

Why Tech Valuations Keep Getting Bigger - caseyf7
http://www.theatlantic.com/technology/archive/2015/02/why-tech-valuations-just-keep-getting-bigger/385870/?single_page=true

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cjalmeida
Two words: Quantitative easing. Those LPs must show some returns!

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api
Stimulating investment is very much the intent of QE. Given that the entire
economy is transforming, we could use quite a bit more money flying into
experiments and new ventures right now.

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cjalmeida
I partially agree. One of the reason of the subprime bust was that investor
bonuses were not risk adjusted. They would cross-buy subprime assets, cash in
the high returns and associated bonuses, and ignore the risks. The very low
interest rates, while not the only culprit, provided the money flow for those
alternative assets.

I'm not arguing that alternative assets, VC specially (!), are bad. But just
that liquidity provided by QE may be, tempting not-so-ethical fund managers
and IBs close deals on unrealistic valuations fueled by a crazy stock market.

But creating a risk-adjusted yearly bonus scheme is not something easy. I'd be
interested to know if the smart guys around here ever approached the issue.

