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Investors realizing that they can't make their money back. Right now even if they pay $10 billion for a photo app, they're still expecting other investors will
by nextparadigms 14y ago
Investors realizing that they can't make their money back. Right now even if they pay $10 billion for a photo app, they're still expecting other investors will buy their shares at a $20 billion valuation or more later on. All investments are made on speculation right now, rather than based on true value and potential for making money.
But if that doesn't come true, and everyone realizes this, then there will be a crash. Valuations will fall, and the initial investors won't be able to make their money back because those photo apps weren't making any revenue, let alone profits.
- marcusf 14y agoThat doesn't seem like a crash though; I'd wager the investor class and the general populace are quite disjoint sets, e.g. there's not a mass of pension funds involved in IT venture capital. What we might see is a "return to senses" and a shortfall of capital for a while, but not a crash.
- 46Bit 14y agoI've been expecting that for a while. Too many startups have crazy valuations, but too many seem to make good money for me to think all the investment will dry up for 5 years or anything like it.
- brazzy 14y agoAFAIK, quite a lot of the money that VCs are so desperately trying to invest DOES come from Pension funds.