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2016 is the year when Silicon Valley feels the wrath of Buffett's "when the tide goes out" old saying, and probably most haven't been wearing swimming trunks in
by steven2012 11y ago
2016 is the year when Silicon Valley feels the wrath of Buffett's "when the tide goes out" old saying, and probably most haven't been wearing swimming trunks in a long time.
The stupidity, of course, is the media and the rest of the Valley using VCs' own valuation as some sort of data, instead of the self-interested BS that it is. VCs are the greater-fool theory in action, and the greatest fool are the retail investors. Look at Groupon that somehow IPOed, and the only ones that lost money were the mutual funds and retail suckers that bought in.
VCs are considered great if they are right 1 out of 10 times. The only reason why they don't go belly up is because they stack the deck in their favor through liquidation preferences, onerous funding terms, etc. So why on earth would we believe them when they say companies like Lyft are worth 5B or Snapchat is worth 20B?
When the Revaluation of 2016 hits, it will be harsh and immediate. VCs act like a flock of birds and it's binary. Either they are in feeding frenzy mode, or they are cowards on the sidelines. When a couple of VCs start getting cold feet, they all get cold feet, and when that happens, unicorns start dying. Companies like Dropbox that have a real business model but whose maximum prospect of profits have been critically injured by Box's IPO, will probably get destroyed by either horrible funding terms or a Square-like IPO. Lyft will probably be dead by the end of 2016, and people will be wondering how they burned through 1.5B in funding.
My bet is that 2/3 of the unicorns are acquihired for terrible terms, dead or on life-support by the end of 2016. If only I could short them, I would, but since I'm living in the Valley, I'm probably going to be negatively affected by this unfortunately.
- hitekker 11y ago> My bet is that 2/3 of the unicorns are acquihired for terrible terms, dead or on life-support by the end of 2016. If only I could short them, I would, but since I'm living in the Valley, I'm probably going to be negatively affected by this unfortunately. I make this same prediction, and the consequences will affect me as well.
- jedberg 11y ago> If only I could short them, I would, but since I'm living in the Valley, I'm probably going to be negatively affected by this unfortunately. Hey it's not all bad. The last time this happened, traffic on 101 got really great for a few years and you could get a reservation at any restaurant you wanted to (assuming you could afford it).
- donkeyd 11y agoCould be good for real estate prices too... If you're on the buy side.
- romanhn 11y agoDidn't happen last time, as capital fled the imploding tech sector and flooded into real estate, causing the prices to balloon rapidly compared to prior years.
- donkeyd 11y agoThat's very interesting, do you know if there are any articles about that?
- romanhn 11y agoThere is a small blurb here: https://en.wikipedia.org/wiki/Causes_of_the_United_States_housing_bubble#Dot-com_bubble_collapse https://en.wikipedia.org/wiki/Causes_of_the_United_States_ho.... It leads to an article by Robert Shiller called "The Bubble's New Home" (Google it to get around the paywall) as well as his classic book "Irrational Exuberance".
- donkeyd 11y agoThank you!
- duncanawoods 11y agoInterestingly, this fact is used in the The Big Short as Michael Burry's insight for spotting the housing bubble and beginning the short. There is plenty of artistic license in that film so I don't know how true that really is but its quite exciting for small counter-intuitive "surprises" like this to be the early indicators for massive global events.
- 11y ago
- morgante 11y ago> When the Revaluation of 2016 hits, it will be harsh and immediate. That's where we disagree. It's hard for a private market to have a quick correction, especially since (a) VCs can't completely shut down, they'll just be much more aggressive on valuation and (b) many/most unicorns have huge war chests. If they see the market has turned against them, they'll slow down growth and extend their runway to prevent having to raise another round. > If only I could short them This is one of the biggest factors which prevents a collapse. Only bulls get to set prices: bears don't have a market mechanism to express their opinion. When investors become more bearish, we'll see a slowdown in funding—but not a "harsh and immediate" crash.