

Two Charts - jaboutboul
http://avc.com/2015/06/two-charts/

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birken
A good data analysis lesson here: Make sure to use multiple Y axes if you are
compared line graphs like this.

It is much easier to see the differences at the top of the scale than at the
bottom of the scale, but that doesn't mean the shapes of the lines aren't
similar if scaled properly. In fact somebody in the comments has made a
version with the Y axes normalized, and the shape of the graphs are all pretty
much the same, completely contradicting the conclusion the author makes (or if
not, the author didn't provide enough clarity on the point he was trying to
make).

Classic example of "not challenging your own data" [1]. A tough skill to learn
when doing data analysis, because it isn't fun spending a lot of time and
effort to try to prove yourself wrong.

1: [http://danbirken.com/statistics/2013/11/19/ways-to-make-
fake...](http://danbirken.com/statistics/2013/11/19/ways-to-make-fake-data-
look-meaningful.html)

~~~
df07
The comment is here if you're curious about this (as I was):

[http://avc.com/2015/06/two-
charts/#comment-2108986922](http://avc.com/2015/06/two-
charts/#comment-2108986922)

Direct link to the comparison chart:

[http://a.disquscdn.com/uploads/mediaembed/images/2217/5785/o...](http://a.disquscdn.com/uploads/mediaembed/images/2217/5785/original.jpg)

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acconrad
> Public markets are rational

Are they? If markets were rational and efficient, you wouldn't have stocks
trading below their asset value. There is nothing rational _at all_ about
having $1B on the books that you could acquire for the company in a fire sale,
and then trading as though you only have $500M. This is the basis for how
value investing works and how people like Ben Graham and one of his students
you may have heard of (Warren Buffett) have made billions of dollars off of
this assumption. Fred's a great private/venture investor, but he's not a
credible source on macroeconomic theory.

~~~
jerf
Given how blatently obvious this "irrationality" is, either a lot of people
with enough money to do something about that are being really stupid and
missing the huge blinking FREE MONEY sign even though it seems their primary
purpose in life is to search for free money, _or_ you're not fully accounting
for all the costs involved in extracting the putatively free money, and in
fact the market is trying to tell you it's not as easy as it looks.

~~~
idlewords
This is just begging the question. "If the market weren't rational, all these
highly rational rich people would take advantage of it, therefore the market
must be rational."

~~~
jerf
Just because the market is "irrational" does not mean that _your diagnosis of
the irrationality is correct_. It is not a binary thing. There's an infinity
of ways to be irrational, and most of them are incomprehensible... not the
sort of "oh my gosh I can't believe how stupid that is" sort of
incomprehensible, either, but _literally_ incomprehensible.

The manner in which the market is being irrational, distributed across
millions of actors, many of them greatly more informed than you or I, is all
but certainly a rapidly-shifting irrationality, a bubbling froth that changes
before you stand a chance of identifying it and taking advantage of it.

Market irrationality probably does _not_ look like a sign hanging out the door
saying FREE MONEY, stable for months and years at a time, that mysteriously
people are just too stupid to walk up and take. If people aren't claiming
their free money, there's probably a reason you don't know about.

(A lot of people desperately need the market to be "irrational" so they can
justify putting central authorities over it. But it's really a crazy
argument... "the market consisting of millions of entities with all sorts of
differing needs and information moving at the speed of electronic data
transfer is sometimes "irrational", even if we can't demonstrate that we've
correctly identified the "irrationality" by simply profiting from it directly.
So let's fix that by putting an entity in charge of it that has a vanishing
fraction of the computational power, tiny fractions of a percent of the
information, moves at the speed of Congressional deliberation, and has its own
independent incentives that do not necessarily align with any participant in
the market." The F1 racers are moving too fast, let's send that sloth out to
catch them and make them slow down. Surely that will fix racing for
everybody.)

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csomar
I think Fred missed lots of things here:

1\. Series A is heating more in percentages:
[https://a.disquscdn.com/uploads/mediaembed/images/2217/5785/...](https://a.disquscdn.com/uploads/mediaembed/images/2217/5785/original.jpg?w=600&h)
but all series seems to be following a similar trend, so nothing special to
note.

2\. > Public markets are rational.

I thought Public markets are emotional? The same chart that he is putting (the
Nasdaq) with the year 2000 bubble shows pretty much how un-rational the public
market is.

Maybe he means adjustable on the long term?

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glaugh
I wonder how much of the growth in valuations in the early rounds (given
birken/df07's comments) is explained by the "Seed is the new Series A"
phenomenon[1].

It's very challenging to make sense of all this. You can say "Series A
valuations are higher" but does that mean higher valuations per revenue (or
whatever metric), or just that the terminology has changed, or one of several
other possibilities?

[1] [http://www.k9ventures.com/blog/2015/06/05/the-seeds-have-
cha...](http://www.k9ventures.com/blog/2015/06/05/the-seeds-have-changed-an-
epilogue-to-the-new-venture-landscape/)

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paulpauper
_Public markets are rational. Tech stock performance has been strong but is
driven by strong revenue growth and good business fundamentals generally
speaking._

I agree completely. That right there is worthy of an article. Fitbit went
public two weeks ago and has a PE ratio of only 25 right now, and that is
after a 30% pop in price. If this were the 90's it would have gone public with
a PE of 300 or some crazy high number. Despite the high prices, markets are
much more sober. I'm rationally optimistic.

~~~
hkmurakami
We should consider the fact that Fitbit is a hardware company. I say this,
because if you look at the recent software IPOs (say Box, Hortonworks, etc.),
they have inifite PEs because they are unprofitable.

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hkmurakami
Low interest rates -> search for yield by institutions -> increase of flow of
funds into riskier assets (PE / VC / junk bonds / developing nation sovereign
debt) -> "cheap money" for later stage funding.

This contrasts sharply with 1980's VC where capital was much more scarce and
thus VCs were able to command more equity for less money put at stake.

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minimaxir
From the first chart, data is only aggregated yearly, Median Series C funding
only spiked for _1 year_ (2014). That's not enough to establish a trend, and
it's misleading when you compare to the Stock market chart which shows the
data trending more continuously.

~~~
pimlottc
It also only shows 9 years of data - omitting the first tech bubble. That
would be very interesting to see included.

~~~
jaboutboul
yeah. a very curious omission, hmmm....

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billions
This discrepancy could be driven by the private equity brand craze. Firms buy
into the Uber's, Airbnb's and Slack's at irrational prices just to say the are
'investors' when raising the next pool of money.

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drinkzima
Log scale would help quite a bit here, looks like everything is just up in the
same-ish ratio.

