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I have a feeling that this is all past results that don't guarantee future performance. It is tuned to the time when Google, Amazon and Facebook were created -

by zby 7y ago

I have a feeling that this is all past results that don't guarantee future performance. It is tuned to the time when Google, Amazon and Facebook were created - but this evolution phase is over. From Ben Thompson newsletter: """ where would $1 have been best invested on March 25, 2015, when Altman wrote his post? * Unicorn basket: Uber ($41.2 billion -> $53 billion), Palantir ($15 billion -> ~$26 billion), Airbnb ($10.5 billion -> $35 billion), Dropbox ($10 billion -> $7.4 billion), Pinterest ($11 billion -> $10.4 billion), and SpaceX ($10.1 billion -> $33.3 billion) = +$67.2 billion and a CAGR of 11.6%. * SAP 500: From $2061.05 to $3,234.85, for a CAGR of 9.87% * Big Tech: Apple ($714.84 billion -> $1,321.6 billion), Microsoft ($338.6 billion -> $1,210.1 billion), Google ($386.1 billion -> $938.6 billion), Amazon ($172.5 billion -> $929.6 billion), Facebook ($230.9 billion -> $595.1 billion) = +$3,152.06 billion and a CAGR of 23.14% """ plus correction: """ However, I did err by not including dividend payouts, which are basically reassignments of market cap to individual investors. Interestingly, this results in an annualized S&P 500 return of 11.7%, which actually beats the unicorn basket annualized return of 11.6%! More on this in a moment. """

wtvanhest 7y ago
Those companies you list are just big companies that havent gone public yet. They should be added to your s&p bucket. Then you need to compare that return to investing today in a basket of early stage companies. A year ago, stuff like lambda school + a bunch of dogs, plus some stuff I have never heard of. Then measure returns of your basket vs s&p+unicorns. The startup basket may or may not win, but we simply dont know yet.
keenmaster 7y ago
I agree that investing in the SP500 and Big Tech might be better for an individual investor without access to earlier rounds. For anyone reading your comment though, it's worth keeping in mind that the stock price is not just based on current and past performance, but also the expected future value of the unicorn (specifically: the present value of expected future dividends). A unicorn can grow exponentially and still show ordinary stock price appreciation, if that degree of exponential growth was already "baked into" the stock.
mbesto 7y ago
> where would $1 have been best invested on March 25, 2015, when Altman wrote his post? Which is an unfair criticism to Altman, because typical VC returns only mature 7~10 years later. If you put $1 into Uber in 2009 and exited at IPO, your returns would far exceed the S&P. This is a terrible financial analysis from Thompson, but I don't think that was his real point from the newsletter anyway. That being said, the point still stands, investing in venture is generally NOT a good strategy in of itself. The general recommendation is less than 5% of your overall net worth.
- eanzenberg 7y ago
  This is weird, because if you are talking about tenor of 10 years, you need to include the 90% of companies that exited at $0.
  - exhaze 7y ago
    Of course you include them - the whole point of VC investing is that even if most of your companies exited at $0, the 1 10,000%+ return made up for it.
- zby 7y ago
  It was not a criticism to Altman - I only quote it for veracity - the important part is the data. Altman's bet was that there was no bubble in 2015 and that his unicorn basked would not lose money, and he was right.
  - mbesto 7y ago
    > the important part is the data. Altman's bet was that there was no bubble in 2015 and that his unicorn basked would not lose money, and he was right. But thats my point. This is a terrible analysis bc the data presented is not scoped appropriately to fit the narrative.
jacobr1 7y ago
Wrong timeframe for the startups. For Uber, the timefime would have been 2011 with its series A and B, not late stage growth rounds. You buy in at the $60M valuation with the potential for billions, not actual valuation in the billions. In 2015, the "unicorn" to invest in would have been something like Pendo.

by zby 7y ago

wtvanhest 7y ago

Those companies you list are just big companies that havent gone public yet. They should be added to your s&p bucket. Then you need to compare that return to investing today in a basket of early stage companies. A year ago, stuff like lambda school + a bunch of dogs, plus some stuff I have never heard of. Then measure returns of your basket vs s&p+unicorns. The startup basket may or may not win, but we simply dont know yet.

keenmaster 7y ago

I agree that investing in the SP500 and Big Tech might be better for an individual investor without access to earlier rounds. For anyone reading your comment though, it's worth keeping in mind that the stock price is not just based on current and past performance, but also the expected future value of the unicorn (specifically: the present value of expected future dividends). A unicorn can grow exponentially and still show ordinary stock price appreciation, if that degree of exponential growth was already "baked into" the stock.

mbesto 7y ago

> where would $1 have been best invested on March 25, 2015, when Altman wrote his post? Which is an unfair criticism to Altman, because typical VC returns only mature 7~10 years later. If you put $1 into Uber in 2009 and exited at IPO, your returns would far exceed the S&P. This is a terrible financial analysis from Thompson, but I don't think that was his real point from the newsletter anyway. That being said, the point still stands, investing in venture is generally NOT a good strategy in of itself. The general recommendation is less than 5% of your overall net worth.

eanzenberg 7y ago
This is weird, because if you are talking about tenor of 10 years, you need to include the 90% of companies that exited at $0.
- exhaze 7y ago
  Of course you include them - the whole point of VC investing is that even if most of your companies exited at $0, the 1 10,000%+ return made up for it.
zby 7y ago
It was not a criticism to Altman - I only quote it for veracity - the important part is the data. Altman's bet was that there was no bubble in 2015 and that his unicorn basked would not lose money, and he was right.
- mbesto 7y ago
  > the important part is the data. Altman's bet was that there was no bubble in 2015 and that his unicorn basked would not lose money, and he was right. But thats my point. This is a terrible analysis bc the data presented is not scoped appropriately to fit the narrative.

jacobr1 7y ago

Wrong timeframe for the startups. For Uber, the timefime would have been 2011 with its series A and B, not late stage growth rounds. You buy in at the $60M valuation with the potential for billions, not actual valuation in the billions. In 2015, the "unicorn" to invest in would have been something like Pendo.