Re:2016. The year we welcome squirrels – Unicorn Bubble
by ra1n85 on Sunday January 17, 2016 @10:19AM
(#10919668)
>The reason people/investors are moving to startups, as I see it, is that other assets are riskier than we thought
Quite the opposite as I would see it. There has been very few places to get a return on capital other than in equities. These crazy valuations are a product of that. When the market sentiment transitions from return on capital to return of capital in 2016 (as it's looking to be getting there), then we'll see these valuations drop.
>The difference is that oil doesn't enjoy the same upside of startups
But they will share a similar downside. Oil is the canary in the coalmine, and downward pressure on its price has broad impact.
Regarding startups, they are risky assets. The reason people/investors are moving to startups, as I see it, is that other assets are riskier than we thought.
When oil drops to $30, it's probably not as safe as people has assumed. Same goes for gold. The difference is that oil doesn't enjoy the same upside of startups. Oil can't hover over $500. But it can potentially hit a floor of $15.
So why not invest in a startup if all assets are going to the red. China growth has stalled, and the entire stock market is in the red. And you enjoy the upside if the startup has a +$1bn exit.
With oil at record low level, China growth stalling and this entire uncertainty; 2016 is going to be an interesting year. But that does not mean the end of high valuations in the tech sector. Maybe investors will move to Silicon Valley salivating for higher returns. And we might see 2000s all over again.
Welcome to the Jungle!