Are We In A Tech Bubble? Lou Kerner February, 2016
DISLCAIMER The views and opinions expressed in this presentation are those of the author and do not necessarily reflect the official policy or position of his affiliates . Assumptions made within the analysis are not reflective of the position of his affiliates.
The Stock Markets Swings Between Fear & Greed Bear Bubble Market Capitalism Source: Acertus Capital Management
What Causes Tech Bubbles? Amara’s Law Source: Pinterest
“Tech Bubble” Searches Are At A 10 Yr High Source: Google Trends, February 2015
Talk Of A Bubble Has Been Going On For Over A Year Jet Raises at $600 Mil ion Pre-Launch Source: Twitter, February 11, 2015
What’s Going On In The Public Markets?
Bond De-Risking Has Intensified Spread Between BBB Rated Bonds And Treasuries February 18, 2016
There Have Been 39 Corrections In The NASDAQ (Down 10%) In The Last 30 Years Source: Google Finance
Bubbles Deflate….Saas Multiples Revert to The Mean Source: Joe Floyd, Feb 8, 2016
The VIX (S&P500 Volatility – Often Called The “Fear Index”) Remains Historically High Source: Google Finance, February 19, 2015
Markets Have Still Had A Good 5 Year Run Source: Google Finance
Current 10 year CAGR is below the 40 year historical NASDAQ CAGR of 10.5% Source: Google Finance
CAPE Ratio Is Still 45% Above Long-Term Trend 16.65 Mean Source: Multpl.com, Feb. 19, 2015
What’s Going On In The Private Markets?
Tech IPOs Have Been Performing Poorly For Awhile Source: Wall Street Journal, Feb. 2016
Causing Tech IPOs Of VC Backed Co’s To Decrease In 2015 Source: Wall Street Journal, Feb. 2016
M&A Activity Also Decreased In 2015 Source: Upfront Ventures Feb. 2016
More Money Going In To Start Ups Then Out Was An Ominous Sign Aggregate Exit Valuation & Funding Amounts Source: CBInsights, Oct. 2015
VC Funding Is Now Dropping Source: CBInsights
Though AngelList Kept Growing Q4 ‘15 Source: AngelList
AngelList’s Recent $400 Million Agreement With Chinese PE Firm CSC Upshot Probably Had An Impact Source: CNN Money, Oct 2015
Valuations Are Also Falling Source: Upfront Ventures, Feb. 2016
Unicorn Production Is Tanking Source: Wall Street Journal, Feb. 2016
What’s The Relationship Between Public and Private Market Valuations?
How Many In Silicon Valley Think “Private companies are overvalued OR Public companies are undervalued”
Similarly Stupid Question “Either my watch is running fast OR Greenwich Mean Time is running slow”
Al Else Being Equal, Companies Are Worth More Public Than Private Because Investors Pay For Liquidity
Prescient Cal “I think tech sector is making a huge mistake in thinking that they know their companies and how to value them better than Wal Street. That kind of thinking is arrogance and pride comes before the fal .” Fred Wilson, July 2 2015
Did VCs Making Bad Bets On Unicorns? You only find out who is swimming naked when the tide goes out - Warren Buffet
My Conclusions From The Data • Broad stock market valuation metrics indicate valuations remain stretched, even after the recent pullback • The de-risking trend in fixed income is a bad sign for equities • Capital raising outpacing liquidity events is an ominous trend that is exacerbating the investing crunch • The decease in unicorn production is just one sign of a private market correction • The current opportunities for value creation from disruptive tech companies remains at all time highs