Tech Bubble Leaks Air, Healthcare Bests Biotech, & More for 2014
The coming year will see some good news and some bad news in tech. Here are five predictions.
• IPOs: 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, and profit margins maxed out, it 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.
• Venture Capital Fundraising: Very strong liquidity to limited partners in private equity and venture funds give them increased confidence to continue to increase—albeit modestly—allocations to this 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 branded firms find it relatively easy to raise new and larger funds, causing the overall roster of managers to continue to shrink.
• Crowdfunding: This form of financing continues to play an important role for startups, although admittedly, mostly around the margins. The crowdfunding phenomenon simply does not have the heft to lead Series B and C rounds. And furthermore, great entrepreneurs are looking for great business partners in their investors, as well as capital. The risk here is that there will be a spectacular scam and Senator Elizabeth Warren and others come down hard with new consumer protection laws that chill the marketplace. Disaster scenario: a foreign prince needs $10M in Bitcoins to fund his next great widget…and he actually raises the money.
• Healthcare Technology: Out of the carnage of 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 solutions lead the way to greater efficiencies and productivity. Ironically, improvements in healthcare at lower costs accelerate as more people get access to affordable care at the right time, right place. With this comes the appreciation that extraordinary near-term societal benefits outweigh any distant future benefits hoped for with continued massive investments in the next great therapeutic or medical device. In other words, collectively dollars invested in the business of healthcare will have greater overall benefits than dollars trying to find the next great molecule.
• New York 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.
[Boston-based editor’s note: This delusional last prediction should not cast doubt on Mr. Greeley’s other forecasts.]