The Tech Bust of 2015

Maybe instead of a tech bubble, we’re in a tech bust.  No one seems to fervently believe tech valuations are cheap, so it’d be somewhat surprising if we were in a bubble.  In many parts of the market, valuations seem too cheap.  In the part where they seem too high, maybe they aren’t really valuations at all, because the deal structure has changed to become more like debt.

Many of the small cap public tech companies have taken a beating this year.  Companies like Yelp are trading at less than 4 times trailing revenue.

The tech mega-caps are monopolies and have deservedly high valuations.  But even then, I would not be willing to short a single one of Apple, Google, Amazon, or Facebook against the S&P.  Apple in particular trades at a single-digit ex-cash forward P/E.

2015 has seen the lowest level of tech IPOs as a percentage of all IPOs in seven years.  The S&P Tech P/E is lower than the overall S&P P/E.  Neither of these facts seems suggestive of a tech bubble.

On the private side, people complain all the time about early-stage valuations (and to be fair, they’ve felt high to me for four years).  But if you invested in every single YC company over the past three years at their Demo Day valuation (average Demo Day valuations haven’t moved much in the past three years) you’d be very happy, even though investors complain that YC is the worst example of overpriced companies.

The mid-stages also seem generally reasonable, though of course there are notable exceptions.  These exceptions get all the attention—not the hundreds of companies doing remarkably well, but that handful that have raised money at high valuations and are struggling or dead. 

On the whole, it seems harder than any time in the past four years to raise mid-stage rounds.  This is also not suggestive of a bubble. 

So where is the problem?  Late-stage private valuations.  But perhaps the answer is that these “investments” aren’t really equity—they’re much more like debt. [1] I saw terms recently that had a 2x liquidation preference (i.e. the investors got the first 2x their money out of the company when it exited) and a 3x liquidation cap (i.e. after they made 3x their money, they didn’t get any more of the proceeds).

This is hardly an equity instrument at all. [2] The example here is an extreme case, but not wildly so.  Investors are buying debt but dressing it up close enough to equity to maintain their venture capital fund exemption status.  In a world of 0 percent interest rates, people become pretty focused on finding new sources for fixed income.

There is a massive disconnect in late-stage preferred stock, because if you’re using it to synthesize debt it doesn’t matter what the price is.  The closer the rounds get to common stock (a less-than-1x liquidation preference, for example), the more I think the valuation means something.  Unsurprisingly, the best companies usually have the most common-stock-like terms (and “the best companies” are never the ones that seem overpriced for long anyway).

Some of this debt is poorly underwritten.  Some unicorns will surely die (and those are the ones everyone will talk about).  That doesn’t make it a tech bubble.  It’d be more accurate to say it’s a tech bubble if no unicorns die in the next couple of years. 

To summarize: there does not appear to be a tech bubble in the public markets.  There does not appear to be a bubble in early or mid stages of the private markets.  There does appear to be a bubble in the late-stage private companies, but that’s because people are misunderstanding these financial instruments as equity.  If you reclassify those rounds as debt, then it gets hard to say where exactly the bubble is.

At some point, I expect LPs to realize that buying debt in late-stage tech companies is not what they signed up for, and then prices in late-stage private companies will appear to correct.  And I think that the entire public market is likely to go down—perhaps substantially—when interest rates materially move up, though that may be a long time away.  But I expect public tech companies are likely to trade with the rest of the market and not underperform. 

But no matter what happens in the short- and medium-term, I continue to believe technology is the future, and I still can’t think of an asset I’d rather own and not think about for a decade or two than a basket of public or private tech stocks.



Thanks to Jack Altman, Patrick Collison, Paul Graham, Aaron Levie, Geoff Ralston, and Ali Rowghani for reading draft of this. 

[1] There are real problems with these distorted "valuations".  Employees these companies hire often think of them as real valuations.  It also often makes the company think of itself as much bigger than it is, and do the wrong things for its actual stage.  Finally, too much cheap money lets companies operate with bad unit economics and cover up all sorts of internal problems.  So I think many companies are hurting themselves with access to easy capital.

[2] Even before the shift to debt-like rounds, the disconnect between how much people will pay for 5% of a company in preferred stock vs. 100% of a company in common stock was massive (and for good reason--the downside protection alone with preferred stock makes it much different than common stock).  As this delta has accentuated, the public/private disconnect has gotten worse, and caused a number of problems for companies accustomed to valuations always going up.

Airbnb and San Francisco

Airbnb has recently been attacked by San Francisco politicians for driving up the price of housing in the city.  San Francisco has tried, and will continue to try, to ban Airbnb in various ways.  Last week, this excellent post was published on Prop F—“the Airbnb law”. 

I recently reached out to Brian Chesky, the CEO of Airbnb, to learn more about this. I am decidedly a non-expert on this topic, but here are some thoughts from a layperson.

I met Brian in 2008, when he started Airbedandbreakfast as…an affordable housing company.  He couldn’t afford to pay his rent in 10 days and his credit cards were maxed out.  He looked around and realized that he did have one asset he could monetize—his extra space.  And eventually, Airbnb was born and the sharing economy began.

Unfortunately, a lot of other people have problems paying their rent or mortgage.  75% of Airbnb hosts in San Francisco say that their income from Airbnb helps them stay in their homes, and 60% of the Airbnb income goes to rent/mortgage and other housing expenses. Making it harder to use Airbnb in San Francisco may make it impossible for some of these hosts to afford to stay in their homes and in this city.

In 2014 (the most recent year with available data) there were about 387,000 housing units in SF.  About 38% were owner-occupied, and the remaining 62% or 240,000 were rental units.  About 33,000 of these were vacant, generally as a side effect of rent control laws.  (I don’t honestly know if rent control is a net good or bad thing—I assume more good than bad—but it certainly keeps units off the market.) [1]

In the past year, only about 340 units in SF were rented on Airbnb more than 211 nights, which is what Airbnb has calculated as the break-even point compared to long-term rental.  This is less than one out of every thousand units of housing in SF.  Looking at it another way, it’s just over 1.1% of all unoccupied units.  

There have been about 10,700 SF units that have rented on Airbnb in the last year (obviously a much lower number of units are actively listed at any particular time).  The median number of trips per unit was 5, and mean was 13.3.  The mean revenue per host was about $13,000 per year.  More than 90 percent of Airbnb hosts in SF are listing their primary residence, and making money with an extra room or their entire place when they are out of town.

The whole magic of the sharing economy is better asset utilization and thus lower prices for everyone.  Home sharing makes better utilization out of a fixed asset, and by more optimally filling space it means the same number of people can use less supply.  In fact, Airbnb worked with economist Tom Davidoff of the University of British Columbia and found that Airbnb has affected the price of housing in SF by less than 1% either up or down.

But in the last 5 years, the cost of housing in the city has about doubled.  The reason for this is a lot more people want to live in SF than we have housing for, and the city has been slow to approve new construction.  Who is to blame for this?  The same politicians that are trying to distract you with Airbnb’s 340 “professionally rented” units.

What should the politicians actually be doing about the housing crunch?  The obvious answer would be to support building more housing and fixing the supply side of the equation.  But instead they’re doing the opposite (e.g. a moratorium on new construction in the Mission) and trying to turn Airbnb into a scapegoat.

I love San Francisco. I wish housing here were much cheaper.  This is a special city and more people are going to want to live here, and more are going to want to come visit and do business with people here. Instead of trying to ban the future, we should be making it easier for middle class families to stay in the city.  We can do this by building more units to push the market price of housing down and by making it easier for San Franciscans to share their homes.

[1] Selected Housing Characteristics, 2014 American Community Survey 1-Year Estimates

Disclosure: I own a significant amount of Airbnb stock.

Unit Economics

Commentators are looking hard for what’s wrong with startups in Silicon Valley.  First they talked about valuations being too high.  Then they talked about valuations not really meaning anything.  Then they talked about companies staying private too long.  Then they talked about burn rates.

But something does feel off, though it’s been hard to precisely identify.

I think the answer is unit economics.  One of the jokes that came out of the 2000 bubble was “we lose a little money on every customer, but we make it up on volume”.  This was then out of fashion for a long time as Google and Facebook hit their stride.

There are now more businesses than I ever remember before that struggle to explain how their unit economics are ever going to make sense.  It usually requires an explanation on the order of infinite retention (“yes, our sales and marketing costs are really high and our annual profit margins per user are thin, but we’re going to keep the customer forever”), a massive reduction in costs (“we’re going to replace all our human labor with robots”), a claim that eventually the company can stop buying users (“we acquire users for more than they’re worth for now just to get the flywheel spinning”), or something even less plausible.

This is particularly common in startups that don’t pass the Peter Thiel monopoly test—these startups seem to have to spend every available dollar on user acquisition, and if they raise prices, customers defect to a similar service.

Most great companies historically have had good unit economics soon after they began monetizing, even if the company as a whole lost money for a long period of time.

Silicon Valley has always been willing to invest in money-losing companies that may eventually make lots of money.  That’s great.  I have never seen Silicon Valley so willing to invest in companies that have well-understood financials showing they will probably always lose money.  Low-margin businesses have never been more fashionable here than they are right now.

Companies that have raised lots of money are at particular risk.  It’s so tempting to paper over a problem with the business by spending more money instead of fixing the product or service.

Burn rates by themselves are not scary.  Burn rates are scary when you scale the business up and the model doesn’t look any better.  Burn rates are also scary when runway is short (i.e., burning $2M a month with $100M in the bank is fine; burning $1M a month with $3M in the bank is really bad) even if the unit economics look great.

The good news is that if you’re aware of this you can avoid the trap.  If there’s no other way to operate in your space, maybe it’s a bad business.  The low-margin, hyper-competitive world is not the only place to be.  Companies always have an explanation about how they’re going to fix unit economics, so you really have to go out of your way not to delude yourself.

If you hold yourself to the standard of making a product that is so good people spontaneously recommend it to their friends, and you have an easy-to-understand business model where you make more than you spend on each user, and it gets better not worse as you get bigger, you may not look like some of hottest companies of today, but you’ll look a lot like Google and Facebook.

Financial Misstatements

First-time startup CEOs make a lot of mistakes, mostly due to ignorance.

One particularly bad one is misunderstanding or misusing basic financial terms.  I started noticing this in Y Combinator applicants a couple of years ago, but see it now in startups at all stages (including some YC companies). 

It is very important to make accurate financial statements to investors, and it is well worth the time it takes to learn the difference between concepts like “revenue” and “GMV” (gross merchandise volume) and revenue from a “contract” or “LOI” (letter of intent).  Most terms have very specific definitions, and it’s well worth a little bit of time learning what these are.  When in doubt, you will never get in trouble for defining the way you’re using a financial term too precisely.

I’ve seen people use GMV for revenue or refer to an LOI as a contract many times in the past year when talking to investors.  This is a felony.

Although investors should be doing more diligence than is currently in fashion, this issue is on the founders to fix.

The Post-YC Slump

At the end of a YC batch, the general consensus among the partners is that about 25% of the companies are on a trajectory that could lead to a multi-billion dollar company.  Of course, only a handful of them do.  Most go on to be decent or bad.

These companies have a beautifully exponential growth curve during YC, and then a few months after YC is over, it essentially flatlines.  Because it would be so much better for us if this did not happen, we wonder a lot about why.

The main problem is that companies stop doing what they were doing during YC—instead of relentlessly focusing on building a great product and growing, they focus on everything else.  They also work less hard and less effectively—the peer pressure during YC is a powerful force.

The startups justify this to themselves in all sorts of ways—“We’re doing some longer-term strategic work.  You wouldn’t understand.” “We’re cleaning up our technical debt.” “We’re building out the organization.” “We’re focusing on PR for this month.  I’m going to speak at 6 conferences and writing two thought leadership pieces.” “We are different; growth isn’t our most important thing.” We’ve heard all of these from startups that have gone on to disappoint.

In general, startups get distracted by fake work.  Fake work is both easier and more fun than real work for many founders.  Two particularly bad cases are raising money and getting personal press; we’ve seen many promising founders fall in love with one or (usually) both of these, which nearly always ends badly.  But the list of fake work is long.

I tell founders to consider how directly a task relates to growing.  Obviously, building and selling are the best.  Things like hiring are also very high on the list—you will need to hire to sustain your growth rate at some point.  Interviewing lots of lawyers has got to be near the bottom.

During YC, we are ruthless about reminding startups that fake work does not count and will still get you a failed startup no matter how intensely you do it.  We are also ruthless about asking for your progress, and being honest with you if things aren’t working.  After YC, we have less contact with startups—you can go dark on us if you want.  This, by itself, is almost always a sign that a startup is doing badly.

Momentum is everything in a startup.  If you have momentum, you can survive most other problems.  If you do not have momentum, nothing except getting momentum will solve your problems.  Founders internalize this during YC; many seem to forget in the few years after YC.  Burnout seems to almost always affect founders whose startups are not doing well, and then becomes a downward spiral.  In fact, one of my top few startup commandments is “never let the company lose momentum”.

There are a few other common problems.  One is a feeling of “we made it” that comes after a big financing round and a reduction in intensity.  A related problem is that after you’ve raised a lot of money or become somewhat well-known, it’s harder to admit that things aren’t working and you need to change direction.  Also, very small startups can grow by sheer force of will, even with a bad product.  This stops working after a few months as the numbers get larger, and if you haven’t built something people love, you will not be able to continue growing.

So how can startups avoid this slump?  Work on real work.  Stay focused on building a product your users love and hitting your growth targets.  Try to have a board and peers who will make you hold yourself accountable—don’t lose the urgency that you developed during YC.  Keep sending updates on your traction to your investors and anyone else who will read them (in fact, we’re building some new software at YC to automate this for our startups in the hope that it prevent some of them from going off the rails).  Make the mistake of focusing too much on what matters most, not too little, and relentlessly protect your time from everything else.  Don’t ever let yourself feel like you’ve won before you have.  I still don’t think the Airbnb founders feel like they’ve won.  You have to keep up a high level of intensity for many, many years.

Many YC startups learns these lessons after a year or two in the wilderness, but for some it’s too late and for all it’s a waste of time.

The best startups we fund keep on doing exactly what they did during YC.  This sounds so simple and so obvious, but in practice so few founders do it.

The good news is it’s doable with deliberate effort.  If every founder (YC and otherwise) did it, the number of successful startups would probably double.

The U.S. Digital Service

A lot of us complain about how the government is not very good at technology.  The U.S. Digital Service is actually trying to do something about it, by applying the way startups build products to make government services work better for veterans, immigrants, students, seniors, and the American public as a whole.

This is clearly a good idea.  (See U.S. Digital Service Playbook for more details.)

Inspired by the successful rescue of, small teams get deployed inside government agencies to improve critical government software. 

It seems to be working.  To use again as an example, the Digital Service effort helped replace a $200 million login system that cost $70 million per year to operate (I know…) with one that cost $4 million to build and less than $4 million per year to operate, and worked better in every way.  In another example, at U.S. Citizenship and Immigration Services, a Digital Service team has been instrumental in enabling green cards to be renewed online for the first time and a growing number of other improvements to the immigrant experience.

The Digital Service attracted talent on par with the best Silicon Valley startups, including talented veterans from Amazon, Google, Facebook, Twitter, Twilio, YC, and more – engineers, designers, and product managers who have committed to do tours of duty serving the country.

As an American, I am grateful to these men and women for doing this.  Because of their work, the government will work better.

I often get asked about what people can do for a year or two to make a big impact between projects.  Here is a good answer.  Consider joining the ranks.  I think it’d be great if it became a new tradition that people from the tech world do a tour of duty serving our country at some point in their careers.  We need better technology in government.

Projects and Companies

In the early days of my startup, I used to get slightly offended when people would refer to it as a “project”.  “How’s your project going?” seemed like the asker didn't take us seriously, even though everything felt serious to us.  I remember assuming this would stop after we announced a $5 million Series A; it didn’t.  I kept feeling like we’d know we made it when people started referring to us a company.

I now have the opposite belief.  It’s far better to be thought of—and to think of yourself—as a project than a company for as long as possible.

Companies sound serious.  When you start thinking of yourself as a company, you start acting like one.  You worry more about pretend work involving things like lawyers, conferences, and finance stuff, and less about building product, because that’s what people who run companies are supposed to do.  This is, of course, the kiss of death for promising ideas.

Projects have very low expectations, which is great.  Projects also usually mean less people and less money, so you get the good parts of both flexibility and focus.  Companies have high expectations—and the more money out of the gate and the more press, the worse off they are (think Color and Clinkle, for example).

Worst of all, you won’t work on slightly crazy ideas—this is a company, not a hobby, and you need to do something that sounds like a good, respectable idea.  There is a limit to what most people are willing to work on for something called a company that does not exist if it’s just a project.  The risk of seeming stupid when something is just a project is almost zero, and no one cares if you fail.  So you’re much more likely to work on something good, instead of derivative but plausible-sounding crap.

When you’re working on a project, you can experiment with ideas for a long time.  When you have a company, the clock is ticking and people expect results.  This gets to the danger with projects—a lot of people use them as an excuse to not work very hard.  If you don’t have the self-discipline to work hard without external pressure, projects can be a license to slack off.

The best companies start out with ideas that don’t sound very good.  They start out as projects, and in fact sometimes they sound so inconsequential the founders wouldn't let themselves work on them if they had to defend them as a company.  Google and Yahoo started as grad students’ projects.  Facebook was a project Zuckerberg built while he was a sophomore in college.  Twitter was a side project that started with a single engineer inside a company doing something totally different.  Airbnb was a side project to make some money to afford rent.  They all became companies later.

All of these were ideas that seemed bad but turned out to be good, and this is the magic formula for major success.  But in the rush to claim a company, they could have been lost.  The pressure  from external (and internal) expectations is constant and subtle, and it often kills the magic ideas.  Great companies often start as projects.


I think a lot about how important cheap, safe, and abundant energy is to our future.  A lot of problems—economic, environmental, war, poverty, food and water availability, bad side effects of globalization, etc.—are deeply related to the energy problem. 

I believe that if you could choose one single technological development to help the most people in the world, radically better energy generation is probably it.  Throughout history, quality of life has gone up as the cost of energy has gone down. 

The 20th century was the century of carbon-based energy.  I am confident the 22nd century is going to be the century of atomic energy (i.e. terrestrial atomic generation and energy relatively directly from the sun’s fusion). [1] I am unsure how the majority of the 21st century will be powered, but I’d like to help get things moving.

Although a lot of people are working on solar, I don’t think enough people are working on terrestrial-based atomic energy, which has major advantages when it comes to cost, density, and predictability.

Given the potential importance, I’m making an exception to my normal policy of not joining YC boards for Helion Energy and UPower.  Both of these companies went through YC about a year ago.  Helion is working on fusion and UPower is working on fission; I’ve looked at many companies working on both and think these are the two best.  I’ll be the chairman of both companies and I’m also investing in the seed/A rounds for both companies. [2] 

Both companies hope to have a test reactor operating in a few years, and both companies are hiring.  If you’re interested in working on this, please get in touch.


[1] I’m unsure of is what the split between sun-generated (I’m just going to call it solar but I use it to include wind and biofuels) and terrestrial-generated will be.  There will only be one cheapest source of energy, and history suggests whatever that is will be fairly dominant.  So it will probably be 80/20 one way or the other.

[2] I will save my thoughts about traditional technology investors being afraid to touch expensive, long-term, high-risk high-reward projects for another time.  A lot of people talk about the need to try new things that are hard but could have huge impact; it’s important to not just talk about them but to act.  I think it’s easier for individual investors to do this than for venture funds, at least given how they are currently structured.

I don’t think investors are doing nearly enough to fund atomic energy.  With the exception of China, new fission development has effectively stopped and very few plants have been built in recent memory.  Fission has been a remarkably safe and effective power source while generating 11% of the world’s electricity—the first time I saw the data on the safety data of fission energy relative to other power sources, I thought there was an error. 

On the fusion side, only about four US fusion companies have raised venture capital in the past few decades.  The big government projects, like NIF and ITER, unfortunately have the feel of peacetime big government projects.

The days are long but the decades are short

I turned 30 last week and a friend asked me if I'd figured out any life advice in the past decade worth passing on.  I'm somewhat hesitant to publish this because I think these lists usually seem hollow, but here is a cleaned up version of my answer:

1) Never put your family, friends, or significant other low on your priority list.  Prefer a handful of truly close friends to a hundred acquaintances.  Don’t lose touch with old friends.  Occasionally stay up until the sun rises talking to people.  Have parties.

2) Life is not a dress rehearsal—this is probably it.  Make it count.  Time is extremely limited and goes by fast.  Do what makes you happy and fulfilled—few people get remembered hundreds of years after they die anyway.  Don’t do stuff that doesn’t make you happy (this happens most often when other people want you to do something).  Don’t spend time trying to maintain relationships with people you don’t like, and cut negative people out of your life.  Negativity is really bad.  Don’t let yourself make excuses for not doing the things you want to do.

3) How to succeed: pick the right thing to do (this is critical and usually ignored), focus, believe in yourself (especially when others tell you it’s not going to work), develop personal connections with people that will help you, learn to identify talented people, and work hard.  It’s hard to identify what to work on because original thought is hard.

4) On work: it’s difficult to do a great job on work you don’t care about.  And it’s hard to be totally happy/fulfilled in life if you don’t like what you do for your work.  Work very hard—a surprising number of people will be offended that you choose to work hard—but not so hard that the rest of your life passes you by.  Aim to be the best in the world at whatever you do professionally.  Even if you miss, you’ll probably end up in a pretty good place.  Figure out your own productivity system—don’t waste time being unorganized, working at suboptimal times, etc.  Don’t be afraid to take some career risks, especially early on.  Most people pick their career fairly randomly—really think hard about what you like, what fields are going to be successful, and try to talk to people in those fields.

5) On money: Whether or not money can buy happiness, it can buy freedom, and that’s a big deal.  Also, lack of money is very stressful.  In almost all ways, having enough money so that you don’t stress about paying rent does more to change your wellbeing than having enough money to buy your own jet.  Making money is often more fun than spending it, though I personally have never regretted money I’ve spent on friends, new experiences, saving time, travel, and causes I believe in.

6) Talk to people more.  Read more long content and less tweets.  Watch less TV.  Spend less time on the Internet.

7) Don’t waste time.  Most people waste most of their time, especially in business.

8) Don’t let yourself get pushed around.  As Paul Graham once said to me, “People can become formidable, but it’s hard to predict who”.  (There is a big difference between confident and arrogant.  Aim for the former, obviously.)

9) Have clear goals for yourself every day, every year, and every decade. 

10) However, as valuable as planning is, if a great opportunity comes along you should take it.  Don’t be afraid to do something slightly reckless.  One of the benefits of working hard is that good opportunities will come along, but it’s still up to you to jump on them when they do.

11) Go out of your way to be around smart, interesting, ambitious people.  Work for them and hire them (in fact, one of the most satisfying parts of work is forging deep relationships with really good people).  Try to spend time with people who are either among the best in the world at what they do or extremely promising but totally unknown.  It really is true that you become an average of the people you spend the most time with.

12) Minimize your own cognitive load from distracting things that don’t really matter.  It’s hard to overstate how important this is, and how bad most people are at it.  Get rid of distractions in your life.  Develop very strong ways to avoid letting crap you don’t like doing pile up and take your mental cycles, especially in your work life.

13) Keep your personal burn rate low.  This alone will give you a lot of opportunities in life.

14) Summers are the best.

15) Don’t worry so much.  Things in life are rarely as risky as they seem.  Most people are too risk-averse, and so most advice is biased too much towards conservative paths.

16) Ask for what you want.  

17) If you think you’re going to regret not doing something, you should probably do it.  Regret is the worst, and most people regret far more things they didn’t do than things they did do.  When in doubt, kiss the boy/girl.

18) Exercise.  Eat well.  Sleep.  Get out into nature with some regularity.

19) Go out of your way to help people.  Few things in life are as satisfying.  Be nice to strangers.  Be nice even when it doesn’t matter.

20) Youth is a really great thing.  Don’t waste it.  In fact, in your 20s, I think it’s ok to take a “Give me financial discipline, but not just yet” attitude.  All the money in the world will never get back time that passed you by.

21) Tell your parents you love them more often.  Go home and visit as often as you can.

22) This too shall pass.

23) Learn voraciously. 

24) Do new things often.  This seems to be really important.  Not only does doing new things seem to slow down the perception of time, increase happiness, and keep life interesting, but it seems to prevent people from calcifying in the ways that they think.  Aim to do something big, new, and risky every year in your personal and professional life.

25) Remember how intensely you loved your boyfriend/girlfriend when you were a teenager?  Love him/her that intensely now.  Remember how excited and happy you got about stuff as a kid?  Get that excited and happy now.

26) Don’t screw people and don’t burn bridges.  Pick your battles carefully.

27) Forgive people. 

28) Don’t chase status.  Status without substance doesn’t work for long and is unfulfilling.

29) Most things are ok in moderation.  Almost nothing is ok in extreme amounts.

30) Existential angst is part of life.  It is particularly noticeable around major life events or just after major career milestones.  It seems to particularly affect smart, ambitious people.  I think one of the reasons some people work so hard is so they don’t have to spend too much time thinking about this.  Nothing is wrong with you for feeling this way; you are not alone.

31) Be grateful and keep problems in perspective.  Don’t complain too much.  Don’t hate other people’s success (but remember that some people will hate your success, and you have to learn to ignore it). 

32) Be a doer, not a talker.

33) Given enough time, it is possible to adjust to almost anything, good or bad.  Humans are remarkable at this.

34) Think for a few seconds before you act.  Think for a few minutes if you’re angry.

35) Don’t judge other people too quickly.  You never know their whole story and why they did or didn’t do something.  Be empathetic.

36) The days are long but the decades are short.

Bubble talk

I’m tired of reading about investors and journalists claiming there’s a bubble in tech.  I understand that it’s fun to do and easy press, but it’s boring reading.  I also understand that it might scare newer investors away and bring down valuations, but there’s got to be a better way to win than that. 

I would much rather read about what companies are doing than the state of the markets.  The gleeful anticipation of a correction by investors and pundits is not helping the world get better in any meaningful way.

Investors that think companies are overpriced are always free not to invest.  Eventually, the market will find its clearing price.

I am pretty paranoid about bubbles, but things still feel grounded in reason (the thing that feels least reasonable is some early-stage valuations, but it’s a small amount of capital and still nothing I would call a “bubble”).  Even my own recent comments were misinterpreted as claiming we’re in a bubble—that’s how much the press wants to write about this.

Although they cause a lot of handwringing, business cycles are short compared to the arc of innovation.  In October of 2008, Sequoia Capital—arguably the best-ever in the business—gave the famous “RIP Good Times” presentation (I was there).  A few months later, we funded Airbnb.  A few months after that, a company called UberCab got started.

Instead of just making statements, here is a bet looking 5 years out.  To win, I have to be right on all three propositions.

1) The top 6 US companies at (Uber, Palantir, Airbnb, Dropbox, Pinterest, and SpaceX) are currently worth just over $100B.  I am leaving out Snapchat because I couldn’t get verification of its valuation.  Proposition 1: On January 1st, 2020, these companies will be worth at least $200B in aggregate. 

2) Stripe, Zenefits, Instacart, Mixpanel, Teespring, Optimizely, Coinbase, Docker, and Weebly are a selection of mid-stage YC companies currently worth less than $9B in aggregate.  Proposition 2: On January 1st, 2020, they will be worth at least $27B in aggregate.

3) Proposition 3: The current YC Winter 2015 batch—currently worth something that rounds down to $0—will be worth at least $3B on Jan 1st, 2020.

Acquisitions at any point between now and the decision date are counted as their acquisition value.  Private companies are valued as of their last round that sold stock with at most a 1x liquidation preference or last secondary transaction of at least $100MM of stock.  Public companies are valued by their market capitalization.

There will be downward pressure on valuations as interest rates rise.  But I think it will be less than the upward pressure of the phenomenal innovation and earning power of these businesses.

Of course, there could be a macro collapse in 2018 or 2019, which wouldn’t have time to recover by 2020.  I think that’s the most likely way for me to lose.

This bet is open to the first VC who would like to take it (though it is not clear to me anyone who wants to take the other side should be investing in startups.)  The loser donates $100,000 to a charity of the winner’s choice.