Dear Startup Investor,
I emailed my partner Adam this morning. It said, “Read Sam Altman’s latest blog. He nails it.”
Adam’s reply: “It’s nice someone in Silicon Valley agrees with us.”
Ah, yes, finally a voice of reason. And from a respected entrepreneur and investor from deep inside Silicon Valley no less, talking about the myth that won’t die, aka…
Our supposed tech bubble.
Adam and I have made our opinion abundantly clear on the subject… THERE’S NO BUBBLE.
We’ve said so many times on our free EarlyInvesting.com site.
In “What Bubble?” I made the point that “nervous talk of a bubble” does not exactly qualify as irrational exuberance.
In “Another Dot-Com Bubble?” I said, “If equity crowdfunding is approaching bubble territory, it has a hell of a long way to go.”
And in “The State of Early-Stage Investing: Summer ’15,” my partner Adam wrote, “I don’t think we’re in another tech bubble. With 3 billion Internet users in the world, the situation is quite different than it was 15 years ago.”
Sam Altman sees little evidence of a bubble.
He’s in a position to know. Aspresident of Y Combinator, he spends his days working closely with all kinds of young startups.
Altman is a smart guy. And he’s really plugged into the startup world.
So it’s pretty interesting that, instead of a bubble, Altman points to the massive disconnect he’s seeing in late-stage investing rounds as a big reason for elevated valuations…
The problem? Late-stage private valuations… Investors are buying debt but dressing it up close enough to equity to maintain their venture capital fund exemption status… At some point, I expect LPs to realize that buying debt in late-stage tech companies is not what they signed up for, and then prices in late-stage private companies will appear to correct.
To read the entire post, click right here: “The Tech Bust of 2015.”
Altman makes a good case. And I agree. Something strange and not quite right is going on in the later stages. For a little different perspective, check out the two-part series I wrote here and here back in July.
Invest early and well,
Andy Gordon
Startup Investor Portfolio
