tl;dr: The circus that is Donald Trump’s campaign for president finally wandered into our little domain, so let’s chat about it.
We’ve discussed the state of the technology market all year. Slow IPOs, massive rounds, valuation corrections and the like have been our fare. Fair enough. But finally, at last, the Most Tremendous Businesshuman has weighed in on tech, so we can clear the air and really drill down.
According to Donald Trump, technology is overheated at the moment and is most definitely in bubble territory. Following an interview, Reuters published the following paragraphs:
However, the cadre of companies in tech that are, or have been, richly valued before they became profitable is large and important. Box, for example, is currently valued north of a billion dollars but still loses money. It’s also growing ahead of its own expectations and is going to be just fine.
For some companies, burn is not sin; for others, it is. That is a nuance amazingly still lost on some people.
Public And Private
Yes, some unicorns—both public and private—will prove to be scrap material and die, but that isn’t really our concern. Companies are born, and then most die. That’s fine.
In the larger Trump quote, he mostly shot at public tech companies, but that doesn’t mean that his point doesn’t flow backwards into the private domain. The important difference between the current technology market and the market that he analogized it to is that if things do truly fall apart, the losses will be largely constrained to private investors. The still-present lack of technology IPOs means that companies that might have managed a public offering in prior cycles are still private, so their potential implosion will be kept indoors.
This mostly negates the Trump riff. Yes, there are money-losing companies in tech that are currently valued in the billions, but that’s just not bad; most companies spend more than they should. But hell, it’s their call. Their investors are on their board and this is where they have ended up.
To summarize, we can lean on tautology one more time: Solid companies will do well, and solid companies will always be able to raise money. Lesser companies will not. And your grandparents haven’t been able to buy shares in eventually-failing unicorns as they are not accredited investors.
We’re going to be brief today because we’ve run a bit long over the last few posts in terms of word count, but I have to complain about one more thing. Trump notes “bad concepts” in his notes. Yes, perhaps the Uber for Instacart driver insurance real-time CRM isn’t the best idea, but technology as a whole has proven that initially unworkable ideas can morph into new things that do. Which is precisely why tech is a fun industry to watch and write about. At least I am never tired of it.
So Trump is mostly just being boring by saying standard business words, adding nothing to the conversation. Back to work, everyone, and don’t forget to Make Bubbles Great Again.