Moreover, they're basically arguing that it's logical for investors to pile into these late-stage deals, because waiting around for IPO is a losing strategy.
If you believe this data, it doesn't tell you that there isn't a bubble. It says that if there is a bubble here, it's mostly happening off the books, and depends on the huge public exits of a handful of mythical creatures.
Also, slide 38 is an argument for the "No Exit" way of looking at startups: we've got a boom in low-cost, early-stage deals (2x growth since 2009), coupled with an ever-more-ruthless culling of the herd, where most of the aggregate funding goes into fewer (<20) hot deals than ever. Investors are taking a cheap call option on your youth.
Some real, present revenue to big companies comes from the startup world. Maybe it's where I live and what I do, but startups seem to pay for a ton of the Twitter and Facebook ads I see. Amazon makes good money running datacenters for them. Apple and Google see a lot of the value of their mobile platforms created by startup app developers. The big companies' current revenue helps determine how much they're willing to invest, including investments in the form of acquisitions, so the dollars invested into the system can themselves contribute to exit amounts in a weirdly circular way. I'm not the first to observe this.
That in itself proves very little; both sustainable and unsustainable systems can feed on themselves. And all these large companies I'm mentioning are certainly sticking around.
But it does suggest there are paths were one thing goes bad first--new investment falters, the market starts pricing ads drastically lower, big regulatory interventions shake up some subsector or other--and the ripples are bigger and reach further than might be expected.
In the late 90s, this happened because all of the companies were buying ad contracts from one another, booking the total value of the contract as revenue, and using that to pad revenue growth. Today's version is the deferred ARR, which turns a tiny cash flow from subscription software into a magically big top-line number. But what goes up quickly, can fall just as fast...it doesn't take many companies to pare back on spending before your fictional deferred revenue graph falls off a cliff.
Anyways, I don't have a strong opinion either way as to whether we're in a tech bubble or not and it doesn't strongly affect me since I'm not heavily invested in tech companies. But I certainly am skeptical of the high valuations that currently exist.
One last thing HN readers should be aware of. VC firms are like hedge funds. The people running them make money whether the fund does well or poorly and typically the amount invested by the general partners is quite small relative to the size of the fund (often around 1%), so when you look to VC guidance for how the VC market is doing keep in mind what their incentivizes are.
Edited to add on VC firms: Typically the investors in such funds aren't rich people either. They're often (probably in most cases) institutional investors such as pension funds and university endowments.
And private companies are slowly going public at current valuations.
Yet public tech company's earnings to revenue is unusually high.
Open source doesn't fully explain this, as this alone is not a barrier to entry.
As US rates slowly increase, I expect to see an increase in currency headwinds.