Venture capital heavyweight Joe Horowitz, managing general partner at Icon Ventures, has an interesting take on the frothiness of valuations for technology startups.
He thinks they're too high, but that's not stopping his firm from investing. Horowitz is troubled by the number of startups valued at $1 billion or more. CB Insights puts that total at 42.
"When we start throwing around the $1 billion number in such a casual way, then it is a sign that we are losing some perspective," he told
CNBC.
"Building a company that is truly worth $1 billion or more takes a lot of work and a lot of smart people. You have to be at the right place at the right time to truly disrupt a big market relative to traditional players."
But Icon closed on a $260 million fund last year, so it has to put money to work. "We still have to be in the market and try to navigate either headwinds or even winds at our back appropriately," Horowitz said.
Bill Gurley, a partner at venture-capital titan Benchmark, also is concerned.
"I think that Silicon Valley as a whole, or that the venture-capital community or startup community, is taking on an excessive amount of risk right now — unprecedented since '99," he told
The Wall Street Journal. The year 1999, of course, was when the dot.com bubble hit its apex.
"Risk just keeps going higher, higher and higher," Gurley said.
"The problem is that because you get there slowly the correcting is really hard and catastrophic. Right now, the cost of capital is super low. If the environment were to change dramatically, the types of gymnastics that it would require companies to readjust their spend is massive. So I worry about it constantly."
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