US tech funding

Andreessen Horowitz published a presentation on the state of US tech funding earlier this week. The presentation looks to answer the question of whether the US tech sector is in a bubble or not. While many investors increasingly think so, the team at Andreessen Horowitz doesn’t. The full presentation is below.


There are two key takeaways from the presentation.

The first is that the high valuations of late stage private tech companies are the result of many companies delaying their IPO’s. If these companies had chosen to go public, late stage valuations wouldn’t be so high. While I agree with this assessment, I think that it ignores a very important point.

The fact that many late stage companies are delaying their IPO’s has made traditionally public market investors start to compete for investments in late stage private companies. The result is more dollars chasing late stage companies and this has pushed valuations higher than what could be explained just by companies delaying their IPO’s.

The second key takeaway is that the decrease in the cost of starting a company has led to an increase in the number of seed stage companies getting funded. I fully agree with this assessment. There’s more debate about whether the average seed round size has increased or decreased. The presentation argues the latter whereas my anecdotal evidence suggests the former. The difference here likely results from what we treat as seed stage companies.