Silicon Valley is not heading for a dot-com era style bubble burst, if you ask venture capitalist Ben Horowitz. The Andreessen Horowitz cofounder is generally pretty optimistic about the economic environment for tech and startups.
Here are some excerpts from the Q&A, with questions and answers edited for length and clarity.
Question: Some say persistent investment by VC firms in companies that fail to yield revenue is feeding a bubble in Silicon Valley. Do you think tech is heading for a repeat of the Dot-com Bubble? If so, what can be done?
Horowitz: Having been a CEO in 2001, I don't think that we're anywhere near where we were then. Valuations have gotten high in certain tech sectors in the private markets only, but they have actually corrected themselves pretty quickly. For example, enterprise software started to get over valued privately, but after several companies went public at lower valuations than their last private rounds, the private markets corrected as well. I don't see a massive crash on the horizon like 2001. In 2001, Nasdaq lost 80 percent of its value. I'll bet any bubble believer everything that I have that Nasdaq won't drop 80 percent in the next five years.
Question: If we are in fact in a tech bubble, which unicorn startup is best positioned to pull through the burst?
Horowitz: Airbnb, because they are a great company with a great culture and a massive network effect. (Co-founder and CEO) Brian Chesky is amazing.
Question: What advice would you give to those fundraising in this environment of bubble talk?
Horowitz: Historically speaking this is a very easy time to raise money. So just do your thing.
Question: How do you think recent poor performance of the public market will impact early stage companies, such as those seeking seed or Series A funding?
Horowitz: I think that early stage investing, if done right, is pretty disconnected from the public markets. The average venture capital exit is over eight years, so the public markets will change a lot by then. Having said that, a lot of hobbyist investors will stop if the markets crash and that will make it more difficult to raise money for sure. In addition, if you are a VC and you pay a bubble price even at an early stage that can be hard to recover from (for both you and the company) if the climate changes radically.