Babak Nivi of VentureHacks shares a few thoughts on the investment climate. All quite sensible and worth a read, but one of the points stood out:
... the accelerating returns on innovation means that all of the value in the public markets will be shrunk and put in the hands of startups. The NYSE alone has $14 trillion of value. NASDAQ has almost a trillion dollars of volume every day. Today's startups are the heirs to that value.
It's a good point, if you believe that most of the value creation happens at the startup end. Of course, that's not true yet - large companies (and not just the obvious ones) still do a lot of the innovation in today's world, but because startups are so well adapted to the task of disruptive innovation, one could make a reasonable case that they'll eventually be doing most of it.
Then again, it's also possible that attempts to import the startup mentality into large companies will eventually succeed - this would dramatically reduce the importance of startups. But it's not very likely.
If startups do end up doing all the innovation (or a large majority of it), and become able to do so more and more reliably, they will certainly attract more and more investment money (and more and more founders, so it's not clear that valuations will keep increasing forever). It may be that startup investment, with its inherent inefficiences and fragmentation, will be the only safe and profitable refuge for professional investors who can't compete against the super-powered likes of Goldman Sachs and HFT hedge funds.
Perhaps someone should start a startup to solve that lucrative problem. Oh wait, they already did.
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