piece written on the 20th April 2014 by  

I’ve emersed myself in technology for over 2 decades and have seen a lot of amazing things along the way. One thing that I’ve watched quite closely that has always astonished me is the funding of technology ventures that do not have direct revenue models. I’d like to think of myself as a fairly experienced business man and if there’s one thing I’ve learnt, a primary function of a business is to make money. So when it comes to acquisitions and funding rounds that go into the millions of dollars in what I feel are low revenue generating vehicles I just can’t understand.

I receive the CrunchBase daily newsletter that lists companies that have received funding and it blows my mind away. Not only are a huge number of the companies merely replicas of other companies but most of them I just cannot see ever making a profit or offering value to the same degree of what money was paid. Sure, information (and a lot of it) is valuable for many reasons but attaching a price is this information is nearly impossible. Perhaps I look at it the wrong way, perhaps I should be looking at it from a gambling point of view in that if you fund 10 start ups, perhaps 1 will be big enouhg to make back all the money and more. Therefore it’s just another level of investing.. I can buy that I guess, but the odds are certainly not 10:1.

The Wallstreet Journal published an article with the following 2 introductory paragraphs:

Tech stocks have taken a pounding over the past month, putting pressure on the ecosystem for financing startups and taking them public.

The market’s recent downturn—despite a modest rally this week—has changed the tone in Silicon Valley and has some company directors recalibrating their expectations, said Jim Breyer, a partner at venture-capital firm Accel Partners.

Unfortunately I’m not a paying member so I cannot read further, but I did manage to find the following image:


You can see the small upturn towards the end, but a great deal of growth is required for those companies to move back up to their original positions. I can’t help but think that people are perhaps going to start realising that new age tech stocks aren’t really tangible enough to warrant the investment that they are demanding. I’m no expert in this line of work, but I have many many years of technology experience and a decent few years of investment experience so I’m not completely guessing out of the dark.

What ever your belief is in this regard, it’s going to be a really interesting ride as these companies mature and their true market values are reflected. The next best thing is going to come and it’s going to incorporate a lot of what all these companies do individually and I think that if that happens we’re going to experience some incredible changes. I love disruption.. ring it on!