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As a bystander not viewing this through SV lens, I do somewhat hope that the VC bubble bursts (although I 100% feel bad for low level employees that will suffer

As a bystander not viewing this through SV lens, I do somewhat hope that the VC bubble bursts (although I 100% feel bad for low level employees that will suffer). Looking at the market during 20-21 it seemed like it was acting in ways that, at least to me, feel like market manipulation/fraud/pyramid scheme (see SPACs). Companies that barely even had a product were "valued" at billions - it just doesn't make sense. Also, the author seems to lack any type of real self reflection about the VC industry or the current state of affairs.

version_five 5y ago
When / if the bubble bursts, it will be as bad or worse than the dotcom and subprime bubbles. Tech and vc is not an insulated think like maybe it once was, it's the current equivalent of the 80s junk bonds, it's a ponzi scheme that could unravel hard. That will be really bad for a lot of people. I added the "if" because I'm not convinced it will play out that way because we're in some weird post-capitalist mode now where money is infinite. I think we're more likely to just slip further into sort of neo-feudilism where there is always VC money to reward the right kinds of people and behaviors and the actual business matters even less. I don't know if that's better than a big collapse, I just think that's what will happen
- mupuff1234 5y ago
  I'm not sure I see it. Yes, it will hurt a few thousands currently working in overvalued growth startups, but profitable companies will continue to chug along just fine as they have hoards of cash and very low debt. Basically a return to a state where a "Unicorn startup" is actually somewhat rare.
  - version_five 5y ago
    My view is based on the amount of notional money that exists due to the high valuations. Once that disappears, it's going to trigger a much bigger collapse, same as the mortgages did. It's not about the employees that are directly involved (though they will be hurt too), it's the relationship with the whole financial system.
    - boringg 5y ago
      I disagree I can't see this taking down the whole financial system. Is VC way more intertwined in the whole financial community? Yes - however a lot of LP money can take a cut to their returns and still be fine. Endowments/sovereign funds/oligarchs not getting > 5-15% a year isn't a country wide economic crisis. Also for VC's/start ups to unwind can be much more controlled compared to say mortgage backed securities. Timelines vary and are opaque to the investment community. It would be an unwind compared to a collapse if it even went there
      - Kye 5y ago
        Possible scenario: tech crash->rent price crash in overheated markets->all the national and international firms that bought up all the houses to rent them out crash. It just depends on how much those firms depend on markets that depend on tech/finance money to cover their loan, tax, insurance, etc payments. All it takes is a few to try and dump their stock of houses and apartments to pay bills.
    - tomatocracy 5y ago
      Mortgages were a large part of the credit bubble prior to 2008, but very far from the only part. It also extended to consumer credit, leveraged loans, bank and insurer funding, more or less every credit market. And mortgages are and were a much larger part of the economy too than VC is now. This isn't to say VC hasn't experienced a bubble over the past few years or that there won't be a broader downturn, just that I'm pretty sure VC won't be something which causes contagion like that.
    - flyinglizard 5y ago
      Startups usually don’t leverage their valuations (unlike real estate etc) and don’t do significant debt raising, so other than a few banks margin calling high flying founders who took personal loans against equity, the notional hit shouldn’t have much ripple effects.
- BeFlatXIII 5y ago
  Full collapse ahead, let's go go go!
tschellenbach 5y ago
Just to be clear, it's not just VC. This high valuation bubble applies to all companies, including public ones.
- adventured 5y ago
  A lot of the high valuation / high multiple stocks from the latest bubble have already cratered. Snowflake has gone from $405 to $171. Zoom has gone from $406 to $99. Shopify has gone from $1762 to $426. Unity has gone from $210 to $66. Square has gone from $289 to $99. Roblox has gone from $141 to $30. Coinbase has gone from $368 to $112. Robinhood has gone from $85 (really $50-$60 stable) to $10. Rivian has gone from $179 to $30. Twilio has gone from $412 to $111. DocuSign has gone from $314 to $88. Etsy has gone from $307 to $92. Pinterest has gone from $81 to $20. Roku has gone from $490 to $92. Beyond Meat has gone from $160 to $36. Peloton has gone from $129 to $17. Draft Kings has gone from $64 to $13. Teladoc has gone from $174 to $33. Virgin Galactic has gone from $57 to $7. Palantir has gone from $29 to $10. DoorDash has gone from $257 to $74. Cloudflare has gone from $221 to $86. Fastly has gone from $66 to $15. DigitalOcean has gone from $133 to $39. UiPath has gone from $90 to $17. Asana has gone from $145 to $26. Atlassian has gone from $483 to $224. Okta has gone from $276 to $119. And so on. This is a massive ongoing collapse and it's holding (we're 5-6 months into the persistent decline), there is no rebound occurring. The bubble is over (and has been for a while now). It makes sense there would be a sizable VC pullback from the public market crash that is happening to the more bubbly (and less profitable) companies.
  - abraxas 5y ago
    How these prices reached those levels without anyone batting an eyelash a mere 20 years after the last dotcom bust is beyond belief. It's never "different this time", folks.
    - jlawson 5y ago
      Several of today's biggest companies in the world were startups during the dotcom crash, and survived it, lost value, but then came back and took over the world. Perhaps investors are thinking that some of these companies might do the same thing.

version_five 5y ago

When / if the bubble bursts, it will be as bad or worse than the dotcom and subprime bubbles. Tech and vc is not an insulated think like maybe it once was, it's the current equivalent of the 80s junk bonds, it's a ponzi scheme that could unravel hard. That will be really bad for a lot of people. I added the "if" because I'm not convinced it will play out that way because we're in some weird post-capitalist mode now where money is infinite. I think we're more likely to just slip further into sort of neo-feudilism where there is always VC money to reward the right kinds of people and behaviors and the actual business matters even less. I don't know if that's better than a big collapse, I just think that's what will happen

mupuff1234 5y ago
I'm not sure I see it. Yes, it will hurt a few thousands currently working in overvalued growth startups, but profitable companies will continue to chug along just fine as they have hoards of cash and very low debt. Basically a return to a state where a "Unicorn startup" is actually somewhat rare.
- version_five 5y ago
  My view is based on the amount of notional money that exists due to the high valuations. Once that disappears, it's going to trigger a much bigger collapse, same as the mortgages did. It's not about the employees that are directly involved (though they will be hurt too), it's the relationship with the whole financial system.
  - boringg 5y ago
    I disagree I can't see this taking down the whole financial system. Is VC way more intertwined in the whole financial community? Yes - however a lot of LP money can take a cut to their returns and still be fine. Endowments/sovereign funds/oligarchs not getting > 5-15% a year isn't a country wide economic crisis. Also for VC's/start ups to unwind can be much more controlled compared to say mortgage backed securities. Timelines vary and are opaque to the investment community. It would be an unwind compared to a collapse if it even went there
    - Kye 5y ago
      Possible scenario: tech crash->rent price crash in overheated markets->all the national and international firms that bought up all the houses to rent them out crash. It just depends on how much those firms depend on markets that depend on tech/finance money to cover their loan, tax, insurance, etc payments. All it takes is a few to try and dump their stock of houses and apartments to pay bills.
  - tomatocracy 5y ago
    Mortgages were a large part of the credit bubble prior to 2008, but very far from the only part. It also extended to consumer credit, leveraged loans, bank and insurer funding, more or less every credit market. And mortgages are and were a much larger part of the economy too than VC is now. This isn't to say VC hasn't experienced a bubble over the past few years or that there won't be a broader downturn, just that I'm pretty sure VC won't be something which causes contagion like that.
  - flyinglizard 5y ago
    Startups usually don’t leverage their valuations (unlike real estate etc) and don’t do significant debt raising, so other than a few banks margin calling high flying founders who took personal loans against equity, the notional hit shouldn’t have much ripple effects.
BeFlatXIII 5y ago
Full collapse ahead, let's go go go!

tschellenbach 5y ago

Just to be clear, it's not just VC. This high valuation bubble applies to all companies, including public ones.

adventured 5y ago
A lot of the high valuation / high multiple stocks from the latest bubble have already cratered. Snowflake has gone from $405 to $171. Zoom has gone from $406 to $99. Shopify has gone from $1762 to $426. Unity has gone from $210 to $66. Square has gone from $289 to $99. Roblox has gone from $141 to $30. Coinbase has gone from $368 to $112. Robinhood has gone from $85 (really $50-$60 stable) to $10. Rivian has gone from $179 to $30. Twilio has gone from $412 to $111. DocuSign has gone from $314 to $88. Etsy has gone from $307 to $92. Pinterest has gone from $81 to $20. Roku has gone from $490 to $92. Beyond Meat has gone from $160 to $36. Peloton has gone from $129 to $17. Draft Kings has gone from $64 to $13. Teladoc has gone from $174 to $33. Virgin Galactic has gone from $57 to $7. Palantir has gone from $29 to $10. DoorDash has gone from $257 to $74. Cloudflare has gone from $221 to $86. Fastly has gone from $66 to $15. DigitalOcean has gone from $133 to $39. UiPath has gone from $90 to $17. Asana has gone from $145 to $26. Atlassian has gone from $483 to $224. Okta has gone from $276 to $119. And so on. This is a massive ongoing collapse and it's holding (we're 5-6 months into the persistent decline), there is no rebound occurring. The bubble is over (and has been for a while now). It makes sense there would be a sizable VC pullback from the public market crash that is happening to the more bubbly (and less profitable) companies.
- abraxas 5y ago
  How these prices reached those levels without anyone batting an eyelash a mere 20 years after the last dotcom bust is beyond belief. It's never "different this time", folks.
  - jlawson 5y ago
    Several of today's biggest companies in the world were startups during the dotcom crash, and survived it, lost value, but then came back and took over the world. Perhaps investors are thinking that some of these companies might do the same thing.