So I wanted to come up with some 2014 predictions – nothing fancy or too controversial – but hopefully somewhat thought provoking…
- IPO’s: This past year witnessed an extraordinary resurgence in IPO activity for venture-backed companies. It felt much like 1999 right before the crest of the wave. With modest growth, unsustainably high valuation multiples, little excess left for Corporate America to cut, profit margins are maxed out which makes the next 12 months feel very much like the year 2000. While it will not be such a disaster, clearly the pace of last year simply cannot be maintained. Even raging bulls need to stop and smell the roses once in a while.
- Fundraising: Very strong liquidity to LP’s in private equity and venture funds give them increased confidence to continue to increase – albeit modestly – allocations to the asset class. Notwithstanding every investor’s claim that they only invest looking forward, past performance (i.e., distributions) continue to fuel fundraising. Unfortunately the rich continue to get richer as established firms find it relatively easy to raise new and larger funds causing the overall roster of investment managers to continue to shrink.
- Crowdfunding: This form of financing continues to play an important role for start-up’s, although admittedly, mostly around the margins. The crowdfunding phenomenon simply does not have the heft to lead Series B and C rounds. And furthermore, in addition to capital, great entrepreneurs are also looking for great business partners in their investors. The risk here is that there will be a spectacular scam and Senator Warren and others come down hard with new consumer protection laws which chill the marketplace. Disaster scenario: some desperate African Prince just needs $10M more in Bitcoins to fund his next great widget…and he actually raises the “money!” - never to be heard from again
- Healthcare Technology: Out of the carnage with the introduction of health insurance exchanges comes the broad and irrefutable realization that the healthcare industry simply must be fundamentally re-architected. Novel and innovative business solutions lead the way to greater efficiencies and productivity. Ironically improvements in healthcare at lower costs accelerate across society as more people get access to affordable care at the right time, right place. With this phenomenon comes the growing appreciation that extraordinary near-term societal benefits can be achieved and may even outweigh any distant future benefits hoped for with continued massive investment looking for the next great therapeutic or medical device.
- Sports Grand Slam: The Mets win the World Series, the Knicks win the NBA Championship, the Giants win the Super Bowl and the Islanders win the Stanley Cup.
Now you know I have no idea what I am talking about…