He started with $50 million. Today, Thomas Laffont manages $50 billion.
At the All-In Summit, the Coatue Management co-founder explains what has gone wrong in the venture market and how we get back on track.
Fake Unicorns
There are 1,440 private tech companies valued at over $1 billion. This is by far the most ever.
In 2019, there were only 470.
A majority of all tech companies valued above $1 billion are private.
The thing is, most of those valuations are fake. A huge percentage of them were priced by a single firm, Tiger Global Management.
I saw Tiger in deals in 2021. They ripped $100 million checks into anything and everything.
Most of those companies will never exit above $1 billion.
No Exit
Laffont gives a great overview of the three ways unicorns exit. All three are blocked:
1) IPO’s. 2022-4 has seen the fewest tech IPO’s since the mid 90’s — even fewer than in the financial crisis.
2) M&A. Most significant M&A is blocked by the FTC.
3) PE. High interest rates have meant that few PE buyouts are happening. After all, those buyouts are funded by debt.
This means that VC’s are holding companies twice as long as before COVID. That cuts their return in half.
LP’s are running out of money to invest in new funds. They’re still waiting to get their money back from the old fund!
Over time, this will depress innovation. There will be less capital available to startups.
The nonexistent exit market is why we need to get rid of Lina Khan ASAP. Whoever wins the election must fire her immediately.
This is one problem we can fix with the stroke of a pen. We need M&A so that people can afford to keep creating new technology!
What’s the Solution?
Laffont’s solution to the problems in the venture market is simple: going public.
Going public cleans up the cap table, ensures proper governance, and finds the right price for the company. And for all the talk of the IPO window being closed, the reality is that no one can stop you from going public.
Laffont highlights some amazing companies that could go public soon: SpaceX, Shein, Wiz and more. These are some of the greatest companies of all time, and public investors will clamor to own them.
I’d like to see a return to the 90’s….go public after maybe 5-7 years and let the chips fall where they may. Everyone gets liquidity, you find out the right price for the company, and then you prove yourself to the market.
This discipline helped Zuck enormously. If Facebook were private, would he have gotten that company efficient?
I doubt it. And if it works for Zuck, it can work for you!
Wrap-Up
You can tell Laffont’s experience in this talk. He sees the entire market clearly and can assess all the problems and solutions. That’s what 25 years of experience looks like!
I hope we see more rational valuations, no matter how exciting AI is. And let’s man up and get these companies public.
The markets are there. What are we afraid of?
What did you think of Laffont’s talk?
More on tech:
Elon at the All-In Summit
How I Make Sure I’m Never Late to Meet a Founder
Backing One of the World’s Fastest Growing Startups | The Mr. Bray Labs Podcast
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