The Great Recession. The Housing Bubble Burst. The dot com crash. All good things must come to an end, and that will inevitably include the tech bubble, according to many experts. Today, tech startups even in infancy can lure in millions of dollars from venture capitalists and angel investorsâ€”although that’s not the norm.
However, it is â€œcommon enoughâ€ to have everyone from your kid to your grandfather dubbing themselves â€œentrepreneurâ€ and pouring their life savings (and maybe yours) into their venture. In some cases it can actually be a pretty simple pitch since some investors (like friends and family) who don’t really know the tech jargon to begin with. Plus, there are some truly fantastic tech startups out there who need a little financial encouragement to go the distance.
Unfortunately, the president of Y Combinator Sam Altman says this is all going to come crashing down soon. Y Combinator is considered by many to be the ultimate startup accelerator. Altman points out that many tech startups raking in the dough end up producing little revenue, if any at all. While there are a handful of early stage valuations through the roof, Altman points out in a blog that the vast majority of tech startups simply won’t make it. â€œIt’s a small amount of capital and still nothing I would call a bubble,â€ he says.
Altman is also quick to point out that he’s â€œpretty paranoidâ€ when it comes to bubbles since he (and others) have been burned before. This doesn’t mean he thinks it’s the end of the tech industry, of course. In fact, in many ways we’re still in the beginning. However, he does think how tech startups are treated will come to a crashing halt very soon. He’s so certain that he’s wagering on it. Altman has made three predictions on where tech will be in five years and he’s happy to put his own money on them.
First, Altman has picked six â€œunicornsâ€, which are companies currently valued over $1 billion each. He selected Airbnb, Dropbox, Pinterest, SpaceX, and Uber. According to Altman, each of these companies will be valued at more than $200 billion by 2020, doubling today’s worth. This is just the start of Altman’s crystal ball viewing.
The Future of Tech
He’s also named nine Y Combinator startups at the mid-level which he thinks will be worth $27 billion in 2020. That’s up from their current average of $9 billion, and includes companies like Stripe and Coinbase. Finally, Altman says the 114 current Y Combinator startups will have an average worth of $3 billion in five years.
Think Altman’s wrong and want to put your money where your mouth is? He’s asking venture capitalists to take him on with a hefty $100,000 bet. Ultimately, that cash will be a donation to a charity, which is also a tax write-off. Technically anyone can take on Altman, but it’s likely that only a venture capitalist would have that kind of cash flow and want to levy it against a startup expert.