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We are in a global asset bubble, not specifically a tech bubble. People like to highlight tech valuations because the general public is familiar with the compa
by kra34 11y ago
We are in a global asset bubble, not specifically a tech bubble. People like to highlight tech valuations because the general public is familiar with the companies.
Click Bait Headline: "COMPANY WITH NO PROFIT WORTH $1.5 BILLION, THE END IS NIGH!"
The valuations are divorced from the future earnings of most of the companies, but so are real estate prices in many cities around the world. So sure, we're in a "tech bubble" but its all part of a shared economic fantasy so it probably doesn't matter.
- brudgers 11y agoThe perception of the valuations is likewise divorced from the risks associated with the investment. That $150 million for 10% that made the $1.5 billion valuation comes with a liquidation preference, and if the company liquidates for $300 million, the first $150 million (50%) goes to that investor with only 10%. That's not suggesting that 0% return is a success, but it's a lot better than losing $150 million. From a VC standpoint, liquidation preference lowers the downside risks and while the high valuation makes a 100x homerun return less likely, that's not really the goal of a series D. A potential 10x with a good chance of catching any downside in the liquidation preference is not a dumb investment.