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The VC market is super frothy at the moment. That drives up valuations in the short term and results in a very easy time to raise capital (aka Gold Rush). Howe
by JCM9 5y ago
The VC market is super frothy at the moment.
That drives up valuations in the short term and results in a very easy time to raise capital (aka Gold Rush). However what follows is a period where the market will turn the screws really hard on companies to show they have a viable and economically justifiable business or they’ll get washed out real quick.
We’re not in a bubble like dot com but it will get very uncomfortable for companies that don’t have a clear path to self-sustaining economics.
- ashvardanian 5y agoMaybe not exactly the same bubble, but it's hard not to make parallels. Pets.com, one of the most comical cases of 2000s, was worth $400M at peak. When Chewy.com went public, they dwarfed that number with a new record of $13B. The analogy was so obvious, that CNBC wrote an article on that [1]. After that $CHWY managed to go as high as $118/share, translating into a market cap of roughly $50 Billion in December 2021. Now they are trading at about half that price. [1]: https://www.cnbc.com/2019/07/26/opinion-chewy-is-no-petscom.html https://www.cnbc.com/2019/07/26/opinion-chewy-is-no-petscom....
- joshgel 5y agoIsn’t the fact that they got cut in half (and other examples, peloton for example) evidence that this isn’t a bubble. There are companies that are exploding in value, yes, but also companies just getting crushed left and right. If you’re growing, your value is very high, but miss your targets and boom, bye bye froth.
- Traster 5y agoIsn't what you're describing stage 4 of a bubble - https://www.investopedia.com/articles/stocks/10/5-steps-of-a-bubble.asp https://www.investopedia.com/articles/stocks/10/5-steps-of-a...