YC head: tech bubble, but start-ups burn speed worries me

note: hunting cloud under capital boom, the industry of science and technology whether existing valuation bubble talk in the past few months. The Y Combinator boss Sam Altman (Sam Altman) in the latest statement, don’t think the science and technology industry valuation bubble. But he pointed out that the startup money too fast. The following for Business insider reports content, translated by tencent technology:

over the weekend, altman wrote a letter to a member of the Y Combinator company, expressed his concerns. In BI telephone interview on Monday, he talked about this again.

“as I said in the past few years, I think, in the current valuation is very high, but in a zero interest rate market, this is still reasonable.” Altman said. “however, compared with a year or two ago, more and more companies burn rate of $1 million a month.”

usually, investors will be through the startup of the burn rate to judge whether the technology industry is a bubble. Twitter and Foursquare investor Fred Wilson (Fred Wilson) admitted that he had invested some of the startup current money to millions of dollars a month. Last September, he said: “the number of these companies to more than I expected, also to my personal feeling unwell.”

another well-known investors mark Anderson (Marc Andreessen) last September also said that if the market turn, then “a lot of money fast company will be” evaporate “.

altmann argues that if startups are growing fast, then achieved by burning money growth is appropriate. However, if the service efficiency of funds is low, so will be a problem.

he said: “if you want to burn money to achieve high growth, improve the speed, it is ok. But if you are planning or market environment change, so do not appropriate, you should use the current money to make a profit. Money is suitable in effective way, and simply burn inappropriate.”

so, so-called pure “burn money” mean?

altmann for startups, two aspects of concern. Some entrepreneurs employed a large and expensive engineering team, but the product development is slow. Entrepreneurs are also likely to invest heavily to attract the user has no value.

in all startup money too fast in the case of electrical business startup Fab is remarkable.

investors for overall valuations reached $900 million. But in order to achieve similar to amazon’s size, overall the board of directors decided to a large amount of money every month, and $300 million again in a few months later. Fab poured money into marketing and user acquisition costs, but the final results show that the new customer loyalty is not high, did not form a repeat buying habits.

as a result, when the Fab is trying to raise $300 million, investors in the company is not a cold. Fab achieved only half that amount of financing, it also forced the company for business transformation and layoffs. In February this year, the rest of the overall business be PCH Innovations to $30 million.

altmann argues that Fab is extreme case about money. However, he said, startups should not be at the mercy of the investors. He said: “if you are the entrepreneurs, then you should not hope like this. If a company has a profit, then the entrepreneurs should be in a position control. Otherwise, investors will be in a position control.”

altmann often to Y Combinator entrepreneurs to provide such advice: each round of financing as the last round of financing.

some private companies, such as Slack and Uber, not encountered problems in financing. However, these companies are heterogeneous. In addition, a lot of financing does not necessarily can ensure the survival of startups.

Snapchat and Uber investor Bill gul (Bill Gurley) in the near future the SXSW conference, said he expected this year, there will be more “unicorn” company’s death. Sequoia capital Michael Moritz (Mike Moritz) also agreed. He recently said in an interview with The Times, “a large part of the” unicorn “will become extinct.”

altmann, also thinks some valuation of more than $1 billion “unicorn” companies will fail, it is a natural part of the business ecosystem. But he thinks that there will be many firms to survive. For investors view bubble, altman said:

“complain about high valuations investors exactly is who has money for investors. All investors are saying, and start-up financing too much, but they also raise the largest ever in the investment fund. Any rational observers will see that the vc discuss startups to burn too much money on one hand, on the other hand is still writing cheques, prompting startup money.”

he said: “to discuss the bubble is to maintain a bubble, I have never seen such a situation.”