Analysis: A slow down in valuations may happen, but tech still offers lots of investment opportunities.
He cites the example of Chinese firm Xiaomi, which "was raising a series of smallish rounds raising money at close to 3.5 to 3.7 times revenues, and that has bitten them because margins have come down, have contracted, and therefore it becomes an issue."
Kaye says that in general "it’s not a bubble, it’s a case that you’ve seen investors be extremely aggressive and take positions in a new generation of company, of companies that are evolving. These are new generation companies, the Ubers of the world, the AirB’nBs, they’re redefining sectors and therefore have been able to command higher valuations."
Jim Mellon, chairman at investment management firm Burnbrae broadly agrees, although he says "unicorpses will litter the landscape soon. "Truly disruptive techs will still attract dollars, but this will be the year that the mania will stop."
Looking further a field Mellon is bullish about a variety of sectors. "The areas I like" he said, "are robotics, IOT (industrial) and education related."
He believes that "med internet is overdone, almost all internet apps are toast, and ride sharing/taxi substitutes is the biggest bust-in-the making in history."
Most controversially, he adds "Apple is beginning to rot at the bottom of the barrel."
Although not putting it quite the same way, both Burbidge and Kaye agree that valuations will start to decrease somewhat.
I think we’re already starting to see it," said Burbidge. "In q4 we anecdotally heard about that from our networks, people that we took in the
West Coast and people that we talk to in Asia . My point again is I think in the UK you want really see too much of a reaction or a correction because I don’t think we ever got to that level of exuberance."
2016 then looks set to be a fascinating year for anyone interested in putting money into future services and technology. While it may have had a somewhat difficult start on the stock markets, these industry experts clearly think there is much scope for optimism, particularly in the UK.
Whether we see anything like the kind of valuation mania we saw in 2015 remains to be seen, but a cooling off period seems likely. That probably won’t do tech firms, or their venture capital investors, much harm.