C B I n s i g h t s

Bubbles, Unicorns & Our

Crazy Private Markets

Illiquid doesn’t have to mean opaque


About CB Insights

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“According to CB Insights…”

From the NY Times to Bloomberg, CB Insights data is used by hundreds of leading media outlets every week

See our latest media mentions


“The stakes for both exchanges are high. According to the research firm CB Insights, about

588 privately backed companies have valuations of more than $100 million, meaning that

they are potential candidates for going public sometime in the next several years.”

“London & Partners, working with data from CB Insights, says that moneytransfer

startup WorldRemit raised the most of any other company in Q1, a

$100 million round in February”

CB Insights put out an intriguing infographic in which they analyzed the most

capital efficient unicorns. That is, the startups with the highest ratio of

investment to current estimated valuation.” - Forbes

“Last year, more than $100 million flowed into U.S. drone start-ups, according

to CB Insights, double 2013 levels.” - Reuters

“About 33 Dallas-based tech companies have been acquired since 2012,

including the enterprise cloud company SoftLayer, which was bought by IBM

in 2013 for $2 billion, according to data from CB Insights. ” - CNBC

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Lots of bubble


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Many smart folks say things are bubbly

From investors to journalists, the cries of a bubble have intensified as of late

“Now there is a clear consensus that we are witnessing our second tech bubble in 15 years. What

is uncertain is how much further the bubble can expand and what might pop it.

In our view the current bubble is an echo of the previous tech bubble, but with fewer large

capitalization stocks and much less public enthusiasm. Some indications that we are pretty far

along include:

• The rejection of conventional valuation methods;

• Short-sellers forced to cover due to intolerable mark-to-market losses; and

• Huge first day IPO pops for companies that have done little more than use the right

buzzwords and attract the right venture capital.”

David Einhorn, Greenlight Capital

“I think there’s two things are going on: One, there’s quite a bit of capital availability out there, and

if you look at how low-interest rates are, and what are the alternatives to invest capital and get

return, that causes asset prices to rise. The stock market’s up, as well.

You know, this is a cyclical industry, and when times get good, they get really good. Last time we

saw that was 1999 and many of the people at this conference might not have been paying

attention, because they were in high school. But money is definitely freer flowing today than it

was three or four years ago.”

Bill Gurley, Benchmark Capital

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Many smart folks say things are bubbly

From investors to journalists, the cries of a bubble have intensified as of late

“It’s been a steady sequence of very large rounds. It means we are in bubble territory…No one wants

to say because nobody wants to break it. Everybody wants to cash out before its over.

…We are seeing expansion of valuation even from the seed stage all the way up…(There is)

desperation to not miss out on what will be the next big thing.”

George Zachary, CRV

As with so many of the telltale signs of a bubble, I have seen this before. When times are so good

that executives are willing to disregard the difference between ethical and unctuous behavior, it’s

just one sign that the end, relatively speaking, is near. It’s not the only sign. The over-supply of

journalism jobs covering the technology industry, for example, is a good indicator.

Adam Lashinksy, Fortune

“For me a bubble is simple, it’s when people are paying significantly higher prices for any asset

class that is in great excess of the underlying value of that asset. (One area that is subject to that

definition right now is) late-stage financing of tech companies of companies like ZocDoc, or maybe

even Dropbox, AirBnB and Uber. I’m not arguing (late-stage investors) are crazy, I’m arguing they’re


Mark Suster, Upfront Ventures

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Other signs

Things that made us go huh?

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Other signs

Things that made us go huh?

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Other signs

Things that made us go huh?

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Other signs

Things that made us go huh?

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In God we trust, all

others must bring data

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Why it’s a bubble

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What’s a unicorn?

Unfortunately, this term was adopted by our industry. I apologize.

Private companies valued at over

$1B. Generally refers to companies in

high-growth sectors of tech, life

sciences and energy. But mostly


Unicorn exits are private companies

which have exited for over $1 billion

via M&A or IPO.

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Lots of new VC funds being formed

Source: Venture Capital Raising Barbell

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Lots of new unicorns

More and more companies are getting valued at a billion dollars in the private markets

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VC deal and funding activity is down, but…

Deal activity involving VCs has actually declined for 3 straight quarters

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Investment to private companies hit new highs

Private equity, hedge funds, mutual funds and sovereign wealth funds are all investing big dollars

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Much easier to raise at a billion than exit at one

Stark difference in the # of companies raising at a billion dollar valuation vs those which exit at one

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IPO activity has been blah

Q1 2015 was grim

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But private IPO activity has been increasing

$100M+ financings are increasingly common

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Private + public IPO activity is trending up

An atypical cast of characters has helped the “IPO” market stay strong

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The new cast of characters

Here’s some of the names we’re seeing in the large rounds

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Hedge funds are active and competing

Tiger Management offspring (Tiger Cubs) are getting more and more active and competing with each other

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Corporate VCs deals & funding are up

Corporates are investing at a fast and furious pace in private companies

Source: 2014 Corporate VC Report

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More corporate VCs jumping in

Corporates are investing at a fast and furious pace in private companies

Source: 2014 Corporate VC Report

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Find & stalk smart money investors

Monitor strategies and deals of investors and uncover new sources of dealflow in your areas of focus

Common refrain from some VCs is that many of these investors are “dumb

money”. Of course, that also conveniently ignores returns of most VCs.

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Price/Revenue multiples of unicorns

Some of these companies are being valued at seemingly eye-popping valuations

Source: Uber and Slack have significantly higher valuation multiples than other unicorns

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Private & public market multiple disconnect

A look at Dropbox (private) vs Box (public)

Source: The Dropbox valuation is irrational

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Wait a minute…

Why it’s NOT a bubble

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Some more perspective

Unicorns as % of Nasdaq 100 total market cap

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Unbundling Honeywell

Attacking industrials

Source: Disrupting Honeywell: The Startups Unbundling Honeywell in the Smart Home

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Unbundling P&G

Attacking consumer packaged goods (CPG)

Source: Disrupting P&G and the Consumer Packaged Goods Industry

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Unbundling FedEx & UPS

Attacking logistics

Source: Disrupting Honeywell: The Startups Unbundling Honeywell in the Smart Home

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Unbundling Wells Fargo, Bank of America, Citi

Attacking banking

Source: Disrupting Wells Fargo, Citi and Bank of America

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The old guard are waking up

Tech is not just attacking tech

Goldman Sachs issues this ominous sounding

report about an “expanding class of competitors

to capture profit pools long controlled by banks.”

“Silicon Valley is coming. There are hundreds of

startups with a lot of brains and money working on

various alternatives to traditional banking. The ones

you read about most are in the lending business,

whereby the firms can lend to individuals and small

businesses very quickly and – these entities believe –

effectively by using Big Data to enhance credit

underwriting. They are very good at reducing the “pain

points” in that they can make loans in minutes, which

might take banks weeks.”

Jamie Dimon, Chairman and CEO JP Morgan Chase & Co.

Source: Disrupting Wells Fargo, Citi and Bank of America

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Most new VCs are small

70% of new funds are less than $100M in AUM

Source: Venture Capital Raising Barbell

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Every tech unicorn combined is worth < than Facebook

Private markets are frothy but not a material part of tech

Source: The Value of Every US Tech Unicorn Combined is Still Less Than One Facebook

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Some more perspective

Unicorns as % of Nasdaq 100 total market cap


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Public markets are not crazy

The lack of IPOs is a good sign that throwing the label “tech” onto something is not enough for a lofty public market valuation

Source: The Compression ins SaaS Valuations

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Ho-hum companies get punished

For all the chatter about retail investors getting shut out of IPO gains, public market prudishness has protected them as well

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A bubble requires rapid expansion AND contraction

And the private markets are seeing the expansion happen. There is no public scorecard to force the contraction.

Some investors will lose

money on these bets.

And they’ll be replaced by

new investors who

dismiss “those guys” as


The opaqueness of

the private markets

let you bury the

dead very quietly.

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Want the deck? Disagree? Let’s chat.



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