Tech & Multiples - The Wrath of Jerome
October 17, 2022
Tech
- I've said it before and I will say it again, the whole sector across the world has no cost control.
- Is like asking the royal family to go shopping at Aldi. Not happening, never will.
- The sugar hit that was covid-led online growth is unrepeatable, yet has been extrapolated by everyone in terms of expectations. Hiring and throwing money at various issues is following these expectations too.
- If you cannot hit your top-line growth or have structural growth issues, you are in trouble.
- An industry that knows nothing but abundancy is about to experience some scarcity. Or maybe VCs just keep the industry abundant?
Multiples
- Private markets still have some way to catch up to public markets – hard to justify investing in the space at the moment
- Having said that, the quality of ASX listed smaller capped tech cos is relatively abysmal
- VC is interesting at the moment
- Do you take a bigger (temporary) valuation hit to your portfolio and mark it lower. That way you can build a larger position in the holding when the portfolio co goes to raise again, or
- Do you support raises at higher-than-market valuations and keep your portfolio valuation up?
- This way, you can tell your investors that although listed high-growth comparables have fallen more than 50% in 12 months, that your private portfolio is only down -20% or so.
- Most certainly seeing this today, VCs raising money for their existing portfolio cos at what feels like relatively high vals
- Make your investors feel good.
- But what is better for investors long-run? Making them feel good or making them money?