The problem with unicorn startups is that they don't make any profits, relentlessly burn cash, and host of other issues. Happens in every cycle. VCs are eternal optimists. Dotcoms didn't make any profits and burn cash relentlessly too. At least dotcoms' IPOs performed well from 1999- March 2000. Today's unicorns(Uber, Lyft, etc.) are down 60% from IPO price from the get go! Private markets cashing out as soon as these unicorns go public to get what liquidity they can... https://www.wsj.com/articles/silico...UOyBsIHz3Avapt6jgc6YEPScWWxLCXZeUTOlUf3pjqgNQ
That's what you get when you have the fed throwing trillions and trillions of dollars at the economy. Money has to go somewhere even to unicorn startups with zero profits yet worth tens of billions of dollars.
Funny that everyone (including me at the time!) was saying exactly this about companies like Amazon in the dotcom era you referenced....now it's the largest market cap company in the world. It only takes one of your portfolio companies becoming the biggest in the world, or a couple "lesser" successes, to wipe out a lot of failures, that's the VC model and something almost everyone outside that model doesn't seem to grasp.
Its somewhat important to understand what a valuation is. For example, if a company has a $30B valuation, it's very possible that less than $2B has actually been invested in total in all previous rounds and in fact the round that provided that valuation could well have been only a $100M round. Valuations simply multiply the entire number of shares by the price paid by the last round of investment, which is generally for far less than the total float. So the relatively small number of actual dollars invested in unicorns is really a miniscule sign of Fed policy if it's a sign at all. Large LBOs would be a much more relevant sign, but we're really not seeing a crazy amount of those either. In general an overall inflated stock market seems to be where most of the money is going.
The VC space like any other asset class can become crowded, with too many marginal or duplicative ideas getting funded and the prices paid being too high. Softbank wading in with $100 billion throwing all kinds of shit to the wall was a pretty sure sign of things getting too frothy. Not too long ago, I read a blog post by a B-school professor and founder/cofounder of nine companies, in which he stated that the only consistent factor determining how his various businesses fared was whether they were started in a mature economic expansion / bull cycle vs. during or shortly after a recession. The former group failed and the latter were successful; at least for him, it turned out that the disciplining and focusing effect of tight budgets (both his own and the clients'), and especially the much greater availability of talented people and other resources at rock-bottom prices, far more than compensated for tougher access to capital. Most of the profitless unicorns would not survive a recession or serious bear market. I guess that raises the question of whether we'll ever see another recession or serious bear market.
I don't know about that. Google was founded in late 1998, near the end of the economic expansion. They grew during the dotcom bust. But the key is that they had extremely bright people working for their company, which is more important than the timing of the company's founding. I knew extremely smart people from Berkeley and MIT back in 2002-2004 who applied for Google and were rejected. I imagine in 1999-2001 it was even harder to get in.
I can tell you from experience that 2008 was a great time to start your first company from the perspective of talent availability. That said, it's important to differentiate between the probability of success from the point of an entrepreneur starting one company and a VC investing in a portfolio of companies. It's hard to claim that a company has more chance of success if they give up 40% of their company for their $5M A round (bad times) then if they give up 15% of their company for the same $5M A round in boom times. Extra money floating around just means entrepreneurs get better valuations which is another way of saying they have to give up less of their equity for the same amount of funding. Neither common sense or any study supports the idea that more ownership by the founding team leads to worse outcomes, in fact the opposite is true.