But there’s more: Venture investors report to The Exchange that startup valuations are rising in part thanks to growth rates not only proving stronger than anticipated at tech companies, but also that growth rates are proving to be more durable than expected. That’s to say that former startups are going public with faster growth than many expected, and they are holding onto that pace of expansion longer. The impact of that is that tech companies may be worth more in the future than anticipated, so investors can pay more now and not worry as much incrementally as you’d expect.
Another factor to consider regarding rising prices that Menlo investor Matt Murphy explained to me recently is that the old venture expectations of startup failure rates are now incorrect. The failure rate is lower than it was, and the all-important hit rate is higher, he said.
You might look at the above as a whole, and think well, maybe all those insta-unicorns and six-figure rounds make sense? It’s a somewhat comforting perspective to take. After all, the putatively smart money is taking the wager that faster, more durable growth and fewer failures — essentially that SaaS is hard to kill — will balance out higher costs to generate the sort of returns required to make venture math square up.
But, butttttttttt, there’s more and more risk being taken on because the fundamentals of the startup market have not improved much since the COVID-induced boom in software buying took off after the initial shocks of the pandemic wore off. That’s to say: The startups that venture investors are backing this year haven’t really seen their macro fortunes improve since mid-2020, but they are busy raising lots more money, lots faster. That generates increased investment risk.
There are more than 900 unicorns in the market today, all of which will need IPOs to generate the sort of return that their backers expect. If the market does finally correct a bit, just to get a little more historically aligned, quite a number of high-priced private companies could find themselves stuck in limbo between their private-market valuation and what the public markets might pay. It could get sticky. People are just betting that it doesn’t.
All this is to say that despite there being some reasonable reasons for why startup prices are going up as they also raise more capital, earlier and faster, it is hardly a zero-marginal-risk wager.
The nominations for the 64th Grammys are out and it looks like BTS Army is pretty disappointed with the Recording Academy. The global K-pop icons, who created history at the American Music Award 2021 by winning the Artist Of The Year, along with two other wins (Favorite Pop Duo/Group and Favorite Pop Song), managed to earn just a single nod at the prestigious music awards. And this seems to have irked the Army, who took to social media to express their resentment. While millions of fans used the hashtag ‘Scammy’
while calling out Recording Academy, a few even called them ‘xenophobic’. Check out a few reactions here: