5 ms·

Venture Investing Just Had Its Biggest Q1 in 15 Years, Says PwC Report

35 points by ilyaeck 11y ago

chlestakoff 11y ago
Bubble predictor?
- woah 11y ago
  No, no, no. This is the new paradigm.
  - username223 11y ago
    Stamps.com is nothing like Pets.com.
  - michaelochurch 11y ago
    New Economy, it was called. Oddly enough, we did end up with a new economy. Old corporations were torn down and new ones were built, and cultures generally changed for the worse. Employee stack ranking was still unusual when Enron rolled it out (leading to its demise). Open-plan offices for programmers were a minor startup negative to be put away after 50 people, not something to be celebrated. We actually got a new economy in the early and mid-2000s (for those who don't know, 2002-5 and 2008-9 were horrible years for job seekers, especially recent college grads). It just wasn't a very fun one, and most of the newness had nothing to do with technical progress.
    - jsprogrammer 11y ago
      Early open-plan office designs for the enterprise: http://www.romanroadsmedia.com/wp-content/uploads/2013/10/trireme.jpg http://www.romanroadsmedia.com/wp-content/uploads/2013/10/tr... More recent: http://chsi.harvard.edu/markone/images/HumanComputers.jpg http://chsi.harvard.edu/markone/images/HumanComputers.jpg Putting humans into rows and columns, performing the same tasks, is common pretty much anywhere you look. The list is a (the?) fundamental data structure, and the two dimensional list is an easy extension. For those who desire control over other humans, it's an easy way to check that things are (superficially) in line. [] The trireme design is an arguably effective arrangement in terms of moving a boat.
      - Retra 11y ago
        Anywhere except where you want creative intellectual work to happen.
    - saryant 11y ago
      Stack ranking didn't help but Enron's problems were far deeper and had more to do with a fundamental lack of oversight. Stack ranking, if anything, was a symptom of the same disease that led Skilling to insist on mark-to-market accounting and Fastow to create special investment vehicles that profited himself rather than his employer.
- zzleeper 11y ago
  I see you downvoted (greyed out), but still think you have a point. They are saying this is the best quarter since 2000Q1 without realizing what's so special about that date..
lquist 11y ago
It is important to note that these numbers are NOT inflation adjusted. How much of a difference does this make? Actually fairly significant. 1 USD in 2000 is the equivalent of .73 USD in 2015. So VC investment still needs to increase by 37% to equal Q1FY2000 in inflation-adjusted terms. Source: http://www.usinflationcalculator.com/ http://www.usinflationcalculator.com/ Edit: Thanks gkop
- gkop 11y ago
  Do you mean to note that these numbers are not inflation adjusted?
- dlokshin 11y ago
  This added to real GDP being more than 25% higher than it was in 2000, makes this surprising in the opposite way than the article's intent (to me, at least)
- MCRed 11y ago
  CPI dramatically understates inflation, because non-compressible, and non-substitutable items are excluded (such as fuel.) The basket of CPI goods is arbitrary and changed from time to time to massage the numbers, and the things that would show inflation the best are excluded from the calculation. Unfortunately, the correct measure of inflation is monetary inflation, but the fed stopped publishing the numbers to derive that over a decade ago-- about the point when inflation was regularly exceeding %10 a year. At this point, to be honest, with the FOMC's efforts to "manage" the "markets", which really means, manipulating the economy to make the Fed's inflationary policies seem less damaging, and the fed's direct monetization of treasuries (an open secret) the economy is pretty highly distorted. This makes these kinds of comparisons wrong, but it also means the economy itself is in a bubble because the distortion obscure the true price of money leading to mal investment. Eventually this will no longer be sustainable.
- rgbrenner 11y ago
  So VC investment still needs to increase by 37% to equal Q1FY2000 Not according to the money tree report which says q1-2000 was 28b. So VC investment would still need to more than double to match it. https://www.pwcmoneytree.com/HistoricTrends/CustomQueryHistoricTrend https://www.pwcmoneytree.com/HistoricTrends/CustomQueryHisto...
adventured 11y ago
In my opinion the most interesting number when it comes venture investing, is what the hedge funds are putting in now: "While venture capitalists poured $11.3 billion into startups in the first quarter, up only 11% from a year ago, non-traditional funds invested $6.4 billion, a 167% increase, according to a report on Tuesday from CB Insights, which tracks the market. Two years ago, the outsiders contributed less than $1 billion." http://finance.yahoo.com/news/hedge-fund-money-going-to-venture-capital-skyrocketing-180735668.html http://finance.yahoo.com/news/hedge-fund-money-going-to-vent...
- asanwal 11y ago
  Yes - the rush of private equity, hedge fund, mutual fund and sovereign wealth fund money has been massive. These unusual suspects have quickly become almost 1/3 of the investment $ into private fast-growth companies. The full 121 page report referenced in the Yahoo article is available here for download. https://www.cbinsights.com/research-venture-capital-q1-2015 https://www.cbinsights.com/research-venture-capital-q1-2015 note: CEO of CB Insights
- chatmasta 11y ago
  This is an important point because money from "traditional" funds like Kleiner Perkins is different than money from "non-traditional" funds, like Goldman Sachs. Venture capitalists balance all risk within their VC fund, but "non-traditional" funds can balance risk against other funds. For example Goldman can balance its real estate risk against its venture capital risk. A reliable comparison does not exist between "traditional" and "non-traditional" venture funds because their volumes differ so much. Thus they cannot, taken together, enable investors to make meaningful inferrences from "Venture capital market" trends alone. Non-traditional funds see the market differently than traditional funds, because they are hedged in many different areas.
asanwal 11y ago
The inevitable bubble chatter will pick up steam again. There are many reasons to believe we're in a bubble and in our view, stronger reasons to believe we're not. Here are several in support of a bubble. 1. There were 9x as many $100 million private financing rounds as there were $100 million public offerings. People are starting to call these private IPOs which is a bit of an oxymoron but the point around private market money being plentiful and even providing some liquidity to founders and early investors is happening even in some private transactions. 2. In the first 3.5 months of this year, there were 16 new companies that raised money at a billion dollar valuation or higher. There were 15 in all of 2013. 3. All sorts of new money is flowing into the market, i.e. private equity, hedge funds, mutual funds, corporations and sovereign wealth funds. Why we are NOT in a bubble. 1. All of the US unicorns combined are worth less than Facebook 2. They collectively are worth 3.5% of the Nasdaq 100. Of course, notable tech companies like Twitter are also on NYSE so the % is overstated. 3. The public markets have not lost their mind. In fact, they're fairly hostile to new issuances which despite VC bellyaching is a good thing for VCs and in maintaing the current climate. When retail investors get burned on tech, the bubble will quickly pop. But right now, that's not the case as just calling yourself tech doesn't guarantee a high valuation. The market, while still far from perfect, treats companies with crappy or suspect fundamentals with skepticism (see Box). 4. There is no mechanism that will force a quick contraction. A bubble is typified by rapid expansion and contraction of asset values. The expansion part is happening for sure. 5. But there is not scorecard to provide the contraction. When companies are publicly traded, you have that daily scorecard to force it, but right now, it's private money going in and the beauty of the private markets is you can bury your dead very quietly. In essence, the opacity of the private markets enables investors to point to any failing investment or investor and just say "they were dumb money, we are different". And so there is no event that will pop it. Notes: A. I'm the CEO of CB Insights. We track private company financings and exits. B. A crazy exogenous factor like a disease pandemic, terrorism, a China meltdown, war, etc are not considered in the above. If I could predict those with any certainty, I'd be doing that. C. I gave a presentation at the Quebec Venture Capital and Private Equity conference this past week on this topic "Bubbles, Unicorn and Our Crazy Private Markets". It may be of interest if you're interested in the data behind some of the above bullets. https://www.cbinsights.com/reports/tech-bubble-unicorns.pdf https://www.cbinsights.com/reports/tech-bubble-unicorns.pdf
rgbrenner 11y ago
this is blogspam for the actual press release available here (PDF): https://www.pwcmoneytree.com/NewsFeed/GetNews?Title=Q1%202015%20MoneyTree%20Report%20Press%20Release https://www.pwcmoneytree.com/NewsFeed/GetNews?Title=Q1%20201... (everything except the two quotes in the blog post are in the press release + a lot more info) All of the historical data is also available on money tree's website: https://www.pwcmoneytree.com/HistoricTrends/CustomQueryHistoricTrend https://www.pwcmoneytree.com/HistoricTrends/CustomQueryHisto... Clearly, even after adjusting for inflation, we haven't hit what was seen during 2000 yet Note also, that this is the best _first quater_ since 2000... it's actually 10% less than q4-2014 (8% fewer deals).

35 points by ilyaeck 11y ago

chlestakoff 11y ago

Bubble predictor?

woah 11y ago
No, no, no. This is the new paradigm.
- username223 11y ago
  Stamps.com is nothing like Pets.com.
- michaelochurch 11y ago
  New Economy, it was called. Oddly enough, we did end up with a new economy. Old corporations were torn down and new ones were built, and cultures generally changed for the worse. Employee stack ranking was still unusual when Enron rolled it out (leading to its demise). Open-plan offices for programmers were a minor startup negative to be put away after 50 people, not something to be celebrated. We actually got a new economy in the early and mid-2000s (for those who don't know, 2002-5 and 2008-9 were horrible years for job seekers, especially recent college grads). It just wasn't a very fun one, and most of the newness had nothing to do with technical progress.
  - jsprogrammer 11y ago
    Early open-plan office designs for the enterprise: http://www.romanroadsmedia.com/wp-content/uploads/2013/10/trireme.jpg http://www.romanroadsmedia.com/wp-content/uploads/2013/10/tr... More recent: http://chsi.harvard.edu/markone/images/HumanComputers.jpg http://chsi.harvard.edu/markone/images/HumanComputers.jpg Putting humans into rows and columns, performing the same tasks, is common pretty much anywhere you look. The list is a (the?) fundamental data structure, and the two dimensional list is an easy extension. For those who desire control over other humans, it's an easy way to check that things are (superficially) in line. [] The trireme design is an arguably effective arrangement in terms of moving a boat.
    - Retra 11y ago
      Anywhere except where you want creative intellectual work to happen.
  - saryant 11y ago
    Stack ranking didn't help but Enron's problems were far deeper and had more to do with a fundamental lack of oversight. Stack ranking, if anything, was a symptom of the same disease that led Skilling to insist on mark-to-market accounting and Fastow to create special investment vehicles that profited himself rather than his employer.
zzleeper 11y ago
I see you downvoted (greyed out), but still think you have a point. They are saying this is the best quarter since 2000Q1 without realizing what's so special about that date..

lquist 11y ago

It is important to note that these numbers are NOT inflation adjusted. How much of a difference does this make? Actually fairly significant. 1 USD in 2000 is the equivalent of .73 USD in 2015. So VC investment still needs to increase by 37% to equal Q1FY2000 in inflation-adjusted terms. Source: http://www.usinflationcalculator.com/ http://www.usinflationcalculator.com/ Edit: Thanks gkop

gkop 11y ago
Do you mean to note that these numbers are not inflation adjusted?
dlokshin 11y ago
This added to real GDP being more than 25% higher than it was in 2000, makes this surprising in the opposite way than the article's intent (to me, at least)
MCRed 11y ago
CPI dramatically understates inflation, because non-compressible, and non-substitutable items are excluded (such as fuel.) The basket of CPI goods is arbitrary and changed from time to time to massage the numbers, and the things that would show inflation the best are excluded from the calculation. Unfortunately, the correct measure of inflation is monetary inflation, but the fed stopped publishing the numbers to derive that over a decade ago-- about the point when inflation was regularly exceeding %10 a year. At this point, to be honest, with the FOMC's efforts to "manage" the "markets", which really means, manipulating the economy to make the Fed's inflationary policies seem less damaging, and the fed's direct monetization of treasuries (an open secret) the economy is pretty highly distorted. This makes these kinds of comparisons wrong, but it also means the economy itself is in a bubble because the distortion obscure the true price of money leading to mal investment. Eventually this will no longer be sustainable.
rgbrenner 11y ago
So VC investment still needs to increase by 37% to equal Q1FY2000 Not according to the money tree report which says q1-2000 was 28b. So VC investment would still need to more than double to match it. https://www.pwcmoneytree.com/HistoricTrends/CustomQueryHistoricTrend https://www.pwcmoneytree.com/HistoricTrends/CustomQueryHisto...

adventured 11y ago

In my opinion the most interesting number when it comes venture investing, is what the hedge funds are putting in now: "While venture capitalists poured $11.3 billion into startups in the first quarter, up only 11% from a year ago, non-traditional funds invested $6.4 billion, a 167% increase, according to a report on Tuesday from CB Insights, which tracks the market. Two years ago, the outsiders contributed less than $1 billion." http://finance.yahoo.com/news/hedge-fund-money-going-to-venture-capital-skyrocketing-180735668.html http://finance.yahoo.com/news/hedge-fund-money-going-to-vent...

asanwal 11y ago
Yes - the rush of private equity, hedge fund, mutual fund and sovereign wealth fund money has been massive. These unusual suspects have quickly become almost 1/3 of the investment $ into private fast-growth companies. The full 121 page report referenced in the Yahoo article is available here for download. https://www.cbinsights.com/research-venture-capital-q1-2015 https://www.cbinsights.com/research-venture-capital-q1-2015 note: CEO of CB Insights
chatmasta 11y ago
This is an important point because money from "traditional" funds like Kleiner Perkins is different than money from "non-traditional" funds, like Goldman Sachs. Venture capitalists balance all risk within their VC fund, but "non-traditional" funds can balance risk against other funds. For example Goldman can balance its real estate risk against its venture capital risk. A reliable comparison does not exist between "traditional" and "non-traditional" venture funds because their volumes differ so much. Thus they cannot, taken together, enable investors to make meaningful inferrences from "Venture capital market" trends alone. Non-traditional funds see the market differently than traditional funds, because they are hedged in many different areas.

asanwal 11y ago

The inevitable bubble chatter will pick up steam again. There are many reasons to believe we're in a bubble and in our view, stronger reasons to believe we're not. Here are several in support of a bubble. 1. There were 9x as many $100 million private financing rounds as there were $100 million public offerings. People are starting to call these private IPOs which is a bit of an oxymoron but the point around private market money being plentiful and even providing some liquidity to founders and early investors is happening even in some private transactions. 2. In the first 3.5 months of this year, there were 16 new companies that raised money at a billion dollar valuation or higher. There were 15 in all of 2013. 3. All sorts of new money is flowing into the market, i.e. private equity, hedge funds, mutual funds, corporations and sovereign wealth funds. Why we are NOT in a bubble. 1. All of the US unicorns combined are worth less than Facebook 2. They collectively are worth 3.5% of the Nasdaq 100. Of course, notable tech companies like Twitter are also on NYSE so the % is overstated. 3. The public markets have not lost their mind. In fact, they're fairly hostile to new issuances which despite VC bellyaching is a good thing for VCs and in maintaing the current climate. When retail investors get burned on tech, the bubble will quickly pop. But right now, that's not the case as just calling yourself tech doesn't guarantee a high valuation. The market, while still far from perfect, treats companies with crappy or suspect fundamentals with skepticism (see Box). 4. There is no mechanism that will force a quick contraction. A bubble is typified by rapid expansion and contraction of asset values. The expansion part is happening for sure. 5. But there is not scorecard to provide the contraction. When companies are publicly traded, you have that daily scorecard to force it, but right now, it's private money going in and the beauty of the private markets is you can bury your dead very quietly. In essence, the opacity of the private markets enables investors to point to any failing investment or investor and just say "they were dumb money, we are different". And so there is no event that will pop it. Notes: A. I'm the CEO of CB Insights. We track private company financings and exits. B. A crazy exogenous factor like a disease pandemic, terrorism, a China meltdown, war, etc are not considered in the above. If I could predict those with any certainty, I'd be doing that. C. I gave a presentation at the Quebec Venture Capital and Private Equity conference this past week on this topic "Bubbles, Unicorn and Our Crazy Private Markets". It may be of interest if you're interested in the data behind some of the above bullets. https://www.cbinsights.com/reports/tech-bubble-unicorns.pdf https://www.cbinsights.com/reports/tech-bubble-unicorns.pdf

rgbrenner 11y ago

this is blogspam for the actual press release available here (PDF): https://www.pwcmoneytree.com/NewsFeed/GetNews?Title=Q1%202015%20MoneyTree%20Report%20Press%20Release https://www.pwcmoneytree.com/NewsFeed/GetNews?Title=Q1%20201... (everything except the two quotes in the blog post are in the press release + a lot more info) All of the historical data is also available on money tree's website: https://www.pwcmoneytree.com/HistoricTrends/CustomQueryHistoricTrend https://www.pwcmoneytree.com/HistoricTrends/CustomQueryHisto... Clearly, even after adjusting for inflation, we haven't hit what was seen during 2000 yet Note also, that this is the best _first quater_ since 2000... it's actually 10% less than q4-2014 (8% fewer deals).