On Monday, First Round Capital published a letter it sent to its limited partners about the start of startup investing.
According to New York’s top startup investing firm, things are looking a bit unstable in the private markets. Specifically, First Round Capital notes that every nine days last year, a new startup received a $US1 billion+ valuation, and that many of these so-called “unicorn” companies will be exposed as frauds.
“We believe that some of them will be exposed as nothing more than horses with sticks taped to their heads,” the firm’s lead partner, Josh Kopelman, wrote.
Early stage startups are getting eye-popping valuations lately too. Kopelman says seed-stage valuations have increased 20% year over year over the course of the past decade.
He likens the current startup market to a Black Jack table. Normally, the odds are you have a 52% chance of losing if you play your cards right. But lately, the startup world feels like the odds are more like 80%.
It’s one of the best statements about the bubblicious times right now that’s been published.