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The Valley is largely a bubble that doesn’t actually have returns yet. Exits have mostly been confined to a bunch of industry insiders selling for less than $100 million and employees cashing out shares in the secondary market, and yet prices are going up insanely. Huh? That is like a purple unicorn. It shouldn’t exist in nature. It is purely a function of supply and demand, a scarcity of good deals and a glut of willing capital.
From Sarah Lacy’s article, Will China’s 1999 Moment Bail-Out Some Valley VCs? There’s been a lot of “sky is falling” observations on early-stage startup investment, but Lacy’s inclusion of China within the discussion is certainly an interesting angle, one that I hadn’t thought about.
The best post I’ve read on the “bubble-or-not-bubble” debate is from Dave Lifson, over on his letter.ly account. You’ll need to subscribe for the full text, but as usual, his observations are sober and pragmatic.
