GTC2015: Keynote Lou Kerner – are we in a tech bubble?


At the Geektime Conference on Wednesday, we decided to start the big day with the question that is on everyone’s mind: Is the tech industry in the midst of an economic bubble?

Keynote speaker Lou Kerner, Manager of the Israel Syndicate, expressed an extreme level of confidence about the investment environment in key ecosystems like Silicon Valley and Israel, but he concluded with quotes of doom from the likes of Warren Buffett.

He introduced himself as the creator of the Israel Syndicate, a network of private investors interested in Israeli hi-tech startups. He bemoaned his missed opportunity to get in on Facebook at its inception, but used it as a springboard to explain one of the primary reasons the tech market has shifted from a primarily public market to a private one.

“Unicorns,” or billion-dollar tech startups, got their name for one reason: They were supposed to be rare. But now they aren’t just multiplying, the funding rounds are also billion-dollar cash infusions. The volume of each investment continues to climb, but investors seem to be getting pickier. There are fewer investments, masked by those gigantic rounds.

Yet there are more early-stage investment groups and venture capital funds than there used to be. AngelList, the daddy of that family, just received its own $400 million investment from a Chinese VC. While investor confidence in private markets is definitely climbing in places like the U.S. and Israel, things are not perfect.

In 2015, the average first-day investor can expect to see his or her investment drop about 15% for a company launching on a public stock exchange. The poor performance by recent IPOs has scared investors and kept startups from going public. That is pushing more money into private companies.

Established companies have also joined the venture craze, but their late-stage investments are much higher than startups used to get. All this together is pushing investments higher and probably inflating the value of companies.

But the returns aren’t matching those investments. There is far more money going into these companies than coming out of them.

However, his strongest arguments that we are approaching the popping point is not in the indicators, but in the numbers. The revenue multiples for private companies are off the charts compared to public ones. While it hovers somewhere between 10% and 20% for corporations like Facebook and Twitter, the numbers for companies like Uber and Airbnb are staggering.

He concluded that career financial analysts and stockbrokers are getting the sense that the tech industry is overvaluing what is has to offer. Quoting Warren Buffett, he left few wondering what his own feelings were.

“‘Only when the tide goes out do you discover who’s been swimming naked,’ and the tide will [eventually] go out.”


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