

The Private Market’s Reality Distortion Field - r0h1n
http://www.sandhilleast.net/blog.html

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not_that_noob
You don't know till the party's over if you'll get a hangover.

In other words, no one knows for sure if it's a bubble. It may just be that
this is a new mode for startup growth and expansion, one in which VCs don't
have as much market power as they used to. Or it could be a bubble and it will
pop and things will revert to the older mode.

Also, false analogy alert - just because Pandora is down doesn't mean Uber or
airbnb also should be down. He should make that case on the numbers.

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batbomb
> If you are a VC I would focus on the earlier stages where there is much less
> competition for deals and as a result valuations have not gotten unruly.

If the premise was true, I'm not even sure how this could be good advice. It
sounds like more investors would end up reducing their liquidity by tying up
their money in a bunch of glorified small businesses.

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wtvanhest
The author should understand that the market cap of a public equity where
there is no option to negotiate terms is not equivalent to the market cap of a
private company where the investors can negotiate terms.

If you are investing $10m at a $100m valuation in a private company and you
get a 1x liquidation preference, that is not the same as buying 10% of a
public company for $10m.

If the private company that you invested in with a liquidation preference is
acquired at $50m, you still made money on your investment. If you invest in a
public company with a $100m valuation that falls to $50m, you lose 50%.

The distortion field is in the terms, and a professional investor should know
that. I would be very concerned if I were one of his LPs.

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ismail
The one glaringly obvious issue I see in this post is comparing ms, fb and
Google % increase at different # years after they had gone public. Who is to
say that: Ms has already reached peak, Google is somewhere in between and fb
is just getting started?

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stevedekorte
By "private" market, does the article mean the the one that has a government
created banking cartel printing a $1T a year and dumping it into it's capital
markets (aka QE)?

