Cameo (an example in the article) is an interesting one. It seems like a stable, steady business, making money, should be easy to accurately value if you have access to the financials. No surprise that the "It's $1bn!!!" valuation came from Softbank Vision Fund. https://en.wikipedia.org/wiki/Cameo_(website)
Companies 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.
> 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?
My impression is a lot of these companies raised mega rounds right before interest rates went up, and are now able to tread water by cutting headcount enough that their revenue + interest can sustain them. To what end? Who knows...
I know a few who are really feeling the pressure from customers now being able to vibe code part or their product and also their cloud bill is about to explode because hardware prices are through the roof
SaaS was always destined for this, with or without AI. Excluding the small subset with network effects, the nominal nature of a remote execution aid in basic business process was always semi-farcical.
Zero interest rates kept many weak companies alive but they also have give great companies time to find product market fit, and the hard part is to separate the two in hind sight
If you think it's haunting Silicon Valley, wait til you see what's on the balance sheets of Private Equity, which holds these and many, many more overvalued companies!
Falling valuations spell horror for vcs. 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
Cameo (an example in the article) is an interesting one. It seems like a stable, steady business, making money, should be easy to accurately value if you have access to the financials. No surprise that the "It's $1bn!!!" valuation came from Softbank Vision Fund. https://en.wikipedia.org/wiki/Cameo_(website)
Companies 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.
> 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.
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
My impression is a lot of these companies raised mega rounds right before interest rates went up, and are now able to tread water by cutting headcount enough that their revenue + interest can sustain them. To what end? Who knows...
I know a few who are really feeling the pressure from customers now being able to vibe code part or their product and also their cloud bill is about to explode because hardware prices are through the roof
SaaS was always destined for this, with or without AI. Excluding the small subset with network effects, the nominal nature of a remote execution aid in basic business process was always semi-farcical.
https://archive.is/9mfzD
now this wants me to scan a QR code with a mobile device?
My first attempt to open the archive link took me to a Brazilian radio station that wanted me to install Adobe Flash. Second try worked fine.
Zero interest rates kept many weak companies alive but they also have give great companies time to find product market fit, and the hard part is to separate the two in hind sight
Why post a link that people have to pay to read?
Same article:
https://www.businesstimes.com.sg/opinion-features/zombie-uni...
Follow-up question: why upvote an article that you probably can't read?
I didn't upvote it.
Zunicorn
Zune-icorn?
Zombicorn!
I know of some actual in use Microsoft Zune that have outlasted many companies that were predicted to become unicorns.
If you think it's haunting Silicon Valley, wait til you see what's on the balance sheets of Private Equity, which holds these and many, many more overvalued companies!
children of the zombie corn
So, series h, i, j companies are worthless?
Falling valuations spell horror for vcs. 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
Can we just ban articles that have a paywall? the archive even has a QR code captcha that needs a mobile device to scan it.
This is a pointless, shitty post. I'm glad OP likes paying for the economist, maybe they should comment over there.