We haven't seen a decrease in the valuations/valuation caps at which YC companies have raised money after Demo Day.<p>Valuations are high by historical standards, which means at some point they'll probably fall, but we're not seeing evidence of a fall yet.<p>It does seem to be getting harder to raise later rounds. But I think that is a secular change, not a market fluctuation. VCs seem to be shifting toward a strategy of spraying money at early stage startups, and then ruthlessly culling them at the next stage. This may well be the optimal strategy, but it's tough on the late bloomers.
Two things to nitpick on a macro perspective, both things I would have not expected the article to go into anyway.<p>First, corporate earnings are at all time highs. Looking at P/E ratios as a measure of if we are in a "normal" sentiment environment is kind of a bad idea, since the P/E ratio captures two cycles at once: the sentiment cycle (higher P for less E), and the earnings cycle (higher E overall). At P/E of 15 when the earnings cycle is at it's peak (as it is now) may still be reflecting extremely high (read: irrational) relative sentiment towards equities, even though the ratio itself sits only slightly above average. And, in fact, there are many indicators that point to the fact that the public is more bullish on stocks now than they have been since before the 2008 crisis, even though the P/E ratio is only 15-16.<p>Second, the consensus right now is forming that we may have finally turned the corner in the 30-year bond bull market, and interest rates are on the rise again. If this is true, it represents an important change for asset managers, and will trickle all the way down to private equity and startup funding. As rates rise, particularly if they rise not just due to inflation but due to tightening monetary policy, investors will need to deploy less capital to reach for yield to places such as private equity, so you can expect deal terms to get more "investor friendly." (I am not sure if we are actually at the beginning of a bond bear market, but many people believe so.)
The conclusion is sound - "Today is different in funding than yesterday" Similar to other posters, I nitpick how he got there.<p>Nothing in efficient market theory suggests constant PE ratios over time. Nothing in efficient market theory suggests that your stock will be higher if you double your bookings. (If the initial price assumed 3x bookings, you'll tank even if the market is the same) PE ratios revert over long time horizons (many years) but even what is considered earnings changes over time.<p>That said, his conclusion is true. If you raise money in great times, you may need to take a hit in bad times. Better not to overpromise.
<i>In fact, if you are like most companies, your managers probably implied to your employees that your stock price would only rise as long as you were private. They might have said something ridiculous like: "Based on the current price of the preferred stock, your offer is already worth $5 million." As if the price could never go down. As if the common stock were actually the same as preferred stock. Silly them.</i><p>Is this something that actually happens or is he being hyperbolic? I thought there might be some legal issues around making claims like that.
I think that making claims on the changing capital market climate based on historical P/E ratios may be measuring the wrong thing. A declining trend in P/E ratios may suggest a decline in valuations but it also may suggest a change in capital structure. Or it may suggest a combination of the two.<p>It would be interesting to look at the trend for EBITDA multiples over time instead: <a href="https://cloudup.com/cHNL3Wcy5yH" rel="nofollow">https://cloudup.com/cHNL3Wcy5yH</a> [1]. In this view, you can see that TEV/EBITDA ratios are very similar today to what they were in 1995 even though they took a very circuitous route to get there.<p>1: S&P Capital IQ (exported just now)
I don't think the data says what he think it says.<p>Sure, it is not 1999 or even 2002. I don't think anyone thinks it is.<p>Focus on the last 4 years. It looks pretty flat with a blip in 2010.<p>3/31/2009: 14.5
3/31/2010: 18.8
3/31/2011: 15.4
3/30/2012: 15.5<p>Of course, Ben could be (and probably is) right but the P/E ratio does not look like evidence to me.
<i>You just need one to say yes and she will erase all 20 no's.</i><p>That works as long as the potential investors aren't comparing notes: "I heard Moneybag Ventures only offered you $180 million valuation..."
I find that CEOs are often the last to realize or admit the reality of suckitude a company is under.<p>I mean if you did your job right as CEO, you are the dumbest person there. You spend all your time being upbeat and optimistic in public (maybe horribly depressed in private?). Your engineers and managers, who are experts in divining information out of the smallest bits of data (single line bugs anyone?) are much smarter than you realize.<p>I have rarely seen a CEO that I completely respect. They just don't have the ability to aggregately integrate every detail in the company and tend to lead things to a crash and burn as a result.