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Here are his three bets reproduced for comments: 1) The top 6 US companies at http://fortune.com/2015/01/22/the-age-of-unicorns/ http://fortune.com/2015/01/22/

Here are his three bets reproduced for comments: 1) The top 6 US companies at http://fortune.com/2015/01/22/the-age-of-unicorns/ http://fortune.com/2015/01/22/the-age-of-unicorns/ (Uber, Palantir, Airbnb, Dropbox, Pinterest, and SpaceX) are currently worth just over $100B. I am leaving out Snapchat because I couldn’t get verification of its valuation. Proposition 1: On January 1st, 2020, these companies will be worth at least $200B in aggregate. Seems he is on track for that one. 2) Stripe, Zenefits, Instacart, Mixpanel, Teespring, Optimizely, Coinbase, Docker, and Weebly are a selection of mid-stage YC companies currently worth less than $9B in aggregate. Proposition 2: On January 1st, 2020, they will be worth at least $27B in aggregate. Hmm... not as confident but I would not bet against it. 3) Proposition 3: The current YC Winter 2015 batch—currently worth something that rounds down to $0—will be worth at least $3B on Jan 1st, 2020. http://techcrunch.com/2015/03/23/here-are-the-companies-that-presented-at-y-combinator-demo-day-day-1/ http://techcrunch.com/2015/03/23/here-are-the-companies-that... http://techcrunch.com/2015/03/24/y-combinator-demos/ http://techcrunch.com/2015/03/24/y-combinator-demos/ Might be on track as well, though I am even less confident. If I were a betting man, I would say he is more right than wrong, and on track for all three. I think this underscores how long 5 years is in internet time.

trsohmers 10y ago
Cruise (YC W14) was recently acquired by GM for $1B, so if he picked one earlier class the $3B bet would be attainable in my mind. Not to slight any W15 companies, I just haven't seen much.
- JonFish85 10y ago
  I'm really curious whether that $1B is truly $1B, or if that's the sticker price based on some crazy metrics they have to hit, and the actual value of the deal is in the $150-$250m range (not that that's anything to sneeze at either), plus unlikely incentives.
  - btown 10y ago
    For readers unfamiliar with this type of term: https://en.wikipedia.org/wiki/Earnout https://en.wikipedia.org/wiki/Earnout
blowski 10y ago
> I think this underscores how long 5 years is in internet time. You're absolutely right. The 10 biggest tech stories of 2011 http://edition.cnn.com/2011/12/26/tech/web/tech-news-2011/index.html http://edition.cnn.com/2011/12/26/tech/web/tech-news-2011/in...
- x1798DE 10y ago
  I'm not sure I understand, those stories don't seem to bolster your point - a few of them are one-time events (Steve Jobs' death), and most of them are still ongoing concerns - hackers, facebook, etc. I probably agree that 5 years is a long time in tech, but some variation on almost all those stories could easily be published today.
  - blowski 10y ago
    In that vein, World War 2 was merely a variation on the Roman invasion of Gaul. The reason I linked to the article is that things which are commonplace and obvious today - a multitude of cheap Android-powered tablets, social media being used to facilitate political action - were newsworthy just five years ago.
raldi 10y ago
Another comment in this thread claims to have done the same analysis and come to the opposite conclusion. But neither of you shared your math. Could you show the analysis that led to your conclusion, so we can compare it to the other one?
- projectramo 10y ago
  I concede i didn't do a lot of math, and I agree with the points raised here: 1. That the valuation preference is more relevant than the value cap. Altman is well aware of this, and I think himself might have brought it up in an interview (with Kara Swisher?). However, for our purposes, I am using the value cap as a measure of valuation for ease of use. 2. I agree with the other comment that one or two companys in the pool are doing the heavy lifting. There is a power law distribution. So for the first preduction, i just looked at Uber's last value (again, I didn't account for the preference so this is misleading) at $68 Billion and think yes, Uber + these other companies will probably get up to $200 in another 4 years. Similarly, I'll just pick the top 1 or 2 companies in a pool and guess that if we get over 20% of the value in one year then I just extend linearly. Its not detailed, its just a quick mental short cut.
jessedhillon 10y ago
Regarding #1, this means that all six will need to double their value, or some of them will need to grow by more than 100% to compensate for those which don't. Five years is a long time, but 100% is also a lot of growth. There aren't too many tech companies which I can think of who could provide adequate comps, but if we use GOOG as a generic "tech company": - from 2012-present they went from $350 - ~$725 - from 2005-2012 they went from ~$125 - $350, if you skip a short lull at the end of 2008 when everything was down One doubling on a 7 year scale, then next one on a ~4 year scale, using the today as the arbitrary starting point and measuring back. If we ask the question a different way, which of these six companies have 100% growth ahead of them, i.e. their valuation is huge, and either their current market penetration is low or there are large enough new markets available to them. To me, Uber and SpaceX are the only obvious ones on that list. Palantir and Airbnb are less obviously well-positioned, but I would push them both to yes if I were personally to take this bet. Dropbox and Pinterest seem to be clearly in the other side, and if they maintain their current values, then each of the other companies will need to split $25B in growth four ways in order for this bet to hold. Distributing that evenly: - Palantir was last valued at $20B, so this is a 100%+ growth target over 4 years. - As of 2015, Airbnb was valued at $25B so it's a similar situation for them. - As of the beginning of this year, Uber was valued around $50B, so they would need to grow by 50%+ - SpaceX is valued somewhere around $12-15B, so this would be a ~200% growth for them! Yet, we all know that unicorn gains are not distributed evenly. Even among the unicorns this is true, so a more likely scenario is that one or two of these companies will experience outsized growth while the others will experience impressive, but "modest", increases. It's a fun, but probably pointless, exercise to try and pick which of these will be the unicorns among unicorns. (But I'd say Uber and SpaceX still) Just to contextualize all this -- it was 2009, 7 years ago, when the DJI was last at half its value today. It was also 2009 when the S&P 500 was half today's value. We're talking about companies doubling on 4-5 year scales, 33-50% faster than the rest of the market.
- projectramo 10y ago
  I don't think they will grow evenly though. So the target is $200 Billion and Uber alone is "valued" (I agree that this includes preferences) at $68B. So if Uber "just" tripled its value and everyone else went to 0, he would still hit his prediction. You need one big standout for him to be right.
NumberCruncher 10y ago
Basecamp is now a $100 billion dollar company, according to a group of investors who have agreed to purchase 0.000000001% of the company in exchange for $1. Source: https://m.signalvnoise.com/press-release-basecamp-valuation-tops-100-billion-after-bold-vc-investment-c221d8f86ad7#.m4mgha7cp https://m.signalvnoise.com/press-release-basecamp-valuation-...
- Pxtl 10y ago
  They should have sold it for $10 to make it an even trillion.
- etjossem 10y ago
  You do know that post is one big "valuations are high and we are in a bubble" joke, right?
- reitzensteinm 10y ago
  This is a trite complaint, and in my view, misses what is often bogus about the lofty valuations - liquidation preferences provide a lot of downside protection. For instance, if I invest $1bn in Uber at a $10bn post and a 1x preference, I get the first $1bn of any sale. Yes, I invested at a $10b valuation, but I don't actually lose any money unless the valuation sinks below $1bn. This is a much better deal than simply paying $1bn for 10% of Uber, and in my view, actually does not imply a $10bn valuation at all.
  - gjem97 10y ago
    You're right on, and there may in fact be a half dozen more material economic terms which also adjust down the implied $10bn number. Add into that the fact that each round often has it's own set of terms, and you begin to realize that the "valuation" numbers thrown around mean absolutely nothing.
mikeryan 10y ago
I think #1 is actually the toughest bet. I can see Palantir, Dropbox and Pinterest either remaining static or even dropping from their current valuations. Even Uber and Airbnb don't have a clear path to huge growth in front of them, Airbnb is the safer bet for growth because of the lack of competition. Uber still seems a strong business but I'm not sure how well they continue to grow. X-factor for Uber is how it well it expands into complementary product verticals like self-driving cars, deliveries etc. SpaceX could end up carrying this category.
- smt88 10y ago
  > Uber and Airbnb Imagine a world in which any object (human, animal, package, food) can be moved from one place in a city to any other place in the city using a smartphone. An electric, self-driving vehicle picks it up and drops it off. That world is very nearly possible, and Uber is on the tip of the spear that's creating it. There's an absolutely massive upside. Uber is probably very under-valued. Airbnb is less world-changing, but they still have the rest of the hospitality industry to replace. I personally never stay at hotels anymore, and I don't understand why anyone would. People will continue to use hotels less and Airbnb more.
  - clock_tower 10y ago
    I wouldn't bet on Uber based on self-driving cars. See https://en.wikipedia.org/wiki/Autonomous_car https://en.wikipedia.org/wiki/Autonomous_car: most auto companies and most big tech companies are working on them, and I wouldn't bet that Uber can beat everyone from Audi to Google to the punch. It's more likely that they'll buy self-driving cars from whoever develops them first -- or that whoever develops them will create an app cheaper to use than Uber. (It's not like Uber would be particularly hard to replicate, at least not if you're Google.)
  - ssharp 10y ago
    I hear that argument in favor of Uber a lot, but what barriers to entry exist for potential competitors when there are autonomous vehicles? Currently, you can argue that Uber's competitive advantage and big barrier to entry is the driver network. When you don't need a pool of humans and software that makes the human's job easier, why would Uber be better suited than another company to utilize self-driving vehicles?
vkou 10y ago
A single bad IPO from that list of firms (Which will likely happen in a climate of pessimism, even if we don't hit a recession) will be disastrous to their aggregate valuation, even if they stay private. I feel that the only way Sam will win the bet is if none of the firms in #1 or #2 will IPO between now and 2020.
- projectramo 10y ago
  True, but conversely, one standout that does well could alone hit the target. If you believe that the successful companies follow a power law distribution, you'd expect something like that.
  - vkou 10y ago
    That would be the case if valuations were independent of each-other (Which is a bit of a stretch even in a truly efficient market, like the NYSE.) On the other hand if, say, AirBnB and Palantir have a dismal IPO in 2018, that will likely bring valuations down across the board.
dnautics 10y ago
I think sam's predictions will hold even if we are in a bubble, because those companies (not sure about uber and palantir) seem likely to survive bubbles. There's also enough diversity (zenefits has died, e.g.) that there's some cushioning. Nonetheless, if you think we're in a bubble you should be prepared to liquidate everything and start from scratch at the bottom.

trsohmers 10y ago

Cruise (YC W14) was recently acquired by GM for $1B, so if he picked one earlier class the $3B bet would be attainable in my mind. Not to slight any W15 companies, I just haven't seen much.

JonFish85 10y ago
I'm really curious whether that $1B is truly $1B, or if that's the sticker price based on some crazy metrics they have to hit, and the actual value of the deal is in the $150-$250m range (not that that's anything to sneeze at either), plus unlikely incentives.
- btown 10y ago
  For readers unfamiliar with this type of term: https://en.wikipedia.org/wiki/Earnout https://en.wikipedia.org/wiki/Earnout

blowski 10y ago

> I think this underscores how long 5 years is in internet time. You're absolutely right. The 10 biggest tech stories of 2011 http://edition.cnn.com/2011/12/26/tech/web/tech-news-2011/index.html http://edition.cnn.com/2011/12/26/tech/web/tech-news-2011/in...

x1798DE 10y ago
I'm not sure I understand, those stories don't seem to bolster your point - a few of them are one-time events (Steve Jobs' death), and most of them are still ongoing concerns - hackers, facebook, etc. I probably agree that 5 years is a long time in tech, but some variation on almost all those stories could easily be published today.
- blowski 10y ago
  In that vein, World War 2 was merely a variation on the Roman invasion of Gaul. The reason I linked to the article is that things which are commonplace and obvious today - a multitude of cheap Android-powered tablets, social media being used to facilitate political action - were newsworthy just five years ago.

raldi 10y ago

Another comment in this thread claims to have done the same analysis and come to the opposite conclusion. But neither of you shared your math. Could you show the analysis that led to your conclusion, so we can compare it to the other one?

projectramo 10y ago
I concede i didn't do a lot of math, and I agree with the points raised here: 1. That the valuation preference is more relevant than the value cap. Altman is well aware of this, and I think himself might have brought it up in an interview (with Kara Swisher?). However, for our purposes, I am using the value cap as a measure of valuation for ease of use. 2. I agree with the other comment that one or two companys in the pool are doing the heavy lifting. There is a power law distribution. So for the first preduction, i just looked at Uber's last value (again, I didn't account for the preference so this is misleading) at $68 Billion and think yes, Uber + these other companies will probably get up to $200 in another 4 years. Similarly, I'll just pick the top 1 or 2 companies in a pool and guess that if we get over 20% of the value in one year then I just extend linearly. Its not detailed, its just a quick mental short cut.

jessedhillon 10y ago

Regarding #1, this means that all six will need to double their value, or some of them will need to grow by more than 100% to compensate for those which don't. Five years is a long time, but 100% is also a lot of growth. There aren't too many tech companies which I can think of who could provide adequate comps, but if we use GOOG as a generic "tech company": - from 2012-present they went from $350 - ~$725 - from 2005-2012 they went from ~$125 - $350, if you skip a short lull at the end of 2008 when everything was down One doubling on a 7 year scale, then next one on a ~4 year scale, using the today as the arbitrary starting point and measuring back. If we ask the question a different way, which of these six companies have 100% growth ahead of them, i.e. their valuation is huge, and either their current market penetration is low or there are large enough new markets available to them. To me, Uber and SpaceX are the only obvious ones on that list. Palantir and Airbnb are less obviously well-positioned, but I would push them both to yes if I were personally to take this bet. Dropbox and Pinterest seem to be clearly in the other side, and if they maintain their current values, then each of the other companies will need to split $25B in growth four ways in order for this bet to hold. Distributing that evenly: - Palantir was last valued at $20B, so this is a 100%+ growth target over 4 years. - As of 2015, Airbnb was valued at $25B so it's a similar situation for them. - As of the beginning of this year, Uber was valued around $50B, so they would need to grow by 50%+ - SpaceX is valued somewhere around $12-15B, so this would be a ~200% growth for them! Yet, we all know that unicorn gains are not distributed evenly. Even among the unicorns this is true, so a more likely scenario is that one or two of these companies will experience outsized growth while the others will experience impressive, but "modest", increases. It's a fun, but probably pointless, exercise to try and pick which of these will be the unicorns among unicorns. (But I'd say Uber and SpaceX still) Just to contextualize all this -- it was 2009, 7 years ago, when the DJI was last at half its value today. It was also 2009 when the S&P 500 was half today's value. We're talking about companies doubling on 4-5 year scales, 33-50% faster than the rest of the market.

projectramo 10y ago
I don't think they will grow evenly though. So the target is $200 Billion and Uber alone is "valued" (I agree that this includes preferences) at $68B. So if Uber "just" tripled its value and everyone else went to 0, he would still hit his prediction. You need one big standout for him to be right.

NumberCruncher 10y ago

Basecamp is now a $100 billion dollar company, according to a group of investors who have agreed to purchase 0.000000001% of the company in exchange for $1. Source: https://m.signalvnoise.com/press-release-basecamp-valuation-tops-100-billion-after-bold-vc-investment-c221d8f86ad7#.m4mgha7cp https://m.signalvnoise.com/press-release-basecamp-valuation-...

Pxtl 10y ago
They should have sold it for $10 to make it an even trillion.
etjossem 10y ago
You do know that post is one big "valuations are high and we are in a bubble" joke, right?
reitzensteinm 10y ago
This is a trite complaint, and in my view, misses what is often bogus about the lofty valuations - liquidation preferences provide a lot of downside protection. For instance, if I invest $1bn in Uber at a $10bn post and a 1x preference, I get the first $1bn of any sale. Yes, I invested at a $10b valuation, but I don't actually lose any money unless the valuation sinks below $1bn. This is a much better deal than simply paying $1bn for 10% of Uber, and in my view, actually does not imply a $10bn valuation at all.
- gjem97 10y ago
  You're right on, and there may in fact be a half dozen more material economic terms which also adjust down the implied $10bn number. Add into that the fact that each round often has it's own set of terms, and you begin to realize that the "valuation" numbers thrown around mean absolutely nothing.

mikeryan 10y ago

I think #1 is actually the toughest bet. I can see Palantir, Dropbox and Pinterest either remaining static or even dropping from their current valuations. Even Uber and Airbnb don't have a clear path to huge growth in front of them, Airbnb is the safer bet for growth because of the lack of competition. Uber still seems a strong business but I'm not sure how well they continue to grow. X-factor for Uber is how it well it expands into complementary product verticals like self-driving cars, deliveries etc. SpaceX could end up carrying this category.

smt88 10y ago
> Uber and Airbnb Imagine a world in which any object (human, animal, package, food) can be moved from one place in a city to any other place in the city using a smartphone. An electric, self-driving vehicle picks it up and drops it off. That world is very nearly possible, and Uber is on the tip of the spear that's creating it. There's an absolutely massive upside. Uber is probably very under-valued. Airbnb is less world-changing, but they still have the rest of the hospitality industry to replace. I personally never stay at hotels anymore, and I don't understand why anyone would. People will continue to use hotels less and Airbnb more.
- clock_tower 10y ago
  I wouldn't bet on Uber based on self-driving cars. See https://en.wikipedia.org/wiki/Autonomous_car https://en.wikipedia.org/wiki/Autonomous_car: most auto companies and most big tech companies are working on them, and I wouldn't bet that Uber can beat everyone from Audi to Google to the punch. It's more likely that they'll buy self-driving cars from whoever develops them first -- or that whoever develops them will create an app cheaper to use than Uber. (It's not like Uber would be particularly hard to replicate, at least not if you're Google.)
- ssharp 10y ago
  I hear that argument in favor of Uber a lot, but what barriers to entry exist for potential competitors when there are autonomous vehicles? Currently, you can argue that Uber's competitive advantage and big barrier to entry is the driver network. When you don't need a pool of humans and software that makes the human's job easier, why would Uber be better suited than another company to utilize self-driving vehicles?

vkou 10y ago

A single bad IPO from that list of firms (Which will likely happen in a climate of pessimism, even if we don't hit a recession) will be disastrous to their aggregate valuation, even if they stay private. I feel that the only way Sam will win the bet is if none of the firms in #1 or #2 will IPO between now and 2020.

projectramo 10y ago
True, but conversely, one standout that does well could alone hit the target. If you believe that the successful companies follow a power law distribution, you'd expect something like that.
- vkou 10y ago
  That would be the case if valuations were independent of each-other (Which is a bit of a stretch even in a truly efficient market, like the NYSE.) On the other hand if, say, AirBnB and Palantir have a dismal IPO in 2018, that will likely bring valuations down across the board.

dnautics 10y ago

I think sam's predictions will hold even if we are in a bubble, because those companies (not sure about uber and palantir) seem likely to survive bubbles. There's also enough diversity (zenefits has died, e.g.) that there's some cushioning. Nonetheless, if you think we're in a bubble you should be prepared to liquidate everything and start from scratch at the bottom.