[undergrad_econ]

Knowing that a lot of people here are from silicon valley, is it really a BIEEN (Bubble in everything except name) situation there?

What are your thoughts on the massive valuations of companies that might struggle to manage a profit 3-4 years down the road?

[sillysaurus3]

Given that "home runs" for VCs pay out 1,000x to 10,000x, and that IPOs have much tighter restrictions than in the 90's, it seems fine. Even if it's a bubble, who is harmed by it? The VCs are shouldering the risk. Those who put their money into a VC fund know that it's high risk. Everybody is aiming for the 1,000x return, and it may not be possible to get one without making a lot of risky bets.

[rhino369]

You are only considering direct effects of a bubble bursting. But those burned VCs will be skiddish in investing in new start ups.

All the VC money that is driving huge growing in SV may disappear for a while. A lot of the money won't come back. This means unemployed people, which means pay falls for everyone.

It means less small VC fueled companies buying services that more established companies sell.

So yea it might not crash the S&P500 like 2000 did, but it would still have a huge impact within tech companies.

[lmm]

I'd worry about less sophisticated "end investors" getting burned. Mutual fund managers know that private equity funds are high risk, but they're getting into them anyway. Do the individuals whose pensions are being invested in Uber know where the money is?

[maxerickson]

The information should be available to them. If the fund does not have a sizable exposure to the particular company, it might only be as a statement in the prospectus that the fund can invest up to a certain amount in a certain type of company.

A flip side of this is that one of the many things that contributed to the housing bubble was the requirement that many pensions have to invest in bonds of a given rating. This helped fuel the market for rubber stamped mortgage derivatives.

[sillygoose]

Lots of good new startups will be held back when VCs are licking their wounds from the massive losses they'll incur when the current bubble pops.

[Eridrus]

Startups now are definitely wondering if they should accept a frothy valuation now so that they do not get stuck out in the cold if the bubble pops, which is probably just making the bubble bigger.

[sillygoose]

Sure, but it's a bubble nonetheless, and an even bigger one is even worse :)