This post is by Jason Calacanis from Jason Calacanis
Some folks in our angel investing club (thesyndicate.com) have asked me for my thoughts on the surge in early-stage valuations.
The market is scorching hot, with startups across all growth stages getting funded faster and at higher valuations.
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The dollar amounts raised are often staggering, but so are the exits — which are driving this.
When there is a large number of meaningful exits — from Uber to Airbnb to Coinbase — investors get enthusiastic about investing in the next wave of unicorns.
This causes valuations to quickly double and triple, with investors reporting, “the valuation doesn’t matter if this becomes the next unicorn!”
Of course, it does matter since most companies go to zero, and you can invest in three startups at a $10m valuation for the same price you would pay for one at $30m.
Three swings at bat dramatically increases your chances of hitting an outlier.
Now, if you could invest in Uber or Airbnb’s angel round, Series A, or Series B, you would certainly do it, but there is no way to know which startup is the next Uber or Airbnb (at least not with certainty).
Our firm and investment club are adjusting to this moment to focus on four things:
- We are investing in high-quality startups at reasonable prices, as we have always done.
- We are investing in select, very high-quality startups at these higher valuations.
- We are helping existing portfolio companies raise (Read more...)