Remain Calm…The VC Froth is Contained

It is easy to pick on WeWork at this point.

The IPO was pulled today.

There is no doubt this IPO should have been pulled. As Fred Wilson says in his follow up post I linked to yesterday:

The most important takeaway for me is that the public markets are showing us in tech/startup/VC land that the economic fundamentals of a business, even those that are driving massive disruption in their markets, really does matter and that we need to pay attention to them when we finance these companies.

As for the froth in the Venture Capital market…what should we have expected. Rates are near zero and governments around the world are printing money.

Despite the headlines, the froth feels contained for now. The WeWork failure and the UBER and Lyft weak IPO’s will serve to reset a lot of venture pricing, especially at the late stage level.

Who knows…this might be good for the public markets as loose money realizes that public market investing liquidity is better than late stage private momentum investing where $90 billion IPO’s like JP Morgan thought they could sneak into public hands become reorgs in a matter of months.

I liked this quote from Zach Weinberg (a great entrepreneur with multiple exits) on the state of Venture Capital:

WeWork (& Uber) story is crazy to watch, but IMO it’s the outlier, not the norm.

And almost exclusively driven by free money coming from Softbank. Not “VC” but “Softbank”.

Look at co’s where Softbank isn’t involved: Stripe, Datadog, Okta..that’s the real VC market. Looks good.

Speaking of the real VC market, Beyond Pricing – a portfolio company of ours at Social Leverage raised $42.5 million from Bessemer in a Series A (read about the company here).

Beyond has been incredibly capital efficient getting to sizable cash flow and recurring revenue before even raising a series A.

Let’s get back to work.