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It seems like larger and larger rounds are being announced. Magic just also did a $1B round. Is this cause for concern or innocuous? I don't remember rounds be

It seems like larger and larger rounds are being announced. Magic just also did a $1B round. Is this cause for concern or innocuous? I don't remember rounds being this big before.

adventured 9y ago
It's not becoming more common. Uber, Didi, WeWork, Airbnb and a select few others have raised rounds that large. These are large businesses. Magic is an outlier in terms of what they're raising vs the size of their business. Those couple top companies have gotten a lot bigger in terms of revenue in the last three or four years. You aren't seeing other companies able to raise a billion dollars like they can. It's best to no longer think of those companies as traditional start-ups, they have more in common with their large publicly traded peers (Airbnb & Priceline for example). So far it appears Magic raised $500m in the round - https://www.reuters.com/article/us-magicleap-funding/startup-magic-leap-raises-half-a-billion-in-new-funding-idUSKBN1CM2VI https://www.reuters.com/article/us-magicleap-funding/startup...
- bartozone 9y ago
  Just to piggy back on this, many of these companies are skipping IPO's because there's enough private equity to give them the funds they needs. Previously this wasn't the case.
  - jahnu 9y ago
    There is also more scrutiny once you are public. Staying private can keep the authorities at bay.
    - philsnow 9y ago
      not just the authorities; the moves your company makes are scrutinized by shareholders and then you have to deal (more) with the court of public opinion.
austenallred 9y ago
In the past Lyft would have already IPOd. Now there’s so much private money there’s not a good reason to go public as often.
godzillabrennus 9y ago
Cheap capital searches for a return. Venture funds pump up valuations of privately held companies to show mark to market valuations (paper returns) increasing. Allows funds to show good IRR without actually returning capital to LP’s. Allows funds to raise more capital for new funds based on prior performance. It’s basically an unsustainable financial mess that will collapse. Not that big of a bubble though compared with the student loan fiasco no one is really talking about these days.
- xadhominemx 9y ago
  LPs are much more sophisticated than you give them credit for. LPs are not stupid and know how VC works. They woul easily recognize the tricks you are proposing, which is why it's not actually how the industry operates.
csomar 9y ago
We are riding a bubble. A couple years ago, people were talking about an Internet/High-tech bubble. It was just the ignition. Now, we are even going crazier but this is becoming the "norm", so pretty good ground for things to go super-crazy-high from here. Nasdaq Top 2000: 5,000 Nasdaq Top pre-2008: 2,804 Nasdaq Bottom (2008-crisis): 1,293 Nasdaq ATH: 6,624 (just a couple days ago) That, or the dollar is going through hyper-inflation. And I'm pretty certain this time will not be different (though from a volatility perspective, maybe)
- pm90 9y ago
  While there does seem to be an abundance of free capital, it doesn't seem to be fueled by the kind of reckless lending that fueled the 2008 housing crisis, so there might be a crash, but IMO its unlikely to bring down the entire civilization as we know it. However, there might be something else going on... I wonder if China's efforts to prop up its economy? It would be interesting if someone could tell me where all this capital is coming from.
  - csomar 9y ago
    > it doesn't seem to be fueled by the kind of reckless lending that fueled the 2008 housing crisis How do you know that? The 2008 was led by public borrowing. This might be led by bigger investors borrowing or figuring out "schemes" to leverage themselves. Either way, what we know and are certain of, is that US stocks are rallying. Not quite hard to worry, but they are showing signs of bubbly like behavior. It'll be time for the "larger public" to take notice and plunge themselves.
    - JumpCrisscross 9y ago
      > How do you know that? The 2008 was led by public borrowing Equity versus debt.
      - csomar 9y ago
        Except that if you prop-up the value of equity then everything looks good even though it isn't. The 2000 tech boom had companies with no revenue. This tech boom has companies with revenue. But it'll be a bubble if this revenue is derived from bubbling sectors.
cft 9y ago
The inflation from QE has already happened at the highest corporate levels. A billion is the new million so to say. Wait till it catches up with Main St.
- pishpash 9y ago
  2x inflation in restaurant meals since QE.

It seems like larger and larger rounds are being announced. Magic just also did a $1B round. Is this cause for concern or innocuous? I don't remember rounds being this big before.

adventured 9y ago

It's not becoming more common. Uber, Didi, WeWork, Airbnb and a select few others have raised rounds that large. These are large businesses. Magic is an outlier in terms of what they're raising vs the size of their business. Those couple top companies have gotten a lot bigger in terms of revenue in the last three or four years. You aren't seeing other companies able to raise a billion dollars like they can. It's best to no longer think of those companies as traditional start-ups, they have more in common with their large publicly traded peers (Airbnb & Priceline for example). So far it appears Magic raised $500m in the round - https://www.reuters.com/article/us-magicleap-funding/startup-magic-leap-raises-half-a-billion-in-new-funding-idUSKBN1CM2VI https://www.reuters.com/article/us-magicleap-funding/startup...

bartozone 9y ago
Just to piggy back on this, many of these companies are skipping IPO's because there's enough private equity to give them the funds they needs. Previously this wasn't the case.
- jahnu 9y ago
  There is also more scrutiny once you are public. Staying private can keep the authorities at bay.
  - philsnow 9y ago
    not just the authorities; the moves your company makes are scrutinized by shareholders and then you have to deal (more) with the court of public opinion.

austenallred 9y ago

In the past Lyft would have already IPOd. Now there’s so much private money there’s not a good reason to go public as often.

godzillabrennus 9y ago

Cheap capital searches for a return. Venture funds pump up valuations of privately held companies to show mark to market valuations (paper returns) increasing. Allows funds to show good IRR without actually returning capital to LP’s. Allows funds to raise more capital for new funds based on prior performance. It’s basically an unsustainable financial mess that will collapse. Not that big of a bubble though compared with the student loan fiasco no one is really talking about these days.

xadhominemx 9y ago
LPs are much more sophisticated than you give them credit for. LPs are not stupid and know how VC works. They woul easily recognize the tricks you are proposing, which is why it's not actually how the industry operates.

csomar 9y ago

We are riding a bubble. A couple years ago, people were talking about an Internet/High-tech bubble. It was just the ignition. Now, we are even going crazier but this is becoming the "norm", so pretty good ground for things to go super-crazy-high from here. Nasdaq Top 2000: 5,000 Nasdaq Top pre-2008: 2,804 Nasdaq Bottom (2008-crisis): 1,293 Nasdaq ATH: 6,624 (just a couple days ago) That, or the dollar is going through hyper-inflation. And I'm pretty certain this time will not be different (though from a volatility perspective, maybe)

pm90 9y ago
While there does seem to be an abundance of free capital, it doesn't seem to be fueled by the kind of reckless lending that fueled the 2008 housing crisis, so there might be a crash, but IMO its unlikely to bring down the entire civilization as we know it. However, there might be something else going on... I wonder if China's efforts to prop up its economy? It would be interesting if someone could tell me where all this capital is coming from.
- csomar 9y ago
  > it doesn't seem to be fueled by the kind of reckless lending that fueled the 2008 housing crisis How do you know that? The 2008 was led by public borrowing. This might be led by bigger investors borrowing or figuring out "schemes" to leverage themselves. Either way, what we know and are certain of, is that US stocks are rallying. Not quite hard to worry, but they are showing signs of bubbly like behavior. It'll be time for the "larger public" to take notice and plunge themselves.
  - JumpCrisscross 9y ago
    > How do you know that? The 2008 was led by public borrowing Equity versus debt.
    - csomar 9y ago
      Except that if you prop-up the value of equity then everything looks good even though it isn't. The 2000 tech boom had companies with no revenue. This tech boom has companies with revenue. But it'll be a bubble if this revenue is derived from bubbling sectors.

cft 9y ago

The inflation from QE has already happened at the highest corporate levels. A billion is the new million so to say. Wait till it catches up with Main St.

pishpash 9y ago
2x inflation in restaurant meals since QE.