Josh Kopelman  🇺🇸Verified account

1/ There’s been a good discussion recently about the state of tech startup/venture market recently. Our thoughts: https://medium.com/@firstround/crystal-balls-vs-calculators-7373c0e09c93 …

2/ Some say we’re in a bubble – while other’s say we’re not. While @Firstround doesn’t have a crystal ball, we do have a calculator.

3/ The simple math of venture investing says that only two numbers determine an investment’s return: the entry price and the exit price.

4/ Entry prices continue to rise across all VC stages. The average seed stage valuation in 2015 will be almost 3x higher than it was in 2007

5/ Exit values (from both M&A and IPO), however, have not increased anywhere near the pace of entry values

6/ Unless exit values also triple, a fund that generated a 3x return in 2007 would be just a 1x fund today. (Not rocket science – just math)

7/ It appears that LPs and GPs are implicitly betting that exit values will indeed triple – otherwise industry returns will go down by 3x.

8/ When people look at the “flow of funds” into the market, it is also important to look at the prices those funds are being deployed at.