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Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
Are We In A Tech Bubble?
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Are We In A Tech Bubble?

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A data driven analysis looking at various indicators to evaluate if we're in a tech bubble

A data driven analysis looking at various indicators to evaluate if we're in a tech bubble

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  • 1. Are We In A Tech Bubble? Lou Kerner May, 2015
  • 2. DISLCAIMER The views and opinions expressed in this presentation are those of the author and do not necessarily reflect the official policy or position of his affiliates . Assumptions made within the analysis are not reflective of the position of his affiliates.
  • 3. Lou Kerner Background FORMER
  • 4. What is A Stock Market Bubble? A bubble is when investors drive prices beyond any rational reflection of value, as determined by the performance of the companies. Like soap bubbles, investing bubbles look like they’ll rise forever, but they always pop, and the money invested in them dissipates into the wind Source: Investopedia
  • 5. Why The Bubble of ‘96-’00 Happened
  • 6. What Happened (IMHO) To Pop The Bubble In March of 2000 "For the first time in a decade, our model portfolio is no longer recommending an overweighted position in tech” - Abby Joseph Cohen Goldman Sachs Guru March 28, 2000
  • 7. “Tech Bubble” Searches Recently Surged Source: Google Trends, May, 2015
  • 8. What Caused the Recent Surge In “Tech Bubble” Searches on Google?
  • 9. Just Because Mark Cuban Says It’s A Bubble Doesn’t Mean It’s A Bubble Just Because Mark Cuban Says It’s A Bubble Doesn’t Mean It’s Not A Bubble Lot’s Of Smart People Are Saying We’re In A Bubble
  • 10. Jet Raises at $600 Million Pre-Launch Source: Twitter, February 11, 2015
  • 11. Smart People Have Been Saying We’re We’re In A Bubble For Awhile • George Zachary (4/3/14)– Charles River Ventures – “There is desperation to not miss out on what will be the next big thing.” • David Einhorn (4/22/14) – Greenlight Capital – “Now there is a clear consensus that we are witnessing our second tech bubble in 15 years… Indications include… huge first day IPO pops • Peter Nieh (4/22/14) – Lightspeed Venture Partners – “I must admit when I first saw the WhatsApp valuation I thought I needed to get bifocals. I thought I must have missed a decimal point.” Source: CB Insights, April, 2014
  • 12. Even 24 Year Olds Think We’re In A Bubble “…. years of near-zero interest rates have created an asset bubble that has led people to make riskier investments than they otherwise would.” - Evan Spiegel CEO of Snapchat May 26, 2015
  • 13. What’s Going On?
  • 14. Multiple New Technologies Are Enabling The Disruption of EVERY Industry
  • 15. Convergence Of Disruptive Technologies Is Enabling New Business Modes Borrowers get better rates, Investors get better returns Passengers get better, cheaper rides, Drivers make more money Better way to communicate, share text, images, audio, location …. Founded 2007, Valuation = $7B Founded 2009, Valuation = $40B Founded 2009, Valuation = $19B
  • 16. Causing Unicorn Production To Soar Source: CB Insights, May, 2015
  • 17. Unicorn Production Is Growing Even Faster Outside The U.S. Source: CB Insights, May, 2015
  • 18. Next Wave of Emerging Technologies Are Poised To Accelerate The Disruption Wearables Virtual Reality
  • 19. Classic Way To Spot A Bubble Before It Bursts
  • 20. Spotting A Bubble Is Easy… After It Bursts Source: Yahoo FinanceNASDAQ Composite
  • 21. Internet User Growth In To The 2000 Bubble Source: ITU, a16Z
  • 22. User Growth Driving Valuations Today Source: ITU, a16Z
  • 23. Usage Growth Driving Valuations Today
  • 24. Sustained Outsized Market Gains = Bubble Source: Google Finance
  • 25. Source: Google Finance Current 10 year CAGR in line with the 40 year historical NASDAQ CAGR of 10.8%
  • 26. S&P Composite Is Above Long-Term Trend
  • 27. 2015 Technology Company Market Value a % of S&P 500, 1991-2015YTD Source: KPCB, Morgan Stanley, Bloomberg, CapIQ, LK Estimate
  • 28. Massive Day 1 IPO Pops = Bubble Source: Renaissance Capital
  • 29. Eventually ….Bubble’s Burst Source: Renaissance Capital
  • 30. IPO Pops then Vs. Now Source: Renaissance Capital, Yahoo Finance Largest IPO Pops Now Are Less Then 1/5 of Circa ‘99-’00
  • 31. Avg. Frist Day IPO Pops Appear Normal Source: Renaisance Capital, May 2015
  • 32. Peak Growth Stock Valuations Then & Now Source: Renaissance Capital, Yahoo Finance
  • 33. Source: Pando Daily, January, 2015
  • 34. Companies Are Taking Longer to IPO More Mature Companies At IPO Is Sign of A Healthy Market
  • 35. Companies Are Taking Longer to IPO Because….? • Being public is increasingly painful – Oppressive Compliance (Sarbanes Oxley since 2002) – “The 90 Day Shot Clock” (Term coined by Michael Dell) – Minimal sell side coverage if not a multi-billion co – Electronic trading has dramatically decreased trading spreads • More Difficult For Public Co’s to Attract Talent – Options in a private company can be given at a significant discount to a preferred financing
  • 36. Companies Are Taking Longer to IPO Because….? • Companies that are IPO candidates can get ALL the capital they want n the private markets
  • 37. Source: Pando Daily, January, 2015
  • 38. Later Stage Valuations Are Rising
  • 39. While Public and Private Market Valuations Inform Each Other…..
  • 40. All Else Equal… Higher Multiples For Private Companies Is A Bubble
  • 41. Hedge Funds & Mutual Funds Are Ramping Their Private Shares Investing Source: CB Insights
  • 42. Corporations Are Ramping Their Private Shares Investing Source: CB Insights
  • 43. Corporations Are Acquiring Innovation M&A of VC Backed Private Companies
  • 44. China’s BATs (Baidu, Alibaba, & Tencent) Are Ramping Their Investments In Unicorns (See Slide on Next Page)
  • 45. Private Shares Is Increasingly Global • There are 75 VC backed companies valued at $1 billion or more – 52 are based in the U.S. (Uber $41B) – 12 are based in China (Xiaomi $46B) – 4 are based in India (Flipkart $10B) – 4 are based in Europe (Spotify $4B) – 1 is based in Canada, South Korea and Israel • Up from 66 YE2014
  • 46. Years To $1B Valuation Is Decreasing
  • 47. Many Billion Dollar Companies Continue to Appreciate In Value Rapidly
  • 48. The VC Industry Is Getting Disrupted
  • 49. The Opportunity Is Just Beginning…
  • 50. The Pace of Darwinian Corporate Evolution Is Accelerating
  • 51. Tech M&A Future Is Bright Balance Sheet Cash of Top 25 Tech Companies Source: E&Y, Nov. 2014
  • 52. VC Backed M&A & IPOs Are Growing Rapidly Source: CB Insight, Jan 2015 40% growth in M&A 50% growth in IPOs
  • 53. Conclusions • Broad stock market valuation metrics indicate that valuations are stretched • Tech valuations appear reasonable within the context of the broader market • We are clearly NOT in a tech bubble that is in anyway comparable to ‘99-’00 • The current opportunities for value creation from disruptive tech companies remains at all time highs

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