waving? Been around forever, and it will continue to be. Hyper-competitive MBA types? Existed well before the tech industry. These are personality traits, and while annoying, do not drive this industry.

god_bless_texas 11y ago

One way I think it could be good for the tech sector is the return of reasonable angel investment. Outside of YC, angel investment has moved up the due diligence ladder, resembling something nearer to actual venture capital. When you apply VC difficulty meters to quantifying the success on return of investment, then everyone at the bottom loses. Angel investment was supposed to be high risk, high reward but now it seems even angel groups don't do actual angel investments any more. In Texas, angel deals are standardized at the 2-3 million dollar level for a valuation when they should be high 100's instead. Losing the angel syndicates and opening things up again for real, actual angel investment would mean alot more actual unicorns make it to the marketplace. Not just the ones that get high profile coverage because of educational pedigree or VC attention from sand hill.

jroseattle 11y ago
The focus on specific dollar amounts is a red herring though. The implication of what is "reasonable" depends on whom you ask.