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Of course there's a bubble, and of course it has to burst at some point. There are frankly a plethora of poorly conceived and poorly executed startups on the sc

Of course there's a bubble, and of course it has to burst at some point. There are frankly a plethora of poorly conceived and poorly executed startups on the scene right now, with no hope of ever achieving financial sanity. Just as we saw in the late '90s with any crazy idea being given a ton of VC funding, regardless of whether they had a sane business plan, only to implode when things got tight. Unfortunately, this time around the successes of the previous rounds actually made things worse, because they succeeded too much. VC funding is now, intentionally, a casino. The RoI you can get from growing a winner fast enough to dominate some new market so outclasses what you can earn back from helping a sensible startup grow at a reasonable level that most VCs concentrate their funding to match. It's all about disrupting and breakthroughs and growing fast. This ends up bringing a lot of "unicorns" into existence even if only a few of them are ultimately viable. It also leaves a lot of smaller, more sensible startup ideas in the dust. Silicon Valley is all about stuff that's "cool", not stuff that's challenging or valuable. Sadly, even this round of the bubble bursting is unlikely to change that.

Outdoorsman 11y ago
A business has to make a profit...consumers prefer quality products...investors prefer businesses who are profitable and indicate the wherwithal to ensure future profitability...businesses that sell "entertainment" are vulnerable to reductions in consumer's discretionary spending... These are old, old maxims... I've often wondered what percentage of current Internet "businesses" offer consumers a product they could not live without...?
eoinmurray92 11y ago
How to investors make money on unicorns if there is no liquidity event?
- InclinedPlane 11y ago
  It's a lottery, you only need one. One facebook, one google, etc. Those successes bring in RoI not just of double digit percentages (the sort you'd expect from high-risk investments) but in multiples, orders of magnitude even. 10x, 100x returns sometimes. And when you hit those jackpots all of your other investments are now meaningless. The result is that VC becomes a game of searching for jackpots. Everyone wants a little bit of everything, and everyone wants to have their fingers in the things that look most interesting, that seem to have the chance to blow up. VCs also push the companies they invest in to grow fast and hit the point of finding out whether or not they're a "jackpot" idea or not. At the same time, investors have figured out innumerable ways to get paid out of companies that are obviously not going to make it and won't ever hit a traditional liquidity event. They've gamed the system to an enormous degree but they also pump so much money into it that it's hard to stand up to them.
  - gopiks 11y ago
    Good summary. This is the reason tech is in bubble while economy is heading towards recession.. This and stupid fed policy
lmm 11y ago
Maybe we actually are adjusting to the appropriate level of risk to take. I remember blog posts from PG that if YC were really investing appropriately they'd have more failures.
gopiks 11y ago
I guess it's already bursting.. BTW yc could be arguably one of the chief perpetrators of this bubble..

Outdoorsman 11y ago

A business has to make a profit...consumers prefer quality products...investors prefer businesses who are profitable and indicate the wherwithal to ensure future profitability...businesses that sell "entertainment" are vulnerable to reductions in consumer's discretionary spending... These are old, old maxims... I've often wondered what percentage of current Internet "businesses" offer consumers a product they could not live without...?

eoinmurray92 11y ago

How to investors make money on unicorns if there is no liquidity event?

InclinedPlane 11y ago
It's a lottery, you only need one. One facebook, one google, etc. Those successes bring in RoI not just of double digit percentages (the sort you'd expect from high-risk investments) but in multiples, orders of magnitude even. 10x, 100x returns sometimes. And when you hit those jackpots all of your other investments are now meaningless. The result is that VC becomes a game of searching for jackpots. Everyone wants a little bit of everything, and everyone wants to have their fingers in the things that look most interesting, that seem to have the chance to blow up. VCs also push the companies they invest in to grow fast and hit the point of finding out whether or not they're a "jackpot" idea or not. At the same time, investors have figured out innumerable ways to get paid out of companies that are obviously not going to make it and won't ever hit a traditional liquidity event. They've gamed the system to an enormous degree but they also pump so much money into it that it's hard to stand up to them.
- gopiks 11y ago
  Good summary. This is the reason tech is in bubble while economy is heading towards recession.. This and stupid fed policy

lmm 11y ago

Maybe we actually are adjusting to the appropriate level of risk to take. I remember blog posts from PG that if YC were really investing appropriately they'd have more failures.

gopiks 11y ago

I guess it's already bursting.. BTW yc could be arguably one of the chief perpetrators of this bubble..