Thursday Jan 2, 2014 by Jeff Bussgang - General Partner, Flybridge Capital Partners
A year ago, I felt 2013 would be the Year of Grit - a year characterized by toughing things out in uncertain times. Well, we certainly did that, and 2013 has ended up looking a heck of a lot better than it began.
2014 is shaping up to be the Year of Results. We begin 2014 with a lot of optimism in the air. In a recent survey conducted by the NVCA, portfolio company CEOs and VCs are feeling as good about the future as they ever have, with a stunning 86% of CEOs who plan to raise capital saying it will be the same or easier to do so as compared to last year. Half of CEOs and VCs are optimistic about next year's exit environment.
A rising stock market makes everyone feel good. The NASDAQ is up 30% this year and achieved its highest level since September 2000. The S&P has closed at a record high 44 times in 2013 and the Dow Jones has achieved 50 record highs this year - both indexes are up more than 20%.
When the stock market is down, we VCs like to say that our little tech companies are not affected and simply keep their heads down and build valuable companies. But when the stock market is up, sentiment swings quickly. We rush to take companies public or sell them to take advantage of "the exit window". It is natural, therefore, that a robust stock market has led to a robust IPO market. More and more companies are eyeing 2014 and research conducted by analyst firm 451 suggests it will be a record year for tech IPOs and also suggests M&A will see a strong increase in 2014 as compared to an already solid 2013.
Now it is time to deliver on all that promise. Aileen Lee's now-famous unicorn analysis listed 39 companies founded in the last 10 years who had achieved $1 billion plus valuations. 12 are private companies (Palantir, Dropbox, Pinterest, Uber, Square, Airbnb, Hulu, Evernote, Lending Club, Box, Gilt, Fab.com). At least another dozen with very lofty private valuations wait in the wings (including Spotify, MongoDB, Snapchat, Etsy, Actifio, Automattic, OPOWER, Hubspot, Flipboard, Hootsuite, Appnexus and many others). Not all of these companies will go public or sell out in 2014, but a good number need to in order to deliver on the promise that has been built up in this post-bubble, post-recession era.
And if you are worried about bubbles right now, don't. I wrote a blog post two and a half years ago in response to cries of a bubble that it felt a lot more like 1996 than 1999 right now. In other words, when analyzing unemployment rates and other macroeconomic fundamentals as well as positive structural elements of the tech economy, the rebound was just beginning and had a good 4-5 year run in front of it. Sitting here at the end of 2013, I still feel that to be the case. The fundamentals of a rebounding US economy in combination with the disruptive forces of the cloud, mobile, big data and software eating everything remain strong. The start up economy will overheat at some point, it always does, but that point is not now.
So, buckle up for 2014 - a year where many of those lofty promises of better times over these last few years begin to convert into tangible results.