Market froth

I woke up this morning to an email about a special purpose vehicle (SPV) investing in a late stage private tech company.

Normally such emails contain limited information about the company’s KPI and financial performance. Since capital is readily available for late stage private tech companies, founders prefer to not disclose more than high level transaction volume, revenue, and growth data about their company’s performance.

What was interesting this time was that the company was not only not sharing any KPI or financial data, but it also wasn’t sharing the terms (price, shareholder rights, …) of the investment.

So now, not only do investors not know what they’re getting (the performance of the company), they also don’t know what they’re paying (the valuation of the company).

This takes the existing market froth to a whole new level. And it’s very dangerous.