alt Hacker NewsCompanies being devalued is not news. It happens on the stock market everyday.
For companies that rely on outside investment to survive however it can become a slide to oblivion.
If the company itself is profitable, then typically it can continue. There's no interest rate on VC investment, and if profitable it can run forever. Customers, employees, users and so on are all fine. Investors? Well, they're potentially getting some returns through dividends, but its minor and not what they were chasing.
Of course the VC investment model is high risk. That's kinda the point. It's a bet on IPO or (valuable) acquisition. Most companies end up as neither.
Will this affect new VC funds in the future? Maybe in the short term. But there are still enough IPOs (like SpaceX now) and still enough greedy people willing to play the lottery. Sure the absolute amount of VC money may come down, but I don't think the model is going away.
Indeed it may start to lead to saner valuations along the way.
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> Of course the VC investment model is high risk. That's kinda the point. It's a bet on IPO or (valuable) acquisition. Most companies end up as neither.
Cynically, I wonder how much of the insane (even in the moment) valuations were driven by VC firms trying to commit capital so they could collect management fees?
Even if a company is profitable, depending on voting interest and board control the investors may be able to force a sale.
> If the company itself is profitable, then typically it can continue.
I only wish, but rarely. This is one of the great tragedies of the grow at all cost system. There have been so many great profitable companies, where the product is great, customers love it, employees love it, everyone is happy.. except it's not growing fast enough to satisfy the leeches so it gets destroyed.
As a society we should be supportive of small companies that make a great product that everyone loves, pays good salaries and makes a profit. The more of those, the merrier. But no, unless growth is on the hockeystick curve, private equity will destroy it sooner or later.
> Indeed it may start to lead to saner valuations along the way.
SpaceX’s valuation + “data centers in space” being taken as a serious pitch leads me to think it’s only getting worse.
> Companies being devalued is not news. It happens on the stock market everyday
TFA points specifically at "recent funds" that have underperformed public markets.
More recently launched funds have been returning markedly less money to investors than those of earlier vintages, according to the World Economic Forum. They have also underperformed the S&P 500 by a wide mark, particularly those that did not invest in a small club of artificial-intelligence superstars, says Mr Cohan.
Power law at play, apparently: High risk with high rewards only for the top 5%.
... already, just 5% of them produce 90% of its profits.Agreed. It's gonna be space, then robotics, then quantum robotics, then quantum solar nuclear robotics.
I think it depends way more on where and how much the wealth is concentrated than anything else
> There's no interest rate on VC investment, and if profitable it can run forever.
This isn't how VC funding works. The fund has a time limit, usually ten years, and has to wrap up and pay back in that time limit.
If your company is not profitable in that time limit, tough. The VC will exercise whatever rights they have and pull whatever they can out of it.