VC in 2015: ‘Out of Control’ Valuations
Avalon Ventures founder, Kevin Kinsella, was recently interviewed on the Wall Street Journal on the explosion of venture capital in 2014 and what that means for 2015.
In this piece, Kinsella answers the industry’s top two questions:
- What deals and valuations will happen in VC in 2015?
- Which significant opportunities will define 2015?
His predicted themes for this year are in:
- The IPO market for biotech
- “Out of control” valuations
- A misconception about deal flow
Below is a summary of Kinsella’s interview with Brian Gromley of the Wall Street Journal:
What was most surprising about 2014?
- The IPO market opened up for biotech.
- Acquisitions of tech companies steadily continued.
What will be the biggest challenge for the venture industry in 2015?
- Valuations will keep creeping up in biotech and will leap up in tech.
This is due to two significant factors:
- Valuations paid by VCs to entrepreneurial ventures have gotten completely out of control.
- Situations occur where the availability of capital determines the value of a company, rather than its intrinsic worth.
What is the biggest misconception about the venture industry, and how can VCs change that in 2015?
- “The biggest misconception is that it’s easy, and all you have to do is get money. Just because you have a lot of money doesn’t mean you’re going to get great deal flow. It’s easy to make investments, but the problem is in getting that money back. But this is a self correcting system — and there will be tears.”
You can read the entire WSJ article here.